If you are a business owner that is currently paying 1 or more Merchant Cash Advances, odds are you would be interested in lowering your payment sizes. Merchant Cash Advances are used as a quick fix for business working capital needs, but borrowing more than one simultaneously can mean a significant drain on operational cash. The quick payback of MCA loans mean that the business will need to commit to weekly or daily repayments, often a term of less than 12 months.
The debt servicing requirement for paying off Cash Advances is often quite high. With paying back more than one MCA, the debt service can become very problematic and can hinder the business from running smoothly. When the business can’t satisfy general business expenditures the business owner may be tempted to borrow another cash advance. Although this temporarily satisfies the need now, the debt servicing requirements will increase.
For example:
A business generating $200,000 per month in deposits may have been approved and taken a cash advance for $175,000 over 12 months for $4,440 payment weekly. This equates to 11% debt servicing. This means that 11% of the gross sales are going to satisfy the MCA debt requirements on a monthly basis.
If the business takes on another cash advance, let's say $100,000 for 12 months at a $2,220 payment weekly, this means the debt servicing went up from 11% to 17%. Depending on the type of business, this could severely impact profitability of the business and could jeopardize the finances of the business.
The Truth about searching for a way to ‘consolidate’ cash advances
When looking at consolidating one or multiple merchant cash advances the truth is that a funder is unlikely to approve this type of deal. If your current mca balances are paid in full from another funder, the funder is then at risk of the merchant being targeted for more funding. Also, if a funder was to payoff multiple mca balances with a larger cash advance, the cost of capital would be twice as much and the payment size (even though a single payment) would only be relatively less if the term was extended longer than the previous loan’s contract terms.
The Best Consolidation Available
Here is an example of a business with 4 MCA’s. Their cumulative daily payment was $661 and we were able to lower it 47% to $312. As can be seen from the weekly distribution grid, the total cumulative daily payments per week are totaled and we issue funding for this amount. This means that the current MCA payments will not affect the business cash flow. The current MCA terms run their course and fall off. This means that the funding amounts per week lessen as the MCA payments stop.
This consolidation is called a reverse consolidation. Basically we are stretching the term of the debt all while making sure that cash flow of the business is not restricted.
It's FREE to apply and see if you qualify. Apply or Connect with a Specialist.
Working capital is the lifeblood of a small business and without cash on hand a business will be hard pressed to operate. So, when a business takes on a heavy debt servicing program like an MCA, the business’ cash flow could be stifled. This debt servicing requirement is significantly increased if the business takes on more than one MCA.
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