Merchant Cash Advance Consolidation

Many business owners fall for the multiple loan syndrome or in the merchant cash advance world it is known as stacking. As a small business owner, you feel you have limited options for getting access to capital. Then the phone rings and the person on the other end of the call tells you that your credit doesn’t matter and that they can lend you money based on your daily credit card or cash receipts. Wow, what a great way to get money without the hassle of the bank.  

But now that you have gone ahead and obtained funding, it’s like the floodgates opened and everyone and their brother will be calling you, offering you even more money. Wow a feeling of worth overcomes you, and you start having dreams of grandeur, You find out they can stack their loans in 2nd, 3rd….8th position and you are starting to love the color green. You soon find yourself with 3 or more positions and the daily ACH out of your account for payment is putting a strain on the cash flow, which is why you took the money in the first place to help the business cash flow.

The one thing that I find is that business owners are unaware that if they have a decline in business or are affected by something that causes their business to be shut down for a period of time, they need to contact the lender. You are funded based on your daily volume and if that volume should decline you can discuss with the lender to either get the payments lowered or suspended for a time in order to have the business recover. If you have a credit card processing advance your daily amount automatically adjusts according to the volume you process. It is a fixed percentage being withdrawn. Whereas funding on cash receipts is a fixed dollar amount that is ACHed out of the business account, and the lender does not have access to your daily volume. 

Now you find yourself being choked with the payments and you need a solution. The good news is that there are a couple of solutions that can get you back on track. Let’s take a look.

Reverse Consolidation

A reverse consolidation is a funding style that is designed to cover your daily payments on your existing merchant cash advance. The way it works is the funding company totals your daily and weekly payments and then funds you an amount that will pay off the existing advances while providing you a longer-term which reduces your payments. The company advances you every week the amount owed to the other companies which in turn uses to make those daily ACH’s.


The basic idea when a business takes out a reverse consolidation loan is to exchange the frequent repayment schedules of its MCA loans with a larger loan that has a longer repayment period and smaller repayment amounts.


So, while it doesn’t wipe the slate clean right away, a reverse consolidation loan can help a business pay off its MCA obligations without the stress and pressure that comes with juggling several MCA repayment schedules at once. Of course, the business still needs to pay back the reverse consolidation lender. But with far less anxiety than being required to pay back multiple MCA’s.

For example, if you had 4 MCA’s with a daily ACH of $1200 per day or $6000 per week with a total balance of $30,000, and 7 weeks remaining, you would be funded initially $16,000 which $10,000 would be provided as additional cash and the $6,000 would be for that week’s payments. Each week you would receive another $6,000 for the payments due until the debt is paid off. The amount funded was a little over $40,000, which was the $30,000 that was owed plus the $10,000 additional funding, plus some closing fees, but just to keep it simple we will keep it at $40,000. This 40,000 would be stretched out for a longer-term, so let’s say 6 months, in which the daily payment would be $466.67. This would reduce your daily payment by 68% and would make the payments much easier and you even got an extra $10,000 to play around with.  

As you can see the reverse consolidation does not rid the debt owed it just extends the payment term in order to reduce the daily payment. It also eliminates the confusion that can occur by having to juggle 3 payments and the possibility of having a low cash day and bouncing the ACH payment and incurring bank charges. This is a good option if you are struggling with cash flow, but remember it just takes the debt and extends over a longer period of time.

Hire A Professional

Although there are other options such as taking out a lower-cost term loan, for the purpose of this article and the fact that we are talking about business owners who have either one or multiple merchant cash advances and do not have the credit quality or the financials to get a term loan.

If you are struggling with your current Merchant Cash Advance situation your best course of action is to hire a professional who can analyze your situation and plot the right course for you. They can negotiate with the lenders and work to save your businesses a good name. Typically when a professional starts to negotiate with the lenders, payments can be stopped for a short time to help you get back on your feet while a plan is developed. A professional can negotiate with the lender(s) and make payment schedules that fit your needs while getting the total amount owed reduced by 30-60%. 


Business Beware

The merchant cash advance industry is not considered one of the most ethical industries. Falling behind on your payments, changing the business account, or doing something else to avoid making your payments and the reluctance to talk to the lenders will open up a can of worms. Many of the lenders will resort to threatening tactics in order to collect their money. Although there are some bad actors, the professional actors will still resort to actions that will be harmful to your business by getting their attorney involved and suing you. Either way, the result will be that they will blacklist your business and you will not be able to get any type of financing for a very long time.

Let’s face it, we all make mistakes. But we have to be proactive when we do to rectify the mistake. Merchant cash advances can be very useful to many businesses, but like anything, overdoing it can be detrimental. If you do find yourself overwhelmed, call for professional help first, it will save you time, money, heartache, and most of all it will save your business.

 If you are interested in obtaining financing for your business or you just have questions, please contact us at Remember at Ebizmore you will Learn More, Do More and Earn More.

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