Did you take a merchant cash advance, or were you unlucky enough to take SEVERAL merchant cash advances? Did a broker “sandwich you,” with several merchant cash advances, and now you’re bleeding money?

Getting out of MCA loans is probably one of the toughest and most difficult things you’ll ever do. Merchant cash advances can become addictive. The money is EASY and FAST to get. You can literally get funded in 24 hours. So the question is how to get out of MCA loans fast. What do you do when you have 1, or more, merchant cash advance positions? What options do you have? Is there any way out?

The answer is yes.

You have several options depending on your financial situation.

Do you have real estate?

You can get out of MCA loans by getting a real estate collateralized loan, like a hard money loan. These loans come with a 9-12% APR cost. This is significantly cheaper than having an MCA. Moreover, the hard money loan typically has a balloon payment at the end of the loan. As opposed to merchant cash advances which have a daily, or weekly, payment.

You can use a real estate loan to pay back the MCA loan. This will switch you from a daily/weekly payment to a monthly payment, or – a payment at the end of the loan (a balloon payment for the principle and interest). This means you now have immense latitude. You have more daily cash flow, and you can invest that cash flow back into your business, or use it just to survive and overall be “ok,” financially speaking.

Do you have good credit?

If you have good credit, this can help you get out of an MCA loan. You can use your good credit to qualify for a conventional term loan from a bank, or SBA loan. Alternatively, you can use your good credit to qualify for a line of credit.

Many line of credit companies like Fundbox, Bluevine, etc, allow you to use your good credit to qualify for a line of credit which is VERY CHEAP compared to a traditional merchant cash advance. Often the cost of a line of credit is 1-2% a month, whereas merchant cash advances end up being 80-120% APR a year.

Should you prepay the merchant cash advance?

Many people want to get out of MCA loans. But that doesn’t mean there’s a reason to do it. If the merchant cash advance lender offers no prepayment discount, there’s literally NO advantage to paying it off early.

If you work with an A grade lender like RapidAdvance, Ondeck, etc, there might be a good reason to pay off a merchant cash advance early. Often lenders like this will offer you great rates, and great incentives, to pay off the loan early.

What should you do if there’s no prepayment discount?

If there’s no prepayment discount from your MCA lender, there’s no reason to get out of the MCA early. With no savings, why bother paying for the entire MCA funds early? While the daily payments might not be convenient, it doesn’t help paying the loan early. You’re still on the hook for paying the entire MCA loan and its corresponding interest, regardless of when you pay it off.

How to get out of an MCA loan early

Before you take an MCA loan, HAVE AN EXIT STRATEGY in place. If you INTEND on repaying the MCA early, don’t take the MCA without having an exit strategy ALREADY lined up.

How can Delancey Street help you get out of an MCA?

We can help with you a wide array of financial products.

We offer many financial products that are exit strategies for an existing MCA.

  • Line of credit
  • Real estate loan
  • Term loans
  • SBA loans

and more.

 

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by Aaron on Delancey Street
Amazing article

great article. thanks

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