Businesses are always in need of cash flow, especially for working capital. There are many companies, such as New York Tribeca Group, that are able to provide businesses with help, such as a merchant cash advance. They are also in a position to help businesses with MCA refinance.
Businesses can apply for MCA refinance at any time. However, a business should ensure that it does not over-extend itself. For this reason, it should pay careful attention to how the initial funds are spent. It should make sure that it does not make things financially more difficult by refinancing with another MCA, especially if the first one has not been paid off.
By applying for an alternative loan type to refinance the merchant cash advance, the financial provider, such as New York Tribeca Group, can either consolidate the MCA or pay it off with the new loan. In order to look into MCA refinance, it would perhaps be a good idea to know what merchant cash advances are before one addresses the issue.
A Merchant Cash Advance Explained
Merchant Cash Advances are all unsecured loans. In reality, it is not a cash loan but a cash advance based on future business sales. The amount borrowed from a provider is paid out as a lump sum and paid back through the business credit card sales. This is one of the negatives of a merchant cash advance, as it can only operate through how much credit card sales the business receives.
It is a convenient way for businesses to have access to cash flow. In most instances, businesses apply for MCAs as it is the easiest way to gain access to working capital. Furthermore, the business does not need to have a good credit score or a high credit score in order to apply for such an advance. However, it helps businesses to know and keep track of their credit score when the need arises for MCA refinance.
Even though it does not seem to be negative, merchant cash advances provide easy access to cash. Being able to get cash flow as easily as this might tempt a business to over-extend itself, causing financial difficulties.
Another way to put it is that businesses sell their future earnings to a provider to obtain immediate cash flow in the form of immediate cash. The other negative about this type of cash advance is that it has a high interest rate. The provider would take a portion of the daily expenditure on a credit card as payment for the advance. The payments will depend entirely on how much the business receives in credit card sales. It is also a downside as these sales can only happen on credit card sales.
MCA Refinancing for your Business
When refinancing your business merchant cash advance, the first step to take is to find the right provider. In this type of cash flow refinancing, the New York Tribeca Group provides excellent service. The group is able to finance a number of different types of businesses by making merchant cash advances available as well as other types of loans. They are also in a position to provide MCA refinance as well as provide any business with alternatives.
It would even be better if you had started your first MCA with this group. If so, then it would be easier for you to simply extend the repayment terms, but most of all, be able to refinance with a cheaper option from the same group. An example would be that, if the initial repayments were set over a six-month period, they could be extended to a twelve-month period. However, as mentioned, it can also be replaced by an alternative type of financing.
An important aspect of MCA refinance is determining the amount that you still owe, the credit you have available, and how much you can afford to pay back on a monthly basis. Thus, it is vital to follow a few simple steps to find the best solution to the business’s financial needs in order to regain financial stability through MCA refinance.
The Steps to Apply for MCA Refinance
Merchant cash advance (MCA) refinance is easier when you already have a merchant cash advance in place with a specific financial provider. It would just be a matter of consulting with them and applying for MCA refinance. The steps to take are simple and easy. The business needs to take the following aspects into consideration:
- The business has to determine how much it needs for the refinancing of the merchant cash advance. Because the merchant cash advance provides daily cash flow, the business can easily determine how much it requires.
- It is important to draw up a financial strategy to determine whether the business can afford to refinance. This is vital so that the business does not fall into more debt through the refinancing process.
- In the second instance, the business owner has to determine the remaining amount that the business owes the provider – that is, the existing balance. He or she will be able to determine this, as a cash advance is provided as a lump sum up front, with the interest rates readily available. The business would therefore know how much the remainder of the capital needs to be paid off.
- The best option for MCA refinance is to pay off the initial MCA balance once you have been approved for the new financing. A financial provider such as New York Tribeca Group would be able to assist with this. They might also suggest consolidation. The decision will also depend on interest rates.
- Businesses should keep track of their credit scores. If they had had a low credit score when applying for the MCA in the first instance, their credit score might have gone up. Thus, the possibility exists that they do not need to continue with MCA financing. If they have a high enough credit score, they could qualify for a better deal in securing cash flow for your company.
- Another great help with MCA refinance is also whether the business has built some collateral while operating with the initial merchant cash advance, which could provide a better option in refinancing.
Why Should a Business Refinance an MCA
Merchant cash advances can be very helpful in times of need for any business. However, if the company uses the money indiscriminately and not for the initial purpose, it can run into trouble. It is therefore important for the company to keep a close reign on expenditure and how they use these funds.
It is most often not expedient for the company to take out a second MCA to solve their financial problems. It is important for companies to realize that it can be very expensive as it will mean paying double the amount of interest. It is therefore advisable not to refinance an MCA with another MCA as it will increase the interest rates on an increased balance.
As mentioned before, businesses should keep track of their credit scores. This will help in refinancing the MCA. This is especially true as the business could build up a better credit score. With a higher credit score, businesses can apply for other types of business loans and other financial aid that offer better interest rates and payback terms.
Instead of MCA refinancing with another MCA, a business should rather apply for conventional or other types of loan through a provider such as New York Tribeca Group. They will be able to advise a business on the best options in a very competitive marketplace. Their options could also include the consolidation of your MCA, which makes it easier for the owner of the business.
The main reason a company should consider MCA refinance is that an MCA is a short-term solution that can be very expensive. The business might discover that it does not solve its financial problems.
It is a risky way of financing the business, especially the day-to-day expenses, as it is based on future sales. The business could run into difficulties if there is a sudden downturn in production or other unexpected expenses.
Another reason to refinance an MCA is that it provides the option of increasing the repayment terms to a longer period. This would make the installments smaller each month. The installments can also be pre-determined and not happen on a daily basis, as is the case with merchant cash advances.
Furthermore, it is helpful for your business overall if you can pay off the initial merchant cash advance and refinance it with a different option. It will save the business and aid its growth in the long run.
Frequently Asked Questions
What is working capital?
No business can operate without working capital. Working capital is the cash needed on a daily basis to keep the business operational. The business can use the cash for various daily operations, such as the need to buy inventory or pay the bills.
Can you use an MCA for working capital?
Working capital is essential to a business for running its daily operations. In the instance of an MCA, there are no restrictions on how a business uses it. Hence, it is possible to use a merchant cash advance as working capital for any type of business.
Can a business with a low credit score apply for an MCA refinance?
As with the initial MCA application, refinancing through an MCA does not require a business to have a high credit score. However, a high credit score can give access to better financial deals from other types of loans, with lower interest rates for MCA refinance.
What is a credit score?
The creditworthiness of a business is visually represented by a credit score. These are presented as credit numbers that are calculated according to the borrower’s creditworthiness. A high credit score (FICO score) is required of businesses if they wish to apply for secured business loans. A high score is not required for most unsecured loans.
What is MCA Refinance?
One could explain it as the replacement of an MCA with a better option of financing, such as a conventional loan. An MCA refinance would allow a business to take out a less risky loan from a financial provider such as New York Tribeca Group.
What types of loans can refinance an MCA?
Some of the loans that are available for MCA refinance are:
- SBA Microloans
- Line of Credit
- CAPLine Loans
- Checking Business
- Invoice Factoring
Conventional loans are an option too, but the above-mentioned options do not require high credit scores or collateral.
How does MCA refinancing work?
A business can make use of MCA refinance at any time. The best way to go about refinancing a merchant cash advance is to find a financial provider such as New York Tribeca Group. They could either consolidate the initial MCA or pay it off once your refinancing has been approved.
Why do you need to refinance an MCA?
One of the major reasons would be to save on cost. However, the business might be in need of more cash flow. Refinancing can help extend the original MCA (which is not advisable) through consolidation and reduced installments. This could be a short-term solution but will be more costly in the long term.
The Need for MCA Refinance
The need for MCA refinance often arises because of a crisis or simply because the business runs out of working capital. A crisis can be business-related, such as stock losses or a downturn in the business, or it could be created from external sources, such as seen in the last few years.
The need to refinance an MCA might also arise from the fact that the business is growing. The business, therefore, needs to cover its increased daily expenses as well as the daily running of the business. The most important thing is to realize that refinancing with another MCA might cause more financial woes for the business. Hence, it should be avoided at all costs.
It is therefore important to choose a financial service provider such as the New York Tribeca Group that would assist and advise on the best options. They can provide the best alternatives for MCA refinance.