Can an MCA Reverse Consolidation Really Help Improve Your Cash Flow?

Is your cash flow being drained by multiple Merchant Cash Advances (MCAs), making it hard for your business to grow? 

As a small business owner, managing several MCA repayments can significantly limit your growth opportunities and put a strain on your cash flow. At Njord Capital Group, we specialize in helping clients transition from the "double-edged sword" of MCA financing to longer-term loans with predictable, lower monthly payments. However, after analyzing your business, we may find that projected profits aren’t sufficient to support a consolidated repayment schedule. In such cases, an alternative approach—like a reverse consolidation—could be the most viable solution to improve your cash flow.

What is Reverse Consolidation, and How Does It Work?

Reverse consolidation can be a life-saver for business owners who need immediate relief from the daily or weekly grind of MCA payments. This structure provides you with weekly deposits that cover your current MCA payments, and in return, sets up a new consolidated weekly repayment schedule that is far more manageable. Essentially, it gives your cash flow a significant boost—often improving it by up to 60%. While it does not reduce your total debt, it makes the repayment terms much more manageable by spreading out payments over time, effectively easing the pressure on your cash flow.

Here's how it works:

• The reverse consolidation provider will deposit funds into your account weekly to cover your existing MCA payments.
  

• In exchange, you make a single, new weekly payment to the reverse consolidation lender, typically at a much lower amount than your current MCA payments combined. This is achieved by extending the repayment term, which helps reduce the immediate burden.
  

Example:

For example, if a business owes $100,000 across multiple MCAs and pays $10,000 weekly (adding up to $40,000 per month), they could receive $10,000 in weekly deposits to help meet those obligations. They would then pay the reverse consolidation provider $2,690 weekly (approximately $11,649 per month) over a 52-week term. This effectively improves their cash flow by 70%, saving them $28,351 each month and providing much-needed breathing room.

It’s important to note that this is a simplified example, and actual terms can vary based on fees, interest rates, and the risk assessment of the business. While cash flow can improve significantly, the total repayment amount may be higher due to these additional costs.

Why Not Just Pay Off the Entire MCA Balance with New Funds?

It’s a good question and a natural one to ask. The reality is that reverse consolidation isn’t about paying off your entire MCA balance upfront—it’s about providing immediate relief while restructuring payments for better cash flow.

MCA lenders and traditional lenders view risk differently. MCA providers approve quickly, often with minimal financials and an eagerness to deploy capital. Their focus is on short-term gain—keeping the debt on their books as briefly as possible to collect fees and move on. This model doesn’t cater well to long-term sustainability, which is why MCAs often feel like a "quick fix" but quickly become unsustainable.

Traditional term loans, meanwhile, require a comprehensive look at your financial health, which takes time and often doesn’t match the urgency of businesses already in the grip of MCA repayment. Reverse consolidation bridges that gap—it’s a timely solution that alleviates the immediate pressure while creating a more favorable structure moving forward.

Is Reverse Consolidation Right for Your Business?

Reverse consolidation can be a powerful tool, especially for businesses caught between a rock (unmanageable MCA payments) and a hard place (limited cash flow). However, it’s not a one-size-fits-all solution.

Consider a Reverse Consolidation If:

• You need an immediate reduction in weekly or daily payments, and waiting for traditional financing isn’t an option due to tight cash flow.
  

Consider Traditional Financing If:

• Your financials are healthy enough to support a longer underwriting process, and you can afford to wait for the benefits of an SBA loan or other long-term solutions. These options are often cheaper in the long run and more sustainable.
  

Need Help with Other Funding Solutions?

At Njord Capital Group, our priority is understanding your unique situation and recommending the best solutions for your business. Whether you’re exploring short-term, long-term, or other financing options to improve cash flow, our goal is to provide real, practical solutions to get you back on track. If you’d like to explore how these strategies can fit into your financial plan, don’t hesitate to reach out at info@njordcapitalgroup.com or visit us at www.njordcapitalgroup.com to explore our other financing products.