MCA Debt Consolidation

When you have one too many merchant cash advances (MCAs), the best way to handle them is to consider an MCA debt consolidation. It’s a creative solution that simplifies your debt. This strategy allows you to manage your existing cash advance accounts in a single loan product. Although it cannot magically erase your problems, loan consolidation can help you greatly with loan stacking issues.

Having several repayment schedules can leave you confused with the automated debit transactions on your business account. Due dates piling up can affect the health of your cash flow. MCA consolidation programs can cut down your interest charges and fees, which makes your debts more manageable.

You can trust the New York Tribeca Group to provide the best loan consolidation package that matches your preference. We have some of the most outstanding solutions to loan stacking that potentially gets you out of the debt cycle.

Merchant cash advances

Understanding MCA debt consolidation means knowing about merchant cash advances. An MCA as its name suggests is a type of cash advance on a business’s future sales. It is technically not a loan but is a type of financing that can prove useful when the borrower cannot qualify for traditional bank loans or SBA loans.

A merchant cash advance, unlike other types of loan, does not rely heavily on creditworthiness and time in business. What often matters to an MCA provider is the company’s revenues. In essence, MCAs are easier to qualify for than other funding options.

You will receive a lump sum payment when you get approved for an MCA. The interest charge applies as a factor rate or a decimal figure instead of a percentage. Prepayment is not effective in reducing the money you owe, although paying early is not typical for cash advances. Whenever your business sells a product or service, the MCA provider takes a cut out of that sale to pay for the merchant cash advance.

It’s common for businesses to have several cash advances at once. The lender will look at your income stream to determine the amount you can afford to borrow. You can receive these funds quickly as soon as you get approved for one. The problem is if you have too many MCAs that you struggle to repay. For this issue, you can use loan consolidation to keep yourself from digging deeper into debt.

MCA debt consolidation

A merchant cash advance consolidation works by rolling multiple MCAs into a single loan facility. Having only one repayment schedule makes it easier to keep track of the debit transactions made on your account. It can extend your repayment term and lower monthly dues, which allows you to boost your working capital.

Ideally, MCA debt consolidation can lessen the interest rate since you’re dealing with a single cash advance instead of several ones. Most MCAs are offered at a higher interest than other financing products. A consolidation of such debts eliminates that burden by letting you have only one repayment to worry about.

MCAs are a tricky funding option since it’s a loan against future credit and debit card receivables. If your cash flow is not enough to make your business thrive, you might find yourself applying for another cash advance, and another. Before you know it, you can get trapped in a loan stacking trouble. A debt consolidation pulls you out of that cycle before it causes irreversible damage to your finances.

Rolling several cash advances in a single MCA helps you pay off your debt while also stabilizing your cash flow. What you need to do is to make sure that your business bank account has enough funds for your repayment.

When to consider loan consolidation

Do you have three or more active MCAs and several loans like equipment or invoice financing, term loans, lines of credit, or more? There’s no harm in having multiple debts, especially if your business is more than capable of paying for them. However, it becomes troublesome once you start struggling with the different terms and charges.

Borrowers with a serious loan stacking problem can turn to MCA debt consolidation to avoid falling into the cash advance trap. This financing product is designed to ease the burden of having multiple repayment schedules. When the lender debits the amount from your account, you don’t have to get confused about which loan you’re paying for.

You can also count on cash advance consolidation to gradually ease you out of debt. You can strongly consider this solution when you want to eliminate some of your loans. In essence, having debt can have benefits for a business. However, it should be done within your capacity, or else you can hurt not only your company’s but also your personal financial health, too.

How it works

Experts define MCA consolidation financing as the process of combining multiple merchant cash advances into a single loan facility. You can start by comparing different offers from lending agencies to find the best package with a suitable interest and amount to cover all your MCAs.

You will receive a lump sum once you get approved for this funding. It simplifies your finances by having only one repayment schedule to keep track of and fulfill monthly. Loan consolidation can grant you smaller monthly dues given that you choose a schedule with a longer term and lower interest rate.

While it can potentially get you out of debt, consolidating loans isn’t effective if you took more than what you can afford from the start. Getting a new financing product can only buy you more time to manage your debt. You still need to widen your profit margins or improve your cash flow.

If you have less than a stellar credit profile, you might not get access to an MCA debt consolidation with low interest rates. If that is the case, then it’s best to review your finances or get an expert’s financial help in deciding on an appropriate solution for your debts.

MCA consolidation vs. refinancing

Some people assume that debt consolidation can be interchanged with the term ‘refinancing’. However, these are two separate concepts and borrowers can choose either one to manage multiple debts. With refinancing, you replace an MCA with a new cash advance or loan. Consolidation, on the other hand, rolls several MCAs into a single facility.

Both these options have the potential to lower the interest rate of your debt. They can also extend your repayment term. They simplify your debt profile and help you cope with your repayments. Ideally, consolidation and refinancing can lower the interest rates or payments compared to your previous MCA.

Snowball vs. avalanche payments

Debt can be managed in two payment patterns: snowball approach and avalanche method. The former refers to the type of payment that prioritizes the smallest debt first. When you successfully pay off these debts, you can then work your way to eliminating the bigger debts until you can manage your most expensive loan.

The snowball method can motivate you to organize your finances since you gradually pay off your loans. However, you can also start by aggressively repaying your most expensive debts first. This way, you can get rid of the loan with the highest interest rate. It can free up your cash flow and help you save more money to handle the minimum amount for your other debts.
However, you might have to opt for an MCA debt consolidation if you struggle to repay even your cheapest loan. A consolidation loan can significantly lower your monthly payments and extend your loan term. Eventually, this solution can improve your cash flow.

Why consolidate your cash advances?

Borrowing businesses can benefit from cash advance consolidation. Why should you consider applying for one? Here are some of the reasons.

  • Fewer payments. Having only one account to pay for monthly makes it easier for you to manage your debt and cash flow.
  • Lower monthly dues. Ideally, an MCA consolidation loan can lower the amount you’re paying for compared to your previous MCAs combined.
  • Less effect on credit score. Although having a merchant cash advance consolidation can hurt your credit score temporarily, it can help you avoid overdraft charges and poor credit rating due to missed repayments of multiple MCAs
  • More cash. Consolidation can get you out of loan stacking, which consequently frees up some of your cash to use for important business expenses.

MCA consolidation loan options

Whether you have a small business or otherwise, juggling multiple MCAs does not have to be complicated. Loan consolidation is a great option to get your finances right and help your business thrive money-wise.

Asset-based consolidation loans

Some lending firms offer asset-based loans to cover multiple MCAs. It refers to a loan secured by collateral, which is typically any commercial property or personal real estate that helps minimize the risk for the lender.

Typical qualifications:

  • 550 or higher credit score
  • 6 years in business
  • 0.5 debt service coverage ratio
  • Tax liens required

Private investment banking

Private investment banks provide lines of credit and term loans that consolidate your debts into a single financing facility. This lender will usually investigate your assets and cash flow before approving your application.

Typical qualifications:

  • Good business credit score
  • At least two years in business
  • 0.5 debt service coverage ratio
  • Tax liens are not necessarily required

MCA consolidation companies

An MCA consolidation company can buy out multiple merchant cash advances and rolls them into a new cash advance. This lone MCA often has a better term and lower rate, with flexible repayments that fit your budget. Some lenders take about 50% of the net amount loan for every MCA they pay off.

Typical requirements:

  • Credit application
  • Bank statements at least six months back
  • Details of existing cash advances
  • Photo ID
  • Voided checks

Additional position MCA funding

Some businesses find themselves in dire need of cash due to unforeseen events that deplete their working capital. In these cases, alternative financing like cash advances on additional positions might be the most appropriate solution. It’s not ideal since having an MCA in the first position is difficult enough as it is but might become necessary depending on the situation.

Typical requirements:

  • Credit application
  • Bank statements at least six months back
  • Photo ID
  • Voided checks

Frequently Asked Questions

Is it bad to have debt?

Debt can have a positive effect on business growth, particularly with building a better credit profile. Having good credit can open more financing solutions that boast excellent terms and rates. However, debt can also easily lead you to financial issues if you let it stack up and hurt your financial health.

Why should I consider consolidation loans?

Consolidation loans can help you manage your merchant cash advances, especially if you are struggling to repay your loans. It can be the answer to loan stacking although it’s not your only option out there. Before you say yes to an MCA debt consolidation, you should be 100% sure that you can afford the loan.

Is refinancing the same as consolidation?

Refinancing is a one-to-one approach, which means that it replaces an existing cash advance with a new loan with typically better terms. Consolidation, on the other hand, rolls most or all your current MCAs into a single loan, making it easier to keep track of repayment.

Will I pay for this type of loan?

Most financing options don’t have upfront fees, but the lender can assign monetary charges at different stages of the application and approval processes.

Can it lower my debt?

This type of loan can potentially lower your debt but only if the lender offers you a product with better terms and rates than your existing ones. For this reason, you should calculate whether you can save money by consolidating your MCAs.

Do I have to wait long for the funds?

Unlike traditional loans with lengthy funding processes, a debt consolidation offered by online lenders takes less time to apply, approve, and provide the money you need.

Conclusion

MCA debt consolidation is worth considering once you find yourself falling deeper into a loan stacking issue. You can talk to the New York Tribeca Group professionals for the best options and packages to pull your way out of debt!

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