What Happens If I Just Stop Paying My MCA Loans?

Businesses that have multiple cash advances often struggle with affording to keep up with payments. Cash advances are designed to be paid back very quickly, which means that the high paced debt servicing could affect the business’ ability to keep up with payments as well as other business expenses. If you are currently shouldering 1 or more MCA, a Reverse Consolidation can help ease the debt servicing, which will make the payback process easier.

If you stop paying your MCA loans, the funding companies may start the default process which means they will implement collection efforts and most likely legal actions. Funders may have the right to seize business assets, especially if they have a UCC filing on your business. This means that they may claim their portion of future receivables as per the UCC lien. These collection efforts will eventually result in judgements against you and your business. Also, many MCA agreements involve a personal guarantee, which means that you could be personally liable, even if your business files bankruptcy or closes.

Instead of defaulting on your cash advances, it would be wiser and more cost effective to secure a Reverse Consolidation. With this program, you are not defaulting on your MCA positions, but making sure the debt is more manageable. The MCA debt does need to be paid in full, so with a Reverse Consolidation, the payments are made for you, and the funder’s payments are kept in place, without the funder knowing.

Here is how the program works:

1. A Reverse Consolidation funder deposits money into the business checking account on a weekly basis based on a pre-determined disbursement schedule. The disbursements each week are the weekly cumulative total of all weekly MCA payments.
2. Automatic payments from the current MCA funders are processed as normal. The Reverse Consolidation has essentially paid these, since the money was deposited into the account to cover these debits.
3. The Reverse Consolidation funder then charges their own payment, which is normally between 20% to 50% less than the cumulative total MCA payments per week. These payments continue for the course of the advance. As the MCA positions run their course and are paid off, the disbursement amount lowers, keeping in line with the now lower weekly cumulative debt servicing.

A Reverse Consolidation allows for the debt servicing of MCA payments to be more affordable. Since the payment size is lower, the business can experience a sense of a ‘cash flow savings’, meaning the money spent in payments each day/week/month is 20% to 50% lower, even though there is an additional capital cost for this program.