NEW YORK, Feb. 15, 2022 /PRNewswire/ -- Fintech Group, Iron Capital Equities, which operates multiple small business web properties, announces their newest platform, www.reverseconsolidation.com. With the use of banking intermediary technology, the fintech platform analyses a business' cash flow and determines how to refinance expensive Merchant Cash Advance (MCA) debt.
Businesses need to consolidate high interest, high payments for MCAs, especially now since thousands of companies received MCAs after emerging from post-pandemic government-imposed lockdowns.
Subprime small businesses find it difficult to obtain traditional financing. With their options to obtain cash are limited, many agree to short-term advances, most with a cost of capital over 30% and payback terms of less than 12 months. Businesses use this expensive money for working capital, upcoming projects, inventory, payroll, etc. Think of a payday loan, but for a small business whose future accounts receivables are put on the line as repayment collateral for a private lender.
"We see that businesses that are paying more than 3 MCAs at one time often have a monthly debt servicing ratio of over 30% compared with their gross sales. This far exceeds the profitability threshold for many businesses', says Matthew Elling, founding partner at Iron Capital Equities. Businesses can use this platform with more than one merchant cash advance (MCA).
Once the money is used, businesses often obtain another MCA to pay for the daily or weekly automatic payments for the 1st MCA. This method can spiral out of control, as with each position, the business's cash flow is not used to run the business but is used to pay for the MCA's positions.
The Reverse Consolidation saves the business up to 50% in weekly cash flow allocation by providing money to the company to pay for their current MCA payment liabilities. This is not debt restructuring, and the initial funding companies are not defaulted on. The term is essentially extended, so the business can satisfy their MCA debts and eventually climb out of debt.
While Iron Capital Equities has offered this Reverse Consolidation program for years, this is the first time that underwriting decisions with the utilization of bank account rectification software can determine the right savings.
"We know that the reverse consolidation works to alleviate a business' cash flow problems because of MCAs, now the use of bank account connectivity products and our fintech software can make better underwriting decisions," explains Matthew Elling.