Financial Guides

Why a Reverse Consolidation works

Many businesses who we meet are crushed with MCA debt. We’ve had clients with more than 10 MCA loans…at a single time! A Reverse Consolidation does work, because it solves the basic problem with paying many MCA’s at the same time. When your business cash flow goes to making MCA payments and not for running the business, a Reverse Consolidation is the perfect solution.

Here’s a quick example of WHY a Reverse Consolidation works to ELIMINATE MCA debt, for good, without defaulting or stopping payments.

EXAMPLE: ACME CO, which specializes in making shovels for businesses to dig out of MCA debt.

The profit margin for businesses vary, but for this example let’s use 15% profit margin AFTER expenses for our example business 15% Profit Margin
Let’s say this business generates $100,000 per month in GROSS Sales. $100,000 Gross Sales per Month (15% Profit Margin=$15,000 per month).
According to general MCA underwriting guidelines, a 1st position MCA can’t take more than 80% of the monthly profit margin in payments. This is right below the profit margin. This is responsible funding practices, since the initial funder is not putting the business in financial jeopardy. But, here comes the problem with multiple advances…. Business gets Funded 1st position, $100,000 for a payback of $120,000 over 10 months with a remit of $600 per day ($12,000 per month). This leaves $3,000 in profit per month.
When the business takes a 2nd MCA, there already isn’t enough room before the business is technically ‘unprofitable’ Business gets Funded 2nd position, $30,000 for a payback of $39,000 over 7 months with a remit of $279 per day ($5,580 per month).
WHAT THIS MEANS The business is now spending MORE in MCA debt than their profit margin. Monthly Profit Margin: $15,000 MCA monthly total debt payments: - $17,580 DEFICIT: - $2,580

Let’s now say that ACME CO has an unforeseen expense. The business is currently losing money because of the 2 MCA’s, but now the business needs to borrow a 3rd MCA. This is a recipe for disaster.

With the 3rd MCA, the funder is not concerned about funding a business that is losing money, they are well aware that the business is not profitable. The funder for any position 3 and up is just risking the fact that they will be paid back BEFORE the business fails. Business gets Funded 3rd position, $15,000 for a payback of $22,000 over 3 months with a remit of $367 per day ($7,340 per month).
The business now has 3 MCAs. It’s getting harder for the business to support itself and pay bills, staff, rent, etc. Sometimes an owner will get more MCA’s to pay for bills, this is a very dangerous cycle. Monthly Profit Margin: $15,000 MCA monthly total debt payments: -$24,920 DEFICIT: - $9,920

What happens with a Reverse Consolidation?

At we understand the hardship a business can go through while paying multiple cash advances. That’s why we always aim to seek the highest discounts and even get some cash upfront to help owners take care of bills. Current Monthly Total MCA Payments: $24,920 Current Weekly Total MCA Payments: $6,230 would fund the business account the exact amount of all MCA debts: $6,230, until they all naturally expire. FUNDING p/ week: $6,230 Currently Weekly Total MCA Payments: $6,230 Net $0
A great scenario would be for the payment to be 30% to 70% less. This would help the business stabilize. charges the client 50% payment, this comes to a weekly payment of $3,115
This means that the business has an extra $12,460 per month in working capital AND the business is now profitable again. With a delta in profit of: $2,540, which is almost exactly the margin from the 1st position MCA. Compare the NEW Reverse Consolidation payment of $3,115 per week to the old payment for 3 MCAs: $6,230.

Want to see exactly what your business would be saving with a Reverse Consolidation? The first step is to apply, so we can understand all of your MCA debt obligations. Then you can see a tailored offer with all the math, prepared specifically for your business and situation.

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