Some businesses that have defaulted on 1 + mca cash advances in the past now understand the amounts and daily payments they can handle, and make. These programs are targeted for:
Missed cash advance payments
Delinquent or lapsed payments.
How to get another Cash Advance after not paying a previous one.
Step 1: Research companies online that offer merchant cash advances to businesses that have a previous default on an mca cash advance. Closely review restrictions for terms and conditions of approval.
Step 2: TIP – Repayment of a previously defaulted merchant cash advance as well as the amount of time since the default may affect your ability to be approved under different programs. Ask if there is a minimum time requirement since the cash advance default. Know the month and year your business first officially defaulted and the amount of the default. Default reporting drags on time wise in business and personal credit reports and makes it look like the default was much more recent than the original date the merchant cash advance company declared a default. Any payments you made on the default often do not appear on the business and personal credit reports a lender looks at and you will not get credit for any payments made. Provide documentation of the payments made.
Step 3: Select the programs that your business will most likely qualify for.
Step 4: Make contact with these lenders that fund with previous defaults. Try to verify how likely your business is to meeting the funding program conditions and requirements.
Step 5: Submit an application for funding. Provide all documentation you have that improves your chance for an approval. Provide documentation that proves the time since the default and if any payments were made.
Step 6: If approved, review terms and conditions. Rates and terms will not be as favorable for some time on your advances after defaulting.
FAQ Frequently asked Questions on getting an mca merchant cash advance after defaulting
Can I get a merchant cash advance after I defaulted on one?
About 6 months to 1 year after a default your business can be considered for financing, including a cash advance. Approvals and amounts depend on how well your business has recovered, it’s ability to repay and if any of the default was paid.
What if I did not repay any of the defaulted cash advance?
It is easier to get another cash advance if you repaid or settled the old defaulted cash advance. New lenders want to see your business made an effort to repay what it could or reach a settlement on the debt.
Does it matter if I defaulted on more than 1 advance?
You may still be able to qualify even if you defaulted on more than 1 previous advance. Approval depends a lot on whether you repaid any of the debt, how many you had, how long it has been.
The best merchant cash advance renewal terms: Benefits and steps
How to Direction:
Step 1 Talk with a representative at your current mca company. Give them your most recent three months business checking account statements and ask them to review your file in advance of their underwriting reviewing your request.
Step 2 Ask the representative to estimate the renewal amount, the number of months and rates. Ask for a better rate on a renewal.
How to Tip: If a renewal offer is made, ask for at least a 2% lower rate on each renewal. Some cash advance companies will not pre-review your file. If they won’t, let underwriting process your file.
Step 3 Tell your current cash advance company that you are shopping for a better offer and are comparing their offer to others.
Step 4 Apply with one or two competitors. If they beat your current mca cash advance companies rate and terms, take their approval offer and ask your current cash advance company to beat that offer. Review the funding stipulations to make sure you can provide everything needed to close.
Step 5 Decide which renewal is the better loan offer, complete the transaction and receive funding.
FAQ: How to get the best merchant cash advance renewal
How can I qualify for more money on a renewal?
All programs have the most aggressive approval offers on renewals with fast funding. Submit your application and provide
the most recent statements for same day offers.
What are your longest terms?
The longest terms are up to 18 months. Your business will get the longest offer available.
Monthly payment programs are up to 60 months now for qualifying customers.
Can you approve me after I was declined by my current mca for a renewal?
Yes, these programs specialize in approval offers for customers declined for renewals with their current mca lender.
More customers get an approval with the highest offers compared to other advance programs.
Do you match or beat other offers?
We match or beat other offers. Provide the approval information from a competitor to get started on a better approval today.
Before applying for a the advance renewal
Make a list of this specific information. Discuss it in advance of applying with all cash advance companies you want to talk to. You may be able to either pre-approve yourself or pre-decline yourself before applying. It is better to know you will likely be declined before applying, rather than applying and being declined.
If the cash advance company is not willing to seriously pre-review your file, you can choose to apply anyway. Your goal is to get as many cash advance companies to pre-assess your file as possible. Do not demand they do in order to apply. If you demand that the cash advance company pre-reviews your file, you may be eliminating yourself from the best option available.
Is your cash advance renewal not enough? Then a 3rd position cash advance for instance, is another option.
Get started on safer, better solutions. Apply Now, below: Secure DocuSign 30 Second Application
Call Tel: 1-919-771-4177.
FAQ frequently asked questions on closing a business checking account to stop mca cash advance payments
Can I close my business checking account to stop a cash advance daily debit?
Closing your account is not allowed and may be considered an intentional default. Call the cash advance company and try to work out a solution. Look at alternatives when the mca company will not give you any repayment plan you can pay.
What will the cash advance company do if I close my account without telling them?
It can be called an intentional default and you can be sued. The cash advance company is much more likely to take legal action against you and your business through a lawsuit filed in state court in the county your business is located in. There could be accusations of fraud if an intentional default is claimed by the mca company.
What are better options?
Working with the advance company to negotiate a lower payment is almost always better than closing the account. That should only be seen as a possible last option under extreme circumstances. In many cases, the bank has called the loan due and you must come to a negotiated solution with the lender to avoid a default.
The following is what many debt settlement companies tell customers to do.
Sign a contract with the debt settlement company. The contract often allows the debt settlement company to represent your business in communications with lenders and mca merchant cash advance companies sometime after your have missed mca payments.
Pay the debt settlement company to start the process.
Close your business checking account per the instructions or advice of the debt settlement company
Allow the debt settlement company to continue to represent you in settlement talks.
There are several problems and possible severe consequences to closing your business checking account to stop paying cash advances or loans and signing a contract with a debt settlement company.
The lender can also consider this an intentional default or fraud.
The lender or mca company can file a certificate of judgement and may also be able to debit funds in other accounts you may have at the same bank or other banks
You may not be able to talk to the lenders or cash advance companies directly any more even if you want to. Language in the contract may not allow you to talk contact the funder directly
You may not have influence over the final settlement agreement.
The contract you sign take power and decisions out of your hands and puts much of it in the hands of the debt settlement companies.
Other options and alternatives to contracting with debt settlement companies and closing your business checking account
Contact the lenders directly and try to discuss your financial situation and reach an agreement with the lenders yourself.
Payoff the merchant cash advances with other loans if the balances are low enough
Discuss your financial situation with a business attorney
The advantage of some of these options in general is that they either show you are sincerely trying to work with your lenders to settle your debt, are forming a coherent strategy to do so, or have officially determined that you cannot pay. These also have advantages over closing your account.
Your business can get an mca merchant cash advance renewal with lower rates and longer terms by understanding tips on cash advance qualifications and guidelines.
The same programs also offer mca merchant cash advance renewals with rates as low as 12% to 15% and up rate factors and longer terms if your business qualifies.
Frequently asked questions FAQ How to get an mca merchant cash advance with lower rates.
How low of a rate can I get?
The lowest rates start at 8% for the best credit, strongest cash flow and longest time in business. Rates in the low teens and higher are more common for most businesses.
Can we switch to a lower rate immediately?
You can by paying it off with a lower rate advance or regular loan. Using the funds from your new funding to payoff the balance on your old advance works especially well when the balance is low.
Can we get a better rate with a regular business loan?
Regular business loans usually do have a lower rate. They may also require a personal credit bureau score of 600 or higher. Time in business of 1 year or longer is needed for lower rate business loans.
There are cash advances you can use like a line of credit. Your business can borrow, repay, and re-borrow repeatedly. You can borrow from the line as soon as 30 to 60 days after closing with good repayment history.
Other options to get better terms
Consider other loan types such as asset based or longer term loans if your credit score is higher
Increase your personal credit score by review your credit and disputing any inaccuracies
Establish a business credit profile and build business credit
Maintain business financial that show your business has a net profit that is more than any new loan payment you are applying for
We specialize in these offers. We will help you structure your existing cash flow as well to insure your payments can safely be made. Apply below now to get your offer and funding quickly!
Step 1: Review your business funding needs and cash flow. How much more can your business afford to repay per day and per week?
Step 2: Determine the approval amount your maximum daily repayment equals. The average cash advance is 9 months or 189 days. If the maximum additional daily payment your business can afford is $100 per day then $100 X 189 = $18900.
Step 3: Select the funders with the products that best match your businesses needs as well as credit and time in business.
Step 4: Contact the best second position cash advance options. Discuss your business profile with the representative. Select the best matching program for your business and apply.
Step 5: When approved look at the daily or weekly repayment and the mca loan contract. If you want to close, then provide all the required closing documentation and complete the transaction.
Step 6: Complete the transaction and receive funds into your business checking account.
Frequently asked questions FAQ: On 2nd position merchant cash advances.
What is a 2nd position cash advance?
When a business takes out a cash advance while having an existing one they are paying on. The business will then have a 2nd advance that is in position behind their first one and make payments on two. The second company considers the existing payment into their decision for how much and long to approve another mca for you.
How can I get a second position for more money?
Show more cash flow through other checking accounts or financial statements. Proof that you will soon payoff other existing debt is another way. Your current first position cash advance may be paid off if the balance is low enough. This allows for even more money on top of the amount to payoff the 1st position.
Can I get a lower payment than I have now?
Ask for the lowest payment when applying so that the longest term offer will be made, and thereby lowest payment. Terms as long as 18 and up to 60 months are available to get the payment down the most.
How important is credit?
Credit is a minor part of the approval. The strength of company cash flow and ability to make the new payment are the most important qualifiers.
Find the lowest deposit month of your last 3 months business checking account deposit totals. Example, $50,000.
Take that figure and multiply it times .20. This is approximately the amount you should conservatively be taking for an mca merchant cash advance.
Contact mca companies and apply. If you are approved for more than your recommended safe amount, do not take more unless you are sure you can make the payments.
Close the cash advance and funds are deposited into your account.
How to calculate the amount
Below is an example of how to estimate a conservative funding amount.
Look at your most recent (3) months business checking account statements. Find and add the amount of your total deposits. Most banks give you one amount and list it as “total deposits”. Some banks will also have a separate entry for electronic deposits. If your bank itemizes different deposit types, add them up. Example figures are below.
December total Deposits $25,000
January total Deposits = $15,000
February total deposits = $19,000
The lowest month is January at $15,000 in total deposits. Multiply $15,000 X .2 = $3,000. $3,000 is a safe and conservative amount.
A more aggressive amount is $15,000 times .5 = $7,500.
Figure out your daily payment. On average, the term of an mca merchant cash advance is approximately 6 months. For $3,000, your daily payment will be approximately $3,000 X 1.35 % (6 x 21) = $155.77 per business day. There are approximately 21 business days per month. The rate factor used here is 1.35.
If you can handle this payment for 6 months, you can close the transaction.
Look at the bank statement payback months from last year. Can you afford the new payment if your sales are the same this year?
Other factors that affect offer and approval amounts:
Depending upon other factors such as time in business, average daily balances and amount of revenues, the funder may offer a much larger business loan or advance. Your business may be able to handle a larger amount. The purpose here is to determine what is a conservative and safe amount.
More net income with higher deposits
Businesses with higher gross deposits can often afford a higher advance. This is because the same percentage of disposable income equals a higher dollar amount. If your business has fixed total expenses of $7,500 out of $10,000, then it has disposable income of $2,500.
When gross deposits are $100,000 and fixed expenses are $75,000, then disposable income is $25,000.
In the later case, a business will be able to handle a larger merchant cash advance, because their total gross deposits are higher.
Many businesses continue to take out merchant cash advances by renewing them once they are paid off. If your business is taking out a merchant cash advance for the first time, try a lower amount first to make sure your business has the cash flow needed and can handle it. If so, you can take out a larger amount on a second advance.
FAQ, Frequently asked questions: Can my business afford an mca merchant cash advance?
How can I get an mca cash advance safe for my business with a payment I can handle?
Use the formula above to figure out how much of a daily payment your business can afford. Also consider if the amount per week and month fits into your business’s budget. Multiply the daily payment times 5 for the weekly total and times 21 for the monthly total. Daily mca cash advance payments should not be more than 20% of total business deposits.
Can I lower the daily payment when my business has a slow month?
Take the average monthly sales of your 3 lowest months per year. The cash advance approval you accept and close should be 20% max of that 3 month average and that will be affordable for your business during slow months.
How can we figure out if we can repay a merchant advance for our seasonal business?
Look at last years sales during the same months you would be repaying a new cash advance now. Take the average monthly sales during those same months last year and multiply it times .20, which equals 20%. That is the affordable approval amount a seasonal business can pay.
Your payments can be safely lowered or eliminated without hurting any of your relationships, including vendor relationships. No delinquencies or disputes with your existing cash advance companies, upfront payments or paying into an account to solve the problem.
Daily or weekly payments are reduced 25% to 50%. Some options reduce payments up to 75%. Apply below for the fast track to affordable mca payments for your business:
Avoid closing your business checking account and being declared in default. These lower daily payment options are safe. They typically prevent a coj certificate of judgment from being filed against your business when you act immediately.
FAQ, Frequently asked questions:
Question: How are my payments lowered?
Answer: The daily and weekly payments are lowered through a payoff, restructuring or consolidation. Your business will be paying a much lower amount for a longer amount of time.
Question: How much lower will my payments be?
Answer: Payments are lowered 25% to 50%. Some get payments lowered up to 75% with a monthly payment for 2 to 3 years. There are not any negative actions on your current advances. The advances you have now do not go delinquent, charge off or default.
Question: Can I get my payments lowered on more than 1 advance?
The programs lower or pay them all off, even if you have several advances. Your payments are reduced the maximum amount based on your current situation.
Question: Does lowering my daily payments cause any new problems with my existing advances?
No. There should not be any problems if you are approved for one of these programs and payoff the other advances. Act before you miss payments, are declared in default and cannot qualify for the better programs. Your current advance companies are not negatively affected or contacted other than to pay them off.
Question: Do I have to keep making the full daily payments like the mca company is telling me?
Apply for programs that consolidate or refinance them for a much longer term. Continue making your daily payments on the current advances if possible until you are approved. You want to avoid missing more than two or three payments in a row or be declared a default.
Is your mca payment is too high? Reduce it without settlements, coj filings, or having to default. No closing accounts or harming your business reputation.
FAQ’s Frequently asked questions on how to get a longer term merchant cash advance
Are merchant cash advances longer than a year available?
Advances over a year long are available. Terms up to 18 and 24 months are approved for qualifying applicants in most industries.
What are the requirements for a longer term merchant advance?
Time in business over 1 year and credit scores over 600 are usually needed. Other guidelines are good average daily business bank balances, and limited or no overdraft and nsf activity.
Can you payoff my shorter term advance with a longer advance?
A shorter term advance that has a low balance can be paid off. If the approval for the longer term advance is higher than the payoff of your current short term advance, you will get the difference funded to your business checking account.
Longer term merchant cash advance and business loan options.
Monthly payment options.
Many programs have a monthly payment option. Monthly payment business loans are harder to get and be approved for. Credit scores also have to be higher, often 660 or higher. The minimum time in business will need to be a year or more. The average daily balance of the business checking account has to be $2,500 to $3,500 or more.
Leaseback real estate
If your business has commercial real estate with equity in it, one option for much longer financing is to leaseback real estate. Funding amounts will usually be much higher and the terms are much longer, as long at 5 year or more. Payments will be monthly instead of daily or weekly. There can also be major tax benefits to this approach. Contact your tax professional for details using this method.
Asset based loan
Another option to getting a longer term merchant cash advance or longer term funding is to convert the merchant cash advance into something else. That involves a payoff. The new funding can payoff the old funding. One option is a loan against equipment. This type of funding is 24 to 48 months with a monthly payment. Equipment such as construction equipment, semi-trucks and also some types of machinery may qualify.
Accounts receivables financing
Accounts receivables financing does not directly get the merchant longer term financing. However, it can be an excellent way to improve cash flow and eliminate the need for a merchant cash advance or short term loan in the first place.
If a business can improve their cash flow and not have to take out another short term advance, they can avoid taking out a business loan. This type of financing should be seriously looked at when funding options are considered.
“I don’t want accounts receivables financing” or “I don’t want factoring”, some clients tell us.
Many merchants are resistant to merchant cash advance financing. They are afraid their client accounts will not like it and they will lose that account.
Merchants can tell their clients that their accountant recommended factoring to improve cash flow. They can call their client and say:
“My accountant told me to look at factoring. Do you all offer that?”
This question is more of an indirect approach and less threatening to your customer. If they do not want to factor, they will feel less pressured since it was your accountant’s idea and may just say no.
Chance are very high that your customer is already factoring for other clients like your business and your business is not the first one they are would factor.
Extending merchant cash advance terms
Some final options include calling the merchant cash advance companies and asking for longer terms. This is less desirable because it means that you will not be fulfilling the contract terms as originally agreed. Therefore, the merchant cash advance company does not have to agree to longer terms and can consider doing so a default.
Longer term merchant cash advances are not easy to get. The entire risk model on which it works is based on short term financing with the customer. Their risk analysis shows that past due accounts and charge off’s increase a lot if the term is over 1 year.
Funders that do merchant cash advances do not want a long term relationship with their clients for one funding. They want renewals and also repeat business but not a long term with each transaction.
This is especially true if the merchant already has one cash advance. For merchants that already have one cash advance, merchant cash advance companies are reluctant to offer a longer term on any new advance.
Merchant cash advance Qualifications and Guidelines are extensive. The amount of total monthly deposits is the #1 qualifying factor in being approved for an mca cash advance. But there are several other important merchant cash advance qualifications and guidelines.
The biggest qualifying factors are: Total monthly deposits, time in business, credit, cash flow along with several more profile characteristics further below.
Not sure where you would fit?
Get one of our qualifying experts work 1 on 1 with you to get you approved and with the best program your business can qualify for. Apply below now.
FAQ Frequently asked questions on Merchant Cash Advance qualifications and guidelines
What are the most important qualifications for approval?
The average of the last 3 months total deposits to your business checking account is the most critical. Your average daily bank account balances along with time in business, type of business and limited overdrafts and negative balances are other important criteria.
How important is credit?
Bad credit and low credit scores usually do not make a difference between an approval or decline. However, a better credit score helps your business get more money, longer terms and better rates.
Is a minimum time in business needed?
At least 3 months time in business and business bank statements are needed. If your business has just under 3 months time in business you can send a month to date daily activity printout of the current month to request an offer.
Top Customer Profile Issues
500 + bureau score
Many programs have a minimum credit score requirement of 500. Some programs require a credit score of 525. Other programs either do not have a credit bureau score requirement, or have a 550 minimum.
51% + Ownership
Many MCA Merchant Cash Advance programs and lenders require at least 51% ownership to close cash advance funding or other loans. Another requirement under some programs is to have any owner with 25% or more ownership listed on the application and also be a signer at closing.
Minority ownership means any owner with less than 50% ownership. This can also mean an owner that has between 1% and 49% ownership in a business or enterprise. Another option some lenders offer is to approve and close financing with owners who are less than 50% owners. However, this is not the norm and also rare and hard to find.
6 months time in business
Many lenders and funders have a minimum time in business requirement of 6 months. Others lenders that have more than a 6 month requirement have a 12 month, or 1 year time in business requirement.
Less than 6 months time in business
Another main minimum requirement is 3 months time in business by some lenders. Some lenders and mca merchant cash advance companies do not have a minimum time in business requirement but need at least 2 months proof of business income, or 2 months proof of revenue. These are considered start up businesses. Find more information on start up businesses here.
$10,000 or more per month in deposits
A high percentage of funders require the merchant to have a minimum of $10,000 or more per month in deposits. Some merchant cash advance companies offer funding programs that require only $5,000 or $7,500 per month minimum deposits. However it is harder to find mca merchant cash advance companies that offer funding with the business depositing less than $10,000 per month. We can place your business in programs that only require $5,000 to $7,500 + per month in deposits.
5 Overdrafts or NSF’s or less per month
Another frequent requirement is for the business to have no more than 5 Overdraft or NSF occurrence items per month. In 2017, some MCA Merchant cash advance companies began to offer programs with 7 or 8 Overdrafts or NSF occurrences per month allowed, but this is also not common.
Less than 5 Deposits per month
Most funders require 5 or more deposits per month. A few require less, such as 3 or 4, but the majority still require 5. Merchants call in and complain that they were denied for too few deposits even though they had 5 or more deposits per month. How can that happen? To find out the answer, we need to look at what lenders and mca merchant advance companies consider a “deposit”
What is the definition of deposits per month?
A source of a deposit is from revenue the business has generated from sales and true business operations. The following is a list of deposits that are not considered business deposits:
1) Small dollar amounts such as less than $100. This dollar figure can be higher, even $200 or $300 and funders may not consider that deposit because the dollar amount is too low. 2)Transfers from savings accounts or other accounts are also not considered deposits. The reason for this is that the funder does not know if the original source of those transfers are from real business revenue. 3) Credits, rebates and other non revenue deposits. Many times, businesses will receive small credits and rebates from other merchants that are not true revenue and are not considered such by lenders.
Most mca merchant cash advance companies have industries that they will
not lend to and restrict funding to. You can ask in advance if your industry is one of those types of businesses they will not fund. For more information see a list of restricted industries here
Many of the criteria listed above are minimum criteria. Many lenders and merchant cash advance companies list a minimum criteria but may still decline the merchant even if the company applying meets that criteria.
In their analysis, if your company profile meets merchant cash advance qualifications and guidelines criteria, they will consider the request, but might still not approve it.Increase your chance of getting business funding greatly by knowing ahead of time what merchant cash advance qualification and guidelines typically are. We specialize in identifying which mca programs their business will qualify for.
Review tips on qualifying and lowest rates and terms on a 2nd position or 3rd position merchant cash advance. Read the steps and tips further below to get approved with the best mca terms with the lowest rates.
Many businesses have short term daily or weekly repayment advances, known as Merchant Cash Advances. The repayment on these advances are short term, usually between 2 and 18 months. Some businesses have several advances with daily debits at the same time. This is causing significant cash flow problems for many businesses. The following is an overview of how the best Merchant Cash Advance Consolidation Programs work.
Consolidation programs are being offered by some alternative funders to improve or rescue businesses from cash flow emergencies. Getting this help is sometimes the difference between the life and death of some businesses.
Beware: Some Merchant Cash Advance Companies are advertising Merchant Cash Advance Consolidations when they really end up only offering you another advance.
If you need a real Merchant Cash Advance Consolidation & not another advance, discuss this with the lender upfront. Some companies use this lure to simply offer another advance. It depends on the company. Some Companies will try to consolidate, but you may not qualify. If your business has 3 advance, your business may not qualify for a consolidation of all 3, but may qualify for a Consolidation of 2 of the 3 Advances. The Advance with the best terms can be left in place the the other 2 advances may be Consolidated. They are paid off, the term is extended and the daily mca merchant cash advance payments are lowered.
However, beware of companies that advertise a Consolidation which could be a bait and switch to giving you another advance. Try to determine if they are really trying to Consolidate, or making no effort to Consolidate and just want to sell another advance.
There generally are 4 basic types and approaches of MCA Merchant Cash Advance Consolidations. This includes cash flow relief and debt settlement company options.
Merchant Cash Advance Consolidation Type 1:
This approach is a true effort to reduce the daily payments business merchants have to make. The Consolidation or “relief” lender covers the payment of the Merchant’s existing advances by depositing the weekly total of their daily payments into the Merchant’s business checking account once per week. The consolidation lender then debits a lesser daily amount than the daily total of the Merchant’s other advances. This reduced daily repayment for the Consolidation is normally between 20% and 50% lower than what the Merchant is currently paying.
The repayment of the lower amount usually continues for a few months longer than the remaining time the merchant is scheduled to pay the existing advances. The Consolidation lender reduces the daily payments for the Merchant by extending the term of the debt. This arrangement gives businesses cash flow relief. For this type of financing, complete the contact information below.
The following is an Example of how this 1st type of Consolidation works:
Acme, Inc. has 3 daily repayment Merchant Cash advances. Each has a balance of $25,000 and will continue for 20 more weeks. The daily payment on each is $250 for a total daily payment of $750. This equals $3,750 per week and $15,000 per Month on average.
For this type of cash flow relief type Consolidation, the payments are usually reduced in the 25% to 50% range. Let’s assume a 50% reduction is offered. The lender will be referred to as the Consolidation lender.
The Consolidation lender deposits $3,750 once per week into the Merchant’s account. The Merchant then begins repaying the Consolidation lender $375 per day instead of $750. This saves the Merchant $375 per day, $1,875 per week and $7,500 per Month. The Merchant continues paying 40 more weeks.
The benefit to the Merchant is that they have improved their monthly cash flow by $7,500 per Month.
Merchant Cash Advance Consolidation Type 2:
The second type of Merchant Cash Advance Consolidation is less common. It is a true Consolidation. The business Merchant provides the Consolidator the total payoff balances of all of their existing advances. The Consolidator verifies the payoff and then pays off the existing advances. The Merchant then begins to repay only the remaining one Consolidation debt. The Merchant also pays the Consolidation lender for a longer period of time. This allows the Consolidation payment to be lower than what the Merchant had before.
The following is an Example of how this Type 2 approach works:
Acme, Inc. has 3 daily repayment Merchant Cash advances. Each has a balance of $25,000 and will continue for 20 more weeks. The daily payment on each is $250 for a total daily payment of $750. This equals $3,750 per week and $15,000 per Month.
In this type of cash flow relief Consolidation, the Consolidation lender pays off each Merchant Cash Advance for a total of $75,000. The Merchant then begins paying the Consolidation company. The amount and terms of the repayment are lower, as in the 1st Example of $375 per day. The term is now 20 weeks instead of 40.
Merchant Cash Advance Debt Restructuring Type 3:
In this case, a Merchant has several merchant cash advances and is having trouble repaying them. The Merchant either cannot qualify for the weekly cash flow reduction and Consolidation program, or wants a different option.
The Merchant still must have cash flow relief. In this method, the Merchant contacts their existing MCA Merchant Cash Advance lenders directly. The Merchant tells the Merchant Advance companies that they soon will not be able to continue paying the daily payments. They need a pause or reduction in the daily payment, or both. Some Merchant Advance companies are more receptive to this request than others. Each request will be considered on a case by case basis and the final decision will be at the discretion of the lender.
It is important for the Merchant to make a strong case for a reduction or pause in payments. They cannot be too demanding but they must give strong reasons. The Merchant Cash Advance lender must know the Merchant truly has short term cash flow issues it won’t survive. By addressing the problem now, the Merchant and Merchant Advance company both win. The Merchant can be put in a position to repay the remaining advance, and the Merchant Advance company will can be repaid. If an agreement cannot be reached, the Merchant will miss payments or default.
Merchant Cash Advance Debt Restructuring or Consolidation, Type 4:
Debt Restructuring companies or options can be considered the last and most dangerous for Merchants. This should only be considered if the Merchant cannot get a Consolidation program and is not able to renegotiate better sustainable repayment terms with their existing advance companies.
In most cases the Advance companies will work with the Merchant as much as possible to reach a workable solution. If that does not happen, the Merchant may be forced to consider remaining alternatives.
There are a few final options:
The Merchant has talked with their Merchant advance companies and could not come to an agreement to reduce or pause payments enough. They determine they cannot continue to make the payments much longer. The Merchant can hire a business Attorney to negotiate a settlement or reduced payments with the Advance companies on their behalf.
The Merchant contracts with a 3rd party Debt Settlement company. This option may be the least desirable of all the options because debt settlement companies may take actions that are not in the Merchant’s or Merchant Cash Advance company’s interest.
A Debt Settlement relief company often tells the Merchant they will get the daily payments to stop and tells the Merchant to sign a contract for them to negotiate with the Merchant Advance Companies. The Merchant is often told to begin paying the 3rd party debt settlement relief company instead. They may tell also tell them to close the business checking account from which the daily payments are being debited and open a new account at another bank to pay them. This is almost always a major mistake and may cause both the Merchant and Merchant Advance companies the worst problems.
Debt Settlement Relief Company Pitfalls
These scenarios may cause several major problems for the Merchant. The Merchant cash advance contracts are always between the Merchant and the advance companies, not the Debt Settlement companies. The MCA companies are under no obligation to talk to or agree to anything the debt settlement companies are asking for. Knowing this, some debt settlement companies call the Merchant Cash Advance companies, tell them their customer cannot repay and the Merchant Cash Advance company better accept a very low settlement amount rather than get nothing. The Merchant may have begun making payments to the debt settlement company and may still not be much better off than they were before, if at all.
What is a Certificate of Judgement?
The Merchant cash advance company may have a COJ, certificate of judgement. If the Merchant closes their business checking account from which the daily payment is debited, it often considered an immediate default per the contract. The Advance company may be able to get a Court judgement within 1 to 2 days.
This judgement is used to debit funds from any account the Merchant has with any bank.
The Debt Settlement company should be concerned with this. They may only be concerned about the contract they have with the Merchant to pay them now. The debt settlement company may provide little or no assistance to the Merchant to deal with these consequences. Payments are made to the debt settlement company in the short term leading up to the Merchant being hit with severe actions by their existing Merchant Advance companies.
With some of this information, consumers whose businesses have Merchant Cash Advances may be able to better determine the best Merchant Cash Advance Consolidation programs or cash relief programs they should choose. Merchants should do further investigation on their own. Each situation and contract may be different and call for different decisions and actions.