You’re reading this because you probably have several merchant cash advances and it’s overwhelming you. You might be looking for additional capital, or need a longer term in order to make it easier to breathe.
Many businesses love business cash advances because they help you get funding when cash flow is being hampered by the holidays, etc. When you have MULTIPLE cash advances it can literally cripple your business, especially if they are pulling daily. It’s a huge stress.
This is where Delancey Street shines.
We can do what is called a reverse consolidation – which can help you through this cash crunch. In this article, we’ll talk about how they work, and why you might want to consider a reverse consolidation to save your business.
What’s a merchant cash advance?
They are short term business financing options used for working capital, which involves the sale of future revenue in return for immediate funds. They can go from 2 to 24 months, and the usual term is 12 months. After a business is funded, the funder will take a daily ACH payment, or do a credit card split.
What are potential consolidation options?
There’s a number of ways you can consolidate your loans and make it more manageable.
SBA Consolidation: Use a lower interest rate, SBA loan, to pay off and consolidate your merchant cash advances into a traditional SBA loan. You must have AMAZING credit, be profitable, and have personal and business collateral to cover it. You’ll need 30-60 days depending on the type of collateral you offer.
Commercial Real Estate Collateralized Loan: You can use a piece of real estate to provide financing to payoff the cash advances and transform them into a mortgage. If there’s an existing mortgage in place, the lender will take out the first position, and then become your new first position. This is a great way of paying less interest over a longer period of time.
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- Cheaper than an MCA
- 12-24 month terms
- Requires real estate
- Requires equity in the real estate
- Most lenders will insist on being 1st position
Factoring: If you have unpaid invoices from your customers you can use this with a factoring company to get an advance on the face value of this invoice. Typically, factoring companies are happy to purchase unpaid 30-120 day A/R, and then give you 80-90% of the invoice’s value. These funds could be used to consolidate and/or payoff the advances.
Reverse Consolidation: This type of consolidation leaves the multiple merchant cash advances in place. The reverse consolidation company takes care of the daily payments. In return for this, the business owner pays the company a fraction of what they have been paying – but the payments get extended for a longer term.
How a Reverse Consolidation Works?
- Reverse consolidation funders deposit the money into your bank account to cover all the cash advance payments for the week
- Each week the lender makes a weekly payment which covers the cost of the existing daily cash advances
- The term of the reverse consolidation is LONGER than the existing terms of your cash advances, as a result payments are made to the reverse consolidation provider after all the cash advances are paid-in full.
More information about Reverse Consolidations
Reverse consolidations DO NOT remove merchant cash advance debt. What they do is help you survive the cash flow crunch associated with having multiple cash advances. With a reverse cash consolidation the cash advances aren’t eliminated. They are simply being managed, so that you don’t have to stress out about having to manage and worry about your expensive daily payments. Because of the reverse consolidation, your daily payments are being covered thanks to the weekly deposit of cash into your account.
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- Reduce your payments by up to 50%
- Extend terms by 50%
- Potentially get more cash immediately
- Give you time to figure out better financial options
- You don’t reduce overall debt
- You have to continue making payments for a long period of time
Reverse consolidations are one of several options you have to reduce your cash-flow crunches. If you’ve stacked multiple cash advances, getting a merchant cash advance reverse consolidation is a GREAT WAY to help reduce your daily payments. They don’t reduce eliminate overall debt, or reduce debt. The main benefit is reducing daily payments, and giving you extra time to find out other potential options.