MCA consolidation: Small Business approved
Being a business owner can be quite overwhelming. Having the finances to cover all resources for your company is extremely important. Looking into financing options is a great way to provide security for your business, because let’s face it: life happens. When taking out a loan, looking into all your options is key. Many people look for the highest amount of money without paying attention to the rates and fees. Many people lean towards getting a merchant cash advance. As tempting as it can be, an MCA may not be the right solution for your business. It’s easy to obtain from a certain standpoint, the underlying truth is that loan approval is based heavily on annual earnings and credit score.
Eliminate your MCA debt; It’s better in the long run
Opening a small business comes with a plethora of responsibilities. Many business owners will start launching by taking out a loan. The most common problem with this is the fact that people don’t think about how to consolidate debt before finding themselves stuck in over extended loans. This mainly applies to merchant cash advances. MCAs provide small businesses with working funds backed up by future bank and credit card deposits.
Lenders consider three main factors when making the decision about your application:
- your current revenue
- how much you overleveraged with merchant loans
- your credit score
With a high credit score and a good cash flow for your business, you’re more inclined to receive better offers. If you don’t meet the lenders requirements, seeking other alternatives may be your best option.
MCAs have their pros and cons. They have a high approval rate, but they also have a higher payback rate. When compared to other sources of funding such as business credit cards and SBA loans, they still fall at the highest payback rate. Businesses will start to feel the strain of an MCA when their funds start to run out; this is when most business owners will start to look and apply for their next loan. Some owners may find themselves stuck in the cycle with up to six or more MCA loans. This usually leads to seeking bankruptcy.
Go with MCA consolidation or reverse consolidation
When finding funding for your business loan, a merchant cash advance may be the choice for you. An MCA helps small businesses find alternatives to other financing. They provide business owners with funds upfront in which the owners repay the advance with a percentage of the business’s sales. The payments can be made weekly or monthly until the advance is paid in full. As resourceful as the option is, this type of funding can lead you into a pitfall of debt consolidation.
If you’ve accumulated debt from one or more MCAs and can qualify for a traditional consolidation loan, you have options in terms of repayments. You’ll receive:
- lower interest rates
- longer repayment period
- monthly loan payments
Most business owners unfortunately don’t qualify for a traditional loan because high debt equals high-risk for lenders. This leaves business owners with options that may not be in their favor such as:
- another high interest MCA
- an MCA Consolidation Loan
- an MCA Reverse Consolidation Loan
Another merchant cash advance? Don’t fall for it
When taking out more funding, you want to avoid “stacking.” Many business owners find stacking to be a solution when it only creates a bigger issue. MCAs are easy to obtain since they don’t require high credit scores and collateral for the long run. Using a new MCA loan to help pay off your original MCA can help relieve some of the burden, but overall, it’s expensive. This tactic has only really led to business foreclosure.
Consolidation helps put merchants back on track towards long-term sustainability. This solution works best. This is a great solution for recipients struggling to make daily payments and struggle with a steady cash flow. An MCA consolidation loan will help ease some of the financial burden. A cash advance company will first buy out all your existing debt (in cash advances) and roll them into a single payment for a better rate and term.
Business owners require to net 50% of the loan amount after the cash advances are paid off. If a new loan $50K is acquired then the merchant only owes of 25K or less to their creditors. In some scenarios, refinance funders and consolidation are willing to pay off the entire debt but not offer any new additional funding.
When it comes to a reverse consolidation scenario, the MCA loans stay in place, but the lender takes care of the daily payments. As a result, you pay the reverse consolidation company a portion of what you have been paying–again for a longer term. Payments are made to the reverse consolidation provider well after all the other cash advances are paid in full. Both options are relatively the same and work as good ways to reduce your business debt.
Multiple lenders and consolidating MCA loans
Business owners with collateral have more of an advantage when taking out a loan. Having an asset-based consolidation loan allows you to take out many loans as needed as long as you have enough to secure them. Anything from real estate to commercial property qualifies. With options like MCAs and debt restricting companies, your agreement has room for adjustment including a payment schedule that works best for you.
It’s highly recommended to investigate all your options for getting approved. You can:
- research online
- call companies
- word of mouth from acquittances
Having a single payment is just one of the perks of consolidating MCA loans. The other benefits that can provide advantage include:
- flexible payment schedule
- longer payback term
- lower interest rate
When in debt, eliminate it
When in debt, many business owners will use additional debt to cover current debt. The goal of taking out another loan should be to help expand your business in the most profitable way. Debt consolidation seems like a saving grace because it provides more flexibility for your cash flow, preventing your business from having too many open holes. By taking on the additional loan to pay off the other, you’ve now increased the duration of paying off the loans in addition to the interest being charged.
Debt elimination companies are more than likely the best option for your business. Their goal is to eliminate more than half of your current outstanding debt. By helping seek their assistance, you could receive up to a year of repose, which means placing a temporary stop to your creditors to free up your finances. This can help you save up for a final settlement that’s much less than what you owe. You will receive letters of release from your creditors, freeing your business to retrieve a healthy status again.