Is your business struggling? Is it underwater? Did you take several merchant cash advances? Are you struggling to make ends meet?
This is a common issue. Many business owners rarely interface with a direct lender. Often, they are working with brokers who sell them a dream, overleverage them, promise SBA loans – or some other cheap form of financing to replace the merchant cash advance, yet do nothing to help them. Many of them disappear, and don’t even answer your calls later.
There are many merchant cash advance brokers who have literally destroyed their clients. When this happens, and you’ve got 3-4 merchant cash advances – you have limited options.
Now you have to ask yourself – what comes next? How do you escape the weight of these merchant cash advances?
There are several tactics to refinance a merchant cash advance. Many of them involve replacing the merchant cash advance with another, more cost-effective, financing option like a term loan, or a line of credit, or perhaps a real estate collateralized loan.
Getting an SBA loan is a popular way of getting affordable funds. Needless to say, SBA loans are one of the most economic forms of financing. Some could say an SBA loan is the holy grail of financing options. This is because the SBA, a government agency, is backing the loan. It is guaranteeing it, incase you default on it. The other “string,” is the fact that not everyone qualifies. You need good credit, you need to have good revenue you must be in business for a few years, etc.
Many business owners who need financing fast often take a merchant cash advance thinking they’ll be able to refinance it with an SBA loan. The issue is most merchant cash advance lenders DO NOT offer any prepayment discounts. Even if you pay it off early, it’s pointless – there’s no savings on the overall interest. It’s rare. Some A grade merchant cash advance lenders offer a discount on the overall interest if you pay it back early; but that’s rare.
Line of Credit
There are several lenders who offer a line of credit option. Their rates can vary, but typically they charge 1-2% a month. Their rates are similar to what credit cards charge on an APR basis. Considering most merchant cash advances charge 80-120% APR (factor rate equivalent) during the course of a year, it can make sense to opt for a line of credit.
Real estate collateralized loans
Did you know that a real estate collateralized loan is one of the most affordable loans? Because you’re pledging real estate, you are able to get a lower rate. With real estate collateralized loans, you’re guaranteeing that even if you fail to repay the loan – the lender can liquidate your real estate to repay the loan you took. Often real estate collateralized loans come with a 10-12% APR. As a result, they are ridiculously cheaper than 80-120% APR equivalent merchant cash advances. The only issue with real estate collateralized loans as a method of refinancing your merchant cash advance is the fact the collateralized loan can take 20-40 days to fully qualify + fund.
There are merchant cash advance lenders who specialize in doing merchant cash advance consolidation. They “buyout,” your existing positions – and give you a brand new position. Instead of multiple merchant cash advance payments, you now have just 1 consolidated payment that goes out. This can make cash flow significantly easier to manage.
By consolidating your merchant cash advances you can increase the term of your merchant cash advances, which means your daily/weekly payment goes down. It also means you’ve now added extra cash flow to your business on a daily basis. Bottom line – its a “win” / “win” on every angle for your business.
Should I refinance my merchant cash advance?
If you can save money, and make surviving easier, why not?
Merchant cash advances are super difficult. They aren’t fun to deal with. Often, people opt for a merchant cash advance out of sheer desperation, because they need funds fast and have no options.
What should I do if I haven’t taken the merchant cash advance yet?
You should take money from an A grade merchant cash advance lender who offers a GENEROUS prepayment discount.
You should then opt for a refinance strategy, like one of the many options we listed above. Get cheaper funds, and then pay off the merchant cash advance – and take advantage of the prepayment discount offered by the merchant cash advance company.