When a business owner explores options for addressing MCA debt, they often encounter different philosophies. Companies like Coastal Debt Resolve focus on the process of negotiation for payment restructuring and settlement. Other companies may utilize a strategy known as Article 9 reorganization.
Choosing a path depends on the specific circumstances of your business and your long-term operational goals. This article evaluates these different models to help you understand the potential impacts on your commercial obligations.
What is UCC Article 9 Reorganization?
Article 9 refers to a section of the Uniform Commercial Code that governs secured transactions. Some consultants use this as a framework to reorganize a business. This process typically involves a secured creditor conducting a foreclosure process intended to transfer certain business assets.
The assets are then purchased by a newly formed entity, while certain unsecured or junior obligations may remain associated with the original business entity depending on the structure and applicable law. Companies may also explore various funding and restructuring options that intersect with these concepts.
Considerations for Reorganization Models
While reorganization is a structured process, it involves significant changes to the business entity.
- Operational Shift: This strategy requires moving assets and operations to a new company.
- Successor Liability: There are potential risks regarding whether obligations could potentially extend to the new entity.
- Creditor Relationships: This approach is often viewed as a more assertive stance toward existing funders.
Coastal Debt Resolve Negotiation Strategy: Restructuring and Settlement
Our approach at Coastal Debt Resolve is designed to address MCA debt through engagement with creditors. We focus on the process of evaluation and negotiation rather than the structural reorganization of the business entity.
How Our Process Compares
- Entity Preservation: We work with your existing business structure. Our goal is to address the debt within the framework of your current operations.
- Attorney Coordination: We may coordinate with independent legal professionals, when appropriate, to evaluate the terms of your agreements and any UCC filings.
- Creditor Engagement: Our team has experience working with MCA funders to explore potential restructuring or settlement options based on your actual cash flow.
Results vary based on business circumstances and creditor participation. Coastal Debt Resolve is not a law firm and these materials do not constitute legal, financial, or professional advice.
Evaluating Your Options for Business Debt Resolution
Step 1: Request a Professional Consultation
The first step is a thorough evaluation of your debt and your business goals. Our program is designed to help you understand the nuances of your MCA agreements. We provide access to strategies that may help make your daily obligations more manageable through structured negotiation.
Step 2: Review Contractual Obligations
It is vital to evaluate the specific terms of your MCA contracts. The impact of any debt relief strategy depends on the agreement and applicable law. Business owners should assess how different models, such as settlement versus reorganization, might affect their ability to continue operations.
Coastal Debt Resolve is not a law firm and these materials do not constitute legal, financial, or professional advice.
Step 3: Develop a Financial Management Plan
Once your options are evaluated, the next step is implementing a plan for financial management. This involves:
- Cash Flow Analysis: Reviewing revenue and expense timing to support debt resolution.
- Operational Planning: Adjusting business practices to improve visibility into future profits.
- Professional Guidance: Consulting with qualified professionals regarding the potential impacts of your chosen strategy.
How Specific Contract Clauses Might Influence Which Of These Strategies Is More Appropriate
Evaluating specific contract clauses is a critical part of determining which business debt strategy may be appropriate for your situation. Because every commercial agreement is different, the presence or absence of certain language can shift the risk profile of a negotiation or a reorganization.
Here is an assessment of how common clauses may influence the decision making process for a business owner.
Results vary based on business circumstances and creditor participation. Coastal Debt Resolve is not a law firm and these materials do not constitute legal, financial, or professional advice. Services provided exclusively for businesses. Not consumer or personal debt relief. Debt resolution outcomes are not guaranteed.
Personal Guarantee Clauses
A personal guarantee or PG is a provision where the business owner agrees to be personally responsible for the debt if the business cannot pay.
- Impact on Settlement: During a negotiation process, the PG is often a focal point. A resolution strategy may aim to release the owner from personal liability as part of a final settlement agreement.
- Impact on Article 9: In a reorganization, assets are moved to a new entity, but the personal guarantee often remains attached to the owner. This means the original creditor may still pursue the individual owner personally even if the old business entity no longer holds the assets.
Confession of Judgment (COJ)
A COJ can be found in some MCA lender agreements that allows the creditor to enter a judgment against the business to expedite the entry of judgment under certain contractual provisions.
- Influence on Strategy: The presence of a COJ typically increases the speed at which a creditor can act. For businesses with a COJ in their contract, business owners often seek to evaluate debt resolution options early to address the obligation before a judgment is entered.
- Process Considerations: This clause may influence whether a business chooses a strategy that involves immediate legal coordination or one focused on timely creditor engagement and evaluation.
UCC-1 Blanket Liens
A UCC-1 filing is a public notice that a creditor has an interest in your business assets.
- Settlement Approach: In a negotiation, the goal is often to reach a payment agreement that results in the creditor filing a UCC-3 termination statement to release the lien once the settlement is paid.
- Article 9 Approach: Reorganization strategies often rely on the foreclosure of these specific liens to move assets to a new company. This process is complex and requires a careful evaluation of the priority of different liens if multiple funders are involved.
Strategic Evaluation Summary
Frequently asked questions
Coastal Debt Resolve typically focuses on negotiating payment restructuring and settlements for existing business debt within your current company structure. Article 9 companies often involve a process of foreclosing on assets and moving them to a new business entity to address the debt.
Article 9 is a part of the Uniform Commercial Code. The impact and validity of a reorganization depend on the specific circumstances and adherence to applicable laws. Clients may benefit from consulting with independent attorneys when evaluating these structural changes. Coastal Debt Resolve is not a law firm and these materials do not constitute legal, financial, or professional advice.
Yes in many cases. Negotiation and settlement approaches may address MCA debt without requiring the formation of a new entity or the transfer of business assets.
We engage with a wide range of commercial creditors and funders. Our team has experience navigating the complexities of multi-lender situations to pursue potential resolution options.
No. Outcomes for any business debt resolution strategy are not guaranteed. Success depends on various factors, including creditor participation and the specific terms of the commercial agreements.
