Mar 14, 2023
As a financial strategy, the reverse MCA consolidation allows businesses to pay off their merchant cash advances (MCA) by consolidating them into a single loan with a lower interest rate and longer repayment term. For many businesses, it’s the right choice, but not for all. The decision depends on a few factors. If these factors are ticked by you, then reverse MCA consolidation is an ideal option for your business.
We will discuss the factors to decide if the consolidation is the right option for your business. But, before that, we would like to answer a question that business owners often have regarding consolidation.
Both reverse MCA consolidation and traditional consolidation are effective ways for businesses to manage their debt and improve their financial situation. But, the former option is always better than the latter option.
Reverse MCA consolidation helps businesses pay off MCA debt with lower interest rates and longer repayment terms. Traditional consolidation might offer lower interest rates but repayment terms are strict.
You can easily qualify for reverse MCA consolidation but traditional consolidation has stricter eligibility requirements. Also, the approval time of the traditional consolidation is more. For example, traditional consolidation requires collateral or a high credit square, but reverse MCA consolidation doesn’t need this.
Reverse MCA consolidation improves cash flow by reducing monthly payments, whereas, traditional consolidation doesn’t offer cash flow benefits as monthly payments don’t reduce significantly.
Because of these reasons, reverse MCA consolidation is better than traditional consolidation.
Debt amount- If you have a significant amount of MCA debt, the reverse MCA consolidation may be a good option for you. You will benefit your business significantly with this loan amount. When multiple MCAs will get consolidated into one loan, it will be easier for you to manage your debt and reduce your overall interest payments.
Cashflow- The reverse MCA consolidation is the right option if your business is struggling to keep up with daily expenses and loan payments. This will give you and your business relief because the longer repayment term and lower interest rate will reduce your monthly payments and improve your cash flow.
Credit score - To determine if your business qualifies for reverse MCA consolidation, your credit score plays an important role. You will qualify for the consolidation but there will be a huge difference in the interest rate. If your credit score is poor, you may not be eligible for a lower interest rate. A high-interest rate makes reverse MCA consolidation less attractive.
Other loan options- To avoid a financial crisis in your business and pay MCAs, you can try other loan options available in the industry. The options include a small business loan and a line of credit. You should compare the costs and benefits of these loan options before deciding on reverse MCA consolidation. If the benefits are more, try them.
Future plans- If you are planning to grow your business and need capital in the future for the same, reverse MCA consolidation might not be the right option for you and your business. By consolidating your MCAs into one loan, you might limit your ability to take on additional debt or secure new funding.
Evaluate your MCA debt
The process starts with evaluating your MCA debt. You should take a closer look at your MCA debt and assess the total amount that you owe. Along with this, you should assess the interest rates and repayment terms on these MCAs. With this, you will know if reverse MCA consolidation is a suitable option for your business.
You will find many lenders offering reverse MCA consolidation loans with different terms and conditions. You should list the names of reputable ones and research them. Your objective should be to look for lenders with competitive interest rates and favorable repayment terms.
Apply for loan
For a reverse MCA consolidation loan, you need to submit an application to the lender. In an application, you will have to provide information about your business ,including revenue, credit score, and existing MCA debt. The details should be truly submitted because the lenders check them thoroughly.
Review loan terms
After your application gets accepted, you would receive loan offers from lenders. You shouldn’t accept them right away. Also, you shouldn’t decide based on a “first come first serve” basis. Before accepting the offer, you should review the terms and conditions carefully. Also, you should check the interest rate, repayment terms, and any fees associated with the loan.
Choose a lender
In one of the last steps, you listed the names of reputable lenders and researched them. Based on your research, you should choose a lender for a reverse MCA consolidation. Make sure the lender offers the most favorable loan terms. After choosing the lender, submit the required documentation to finalize the loan.
Payoff MCA debt
Once you receive the fund from the reverse MCA consolidation lender, use it to pay off your existing MCA debt. Use the fund as soon as possible so that you get rid of MCA debt soon. This will simplify your debt management as your MCAs will be consolidated into one.
Make loan payments
Consolidating MCAs will improve your current financial crisis. Also, you don’t have to worry about cash flow in your business. But, you shouldn’t forget to make regular payments on the reverse MCA consolidation loan according to the agreed-upon schedule. By making regular payments, you will improve your credit score and strengthen your business’s financial position.
Monitor your progress
Along with paying your reverse MCA consolidation loan regularly, you should keep a track of it. You should track your progress in paying off debt and evaluate the impact of reverse MCA consolidation on your business’s cash flow and financial health.
Reverse MCA consolidation is the ultimate solution for overcoming your business's financial distress. So, contact Royale Capital, one of the reputable reverse MCA consolidation providers, today.