Financial Guides

How to Get Out of MCA Debt

Merchant Cash advances are designed to be a short-term fix for immediate business cash flow needs.  Most businesses understandably aren’t heavily capitalized, and owners usually don’t have a solution when they need money for their business. MCAs are a popular solution when immediate influxes of cash are needed to solve an immediate business problem or to enact on an immediate business opportunity. But what happens when today’s solution becomes tomorrow’s problem?

As the funding cash is spent and eventually exhausted, payments to the MCA funder continue and continue. We often see business owners take on more MCA funding to cover the cash shortfall in keeping up with payments for the initial MCA. As you can see, this cycle of continued borrowing is unsustainable for obvious reasons.

Business owners that take on more than 1 MCA may be having ‘buyers’ remorse’ when they experience pressure to handle the weekly or daily payments. The increased debt servicing of multiple cash advances along with the short payback period (less than 1 year) and payment cycle (daily or weekly) make most business owners search for a solution to the multiple MCAs.

A reverse consolidation essentially pays for the business’s current MCA payments by funding weekly into the business bank account. Then the business owner makes a more manageable payment to the Reverse Consolidation Funder.

Top 2 Benefits of a Reverse Consolidation:

  1. Ease Business Cash Flow - Our clients pay 30-60% less on a weekly basis for MCA payments, this means that the business has more operational cash on hand.
  2. Not a Default – Reverse Consolidation means a stabilized exit from current MCA lenders. If you do not pay your MCA (with or without a debt restructurer), you will go into default. This means that you will not be able to borrow MCA again.

A common question regarding the Reverse Consolidation is: “What Happens when one of my MCA positions are done?”

Answer: The weekly funding to cover the existing MCAs mirrors what MCAs are currently being paid. So, when MCAs are paid off as per the original contract and those payments to the funder cease, less money is deposited into the account for the Reverse Consolidation.

If you are experiencing difficulties keeping current on your MCA payments, we want to speak with you! Our team has extensive industry experience and will give you meaningful advice on your options. We’ve helped thousands of clients with custom tailored financing solutions and if we can’t help, we provide meaningful options available to you.

If you are a business owner who is paying more than 1 MCA loan, we can provide a complimentary overview of what is possible. Many times, business owners apply with us seeking a Reverse Consolidation, but actually are approved for SBA or Line of Credit Programs with our Parent Company American Capital Group.

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