If you’re a small business owner, there’s a good chance you’ve heard of a Merchant Cash Advance, or MCA. Perhaps you’ve even used one to cover a cash flow gap, pay your employees, or take advantage of a business growth opportunity. It’s fast, easy, and convenient to get.
But here is the kicker: what might initially look like a lifeline can sometimes end up being a noose. If you are in a position where you are pulling money from multiple MCAs or are unable to keep up with your daily or weekly payments, you are not alone. The good news is you may not be aware that MCA debt restructuring is what you may need.
Let’s break it all down.
So, What Exactly Is MCA Debt Restructuring?
In laymen’s terms, restructuring MCA debt is when you essentially renegotiate the terms of your merchant cash advance(s) to make repayment easier for your business. It’s important to note that unlike a traditional loan, this is not a loan. Instead, this is an advance on your future sales and more often than not the factor rates and repayment periods are aggressive and the interest rates are sometimes higher than a traditional loan.
When restructuring your MCA debt, you’re working with a financial professional or firm to either combine multiple MCAs, lower your daily or weekly payments, extend or modify the term, or sometimes even reduce the final balance to be paid back.
The goal is to provide some relief to your business and not get caught up in the cycle of having to take out a new MCA to pay back an existing one.
Why Do Businesses Turn to Merchant Cash Advances?
Now, let’s talk about some of the reasons why MCAs are a popular form of financing in the first place.
Speed–funding can happen in as little as 24–48 hours.
No collateral-like traditional loans, MCAs usually don’t require personal or business collateral.
Approval–even businesses with bad credit or limited credit history can qualify with MCAs.
But there is a price. MCAs will usually have effective annual percentage rates (APRs) that range from 70%–350% and because of the regular and automatic deductions of revenue, a merchant cash advance can choke your cash flow. This is especially the case if sales slow-down and you have the MCA repayment due. This is where the importance of business debt relief begins.
When Do You Know It’s Time to Restructure?
Here are some warning signs that may indicate that your MCA debt needs restructuring:
You are using one MCA to pay another (a sign of an MCA debt spiral).Your daily or weekly payments are preventing you from paying for other business expenses.
You have missed payments or are threatened with lawsuits from MCA lenders.
You are concerned about default and the ramifications it may have on your business credit or personal assets.
If you identify with any of these, MCA consolidation or restructuring can help you regain control.
How Does MCA Debt Restructuring Work?
Here’s an uncomplicated review of how that works:
Evaluation of Existing Debt: A financial consultant will evaluate all of your existing MCA contracts, including both entire balances, repayment conditions, daily, or weekly obligations.
Negotiation with Lenders: They will then negotiate better terms with your MCA funders. This may include lower payments, lengthened repayment period, or even a settlement for less than you owe.
Establishing a New Agreement: Once a new plan is agreed upon, you will pay on a more sustainable payment plan affectedly achieving a single manageable monthly payment versus daily or weekly remnants.
Cash Flow Relief: This immediately reduces stress on your cash flow allowing you to take care of business normally, continue to grow, or even rebuild your credit.
Benefits of MCA Debt Restructuring
Let’s discuss the tangible benefits of restructuring your MCA debt below:
1. Better Cash flow
Daily debits can be devastating. Doing a restructuring can help you keep more of your revenue and give you the wiggle room necessary to operate your business correctly.
2. Escape from Default and Legal Issues!
Many MCA contracts have a confession of judgment clause, which allows them to sue without anything more than a first contact or written notice from you. Once you miss pay, your lender can now take legal action. Restructuring can help you to avoid this.
3. Comfortability
Running a business is stressful enough. Knowing you are not in a horrible cycle of debt with lenders can help relieve some of the pressure and mental stress.
4. Re-Grow!
When you are not treading water with payments, you can put funds towards marketing, hire again, and, in essence, return to being the business you were supposed to be.
5. Possibly improving your Credit
While MCAs are not reported as regularly as loans, by making your restructured payments it should show on a wider scope that you are responsible and can pay your bills on time.
Choosing the Right Partner for Restructuring
Not every debt restructuring organization is equal. You want one that has a depth of understanding on the challenges of MCA debt coupled with a successful track record of negotiating with MCA companies because each provider is very different in their practices.
This is where organizations like Zeus Commercial Capital become relevant. With years of experience helping business owners navigate MCA relief, Zeus understands how to develop a strategy that works and/or is tailored to you—not just a quick fix.
They are known for they transparency, ethical behavior, and they are committed to you to help your business be successful. They are not “sales” people pushing a product. They are concerned with helping you address a problem and do so with smart and tailored financial solutions.
Is MCA Debt Restructuring Right for You?
Here’s a quick checklist. If you can relate to any of these, MCA debt restructuring may be an appropriate solution:
-You have more than one MCA to deal with.
– Your cash flow is controlled by the payments you’re making on the MCA.
– You feel “stuck” and/or overwhelmed by your current repayment terms.
– You want to avoid taking another costly advance.- You’re truly committed to improving the state of your business’s finances.
If you related to any of these comments, taking the time to explore your options would be time well spent.
Final Thoughts: It’s About Taking Back Control
Ultimately, debt does not necessarily need to dictate the journey of your company. You’re correct that merchant cash advances can lead to some serious financial hurdles, but they do not need to be the end of the road. When you have the right mindset and someone to help you, you can restructure your finances, build your business back up and regain your financial freedom. MCA debt restructuring is about more than simply addressing the financials of your company – it is about giving business owners like yourself the breathing room to evaluate your situation, think clearly, and move the business on from the past.
If you are feeling defeated – you are not alone and there are ways to find relief. Whether it is finding a team like Zeus Commercial Capital or simply educating yourself on your next steps, the most difficult part is often the first step. And that is also the most powerful step to finding resolutions.
