MCA Consolidation

Merchant cash advances can be useful when a business needs money quickly.

The problem usually starts when a business takes a second advance.

Then a third.

Then maybe a fourth.

Before long, the business may have several daily or weekly payments coming out of the bank account at the same time.

Even a business with strong revenue can get into trouble when too much of that revenue is being pulled out every day to pay existing advances.

That is where MCA consolidation or a reverse consolidation may be worth looking at.

The goal is not simply to give the business more money.

The goal is to look at the existing positions and see whether there is a way to reduce the pressure on cash flow while the business pays down the existing obligations.

What Is MCA Consolidation?

MCA consolidation is designed for businesses that already have one or more merchant cash advances or similar revenue-based financing positions.

Depending on the program, a new financing arrangement may be used to:

• Pay off existing positions
• Consolidate several payments
• Reduce total daily or weekly payments
• Improve business cash flow
• Provide additional working capital in some situations

There are several different types of consolidation programs.

Some programs actually pay off existing advances.

Others use a reverse consolidation structure.

They are not the same thing.

What Is a Reverse Consolidation?

A reverse consolidation is a little different from a traditional consolidation loan.

Instead of immediately paying off all of the existing merchant cash advances, the new funding company may provide money to help cover part of the existing daily or weekly payments.

The business continues paying the existing advances, but the reverse-consolidation structure may reduce the amount that effectively comes out of the business’s cash flow each day.

The idea is to give the business some breathing room while the existing positions are being paid down.

This can be useful for a business that is making money but has become overloaded with daily payments.

It is important to understand that the existing advances do not simply disappear.

The program is designed to help manage the payment burden while those balances are being paid.

Why Do Businesses End Up With Multiple MCA Positions?

It usually happens gradually.

A business takes an advance for a legitimate reason.

Maybe it needs:

• Inventory
• Payroll
• Equipment repairs
• Marketing
• Materials for a new contract
• Emergency expenses
• Additional working capital

Then a few months later, another need comes up.

The business takes a second position.

Then maybe another.

Each individual payment may have seemed manageable when the advance was taken.

The problem is the combined payment.

A business might be generating $100,000 per month in revenue but still struggle if several daily withdrawals are hitting the account.

The issue is no longer revenue.

The issue is cash flow.

How Many MCA Positions Can Be Consolidated?

That depends on the lender and program.

I work with programs that can consider businesses with multiple existing positions.

Some consolidation programs may consider up to several positions at one time, depending on the balances, business revenue, payment history, and overall file.

One of the programs I currently work with may consider consolidation scenarios involving up to six existing positions.

Other programs may have different limits.

The number of positions alone does not determine whether the business qualifies.

The lender also needs to look at what the business is actually paying and whether the proposed consolidation improves the situation.

How Much Revenue Does a Business Need?

Revenue requirements vary by lender.

Some programs may consider businesses with monthly deposits starting around $15,000, while other programs may require significantly more depending on the industry or size of the transaction.

The lender is usually looking at actual business bank deposits.

They may review:

• Monthly deposits
• Average daily balances
• Number of deposits
• Negative balance days
• NSF activity
• Existing MCA payments
• Overall cash flow

The stronger the business revenue and bank activity, the more options the business may have.

Does Credit Matter for MCA Consolidation?

Yes, but credit may not be the most important part of the transaction.

Many MCA and consolidation programs focus heavily on the business itself.

That can include:

• Monthly revenue
• Bank deposits
• Time in business
• Existing positions
• Payment history
• Cash flow
• Industry
• Overall financial condition

That means a business owner with weaker personal credit may still have options if the company itself is performing well.

That does not mean credit is ignored.

It simply means the lender may be looking at more than one number.

How Long Does the Business Need to Be Operating?

This depends on the lender.

Some consolidation programs may consider businesses that have been operating for around six months or longer.

Other lenders may want more history.

A business that has been operating for several years will generally have more options than one that just opened.

The lender wants to see that the revenue is established and likely to continue.

Bank Activity Matters

Bank statements are usually one of the most important parts of an MCA consolidation file.

The lender may look closely at:

• Number of monthly deposits
• Average monthly revenue
• Negative balance days
• Overdrafts
• NSF items
• Current MCA payments
• Whether payments have been reduced or missed

A business with strong revenue but constant negative balances may be more difficult to finance.

Likewise, a business that has recently stopped paying existing advances can be a problem.

Some programs may still consider a business that previously lowered or missed payments, but the lender may want to see the original payments restored for a period of time before approving a new transaction.

What If I Have Missed or Reduced MCA Payments?

This can make a consolidation more difficult.

The lender wants to see that the business has been making the existing payments.

If the business has recently reduced payments, stopped payments, or entered into modified arrangements, the lender may require the normal payments to be restored before they will consider the consolidation.

That does not mean the deal is automatically dead.

But it is something I need to know upfront.

I would rather understand the situation before submitting the file than have the lender discover it later.

Previous Defaults Can Be a Problem

Previous MCA defaults are taken seriously.

Some consolidation lenders will not consider a business that has previously defaulted on an advance, even if the business later received some type of settlement or satisfaction letter.

Other lenders may have different guidelines.

Again, this is why I like to review the entire situation before deciding where the transaction should go.

How Much Can Be Consolidated?

This varies widely.

The amount available depends on:

• Monthly revenue
• Current balances
• Number of positions
• Current payments
• Time in business
• Bank activity
• Overall business strength

Some programs may start around $20,000 and can potentially go much higher for stronger businesses.

Larger businesses with significant deposits may qualify for much larger consolidation amounts.

The lender is not simply looking at how much money the business wants.

They are trying to determine what the business can realistically support.

Trucking MCA Consolidation

Trucking businesses often use merchant cash advances because cash flow can be unpredictable.

Fuel, repairs, insurance, payroll, and delayed customer payments can create a need for short-term capital.

The problem is that stacking multiple advances can become very expensive.

Some consolidation lenders have specific guidelines for trucking companies.

For example, certain programs may require significantly higher monthly deposits for trucking transactions, especially when the business already has multiple positions.

The lender may also look at accounts receivable, factoring arrangements, and how the business is being paid.

If you operate a trucking company with multiple advances, I would want to look closely at:

• Monthly deposits
• Factoring
• Existing positions
• Truck payments
• Current MCA payments
• Overall cash flow

Construction MCA Consolidation

Construction companies can run into a similar problem.

A contractor may have plenty of work but still have cash-flow problems because money has to be spent before the customer pays.

That can include:

• Labor
• Materials
• Equipment
• Subcontractors
• Fuel
• Insurance

Some consolidation programs may require higher monthly revenue for construction companies because of the way cash flow works in that industry.

A strong construction business with significant deposits may still have good options even if it already has several advances.

Can You Get Additional Working Capital?

Possibly.

Some consolidation structures are designed primarily to reduce existing payment pressure.

Others may also provide additional working capital.

Whether that makes sense depends on the business.

I do not think the goal should be to consolidate debt and immediately put the business back into the same situation.

If additional capital is provided, there should be a good reason for it.

For example:

• Purchasing inventory that will generate additional revenue
• Funding a profitable contract
• Repairing necessary equipment
• Expanding a successful part of the business

The objective should be improving the business’s financial position.

MCA Consolidation vs Taking Another Advance

This is an important distinction.

If a business already has four or five daily payments, simply adding another advance may make the cash-flow problem worse.

The business receives money today.

But now there is another payment coming out tomorrow.

Eventually, the business can reach a point where a large percentage of its daily revenue is immediately being used to service debt.

That is why I would rather look at consolidation or restructuring before simply stacking another position.

Will MCA Consolidation Lower My Payments?

That is usually one of the main goals.

But I do not like making blanket promises.

Whether the total payment can be reduced depends on:

• Existing balances
• Existing payments
• Business revenue
• New financing amount
• Program structure
• Term
• Number of positions

The numbers need to be reviewed.

If a consolidation does not materially improve the business’s cash flow, then I want to understand why the business would do it.

Does Every Business Qualify?

No.

There are situations where consolidation simply does not work.

For example, the business may have:

• Too many negative bank days
• Too little revenue
• Previous defaults
• Too much existing debt
• Recent missed payments
• An industry the lender will not finance
• Cash flow that cannot support the proposed structure

I would rather tell someone that upfront than submit a deal that does not have a realistic chance.

Some Industries May Not Qualify

Different lenders have different restricted industries.

Certain consolidation programs may not work with businesses such as:

• Bail bond companies
• Check-cashing businesses
• Debt collection agencies
• Certain auto sales businesses
• Credit repair businesses

Other lenders may have different restrictions.

If your business is in an unusual industry, tell me what you do before we spend time putting the file together.

What States Are Available?

Program availability varies by lender and state.

Some consolidation lenders operate across most of the United States but may exclude certain states or territories.

There can also be different structures required in states such as Texas.

This is another reason I need to know where the business is located before determining which program may work.

What Documents Are Usually Needed?

The exact requirements depend on the lender and size of the transaction.

A good starting point usually includes:

• Business application
• Recent business bank statements
• Current MCA statements
• Current balances for each position
• Business ownership information
• Driver’s license
• Voided business check
• Basic business information

Larger transactions may require additional documentation.

The more complicated the file, the more information the lender may request.

What Information Should You Send Me First?

You do not need to send a full package just to see whether the situation is worth looking at.

Start with:

• Monthly business revenue
• Time in business
• Number of existing MCA positions
• Approximate total balances
• Total daily or weekly payments
• Industry
• State
• Approximate credit
• Whether any payments have been missed or reduced

With that information, I can usually get a pretty good idea of which programs may be worth exploring.

Simple MCA Consolidation Example

Suppose a business generates approximately $100,000 per month.

The business has four existing merchant cash advances.

Combined, those advances are taking a significant amount from the account every business day.

The company is profitable, but the owner is constantly short on cash because so much revenue is being used for daily payments.

A consolidation or reverse-consolidation program may be able to restructure the situation so less money is being pulled from the business each day.

That can give the company more room to pay:

• Payroll
• Vendors
• Rent
• Inventory
• Normal operating expenses

The exact savings depend on the existing advances and the new program.

Another Example

Suppose another business also has four MCA positions.

But the company is only depositing $12,000 per month, has frequent negative bank days, and has already stopped paying two of the advances.

That is a very different situation.

The number of positions is the same.

The financial condition of the business is not.

That is why I need to look at more than just the number of advances.

Why Work With a Broker for MCA Consolidation?

There is no single consolidation program that works for everybody.

Different lenders look at:

• Revenue
• Credit
• Industry
• Number of positions
• Current payments
• Time in business
• Bank activity

One lender may decline a transaction that another lender is willing to consider.

My job is to look at the situation and determine which programs are the most realistic.

I do not believe in sending a business owner’s information everywhere and hoping someone approves it.

The goal is to understand the problem first and then determine which lender may actually have a solution.

Need Help With Multiple MCA Payments?

If your business is making several daily or weekly payments and cash flow is getting tight, it may be worth looking at consolidation before taking another advance.

Tell me:

• How much the business deposits each month
• How many MCA positions you currently have
• Approximately how much you owe
• How much is coming out each day or week
• How long you have been in business
• Your industry
• Your state

From there, I can help determine whether a consolidation or reverse-consolidation program may be worth exploring.

Call or text Shawn at (714) 271-8524 or email Info@TheBroker.Finance to discuss your MCA consolidation options.

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All financing is subject to lender approval, underwriting, documentation, program availability, state availability, and lender-specific requirements. Consolidation does not guarantee lower payments or approval. Program guidelines can change at any time.