If your business is juggling several short-term loans, merchant cash advances, equipment financings and lines of credit, you already know the feeling. Money comes in, and before you can use it to grow, it is whisked away by ACH debits to a handful or more of transactional business funders and lenders. Business is profitable on paper, yet always short on cash.
There is a better business financing structure. The funding brokers and lenders you are working with now do not have the experience or ability to offer 24, 36 and 60-month terms on a business credit facility starting at 13% to 16% cost of capital. They are in the business of short-term, fast-moving and expensive capital, not long-term growth capital. By consolidating those individual transactional financings into a single, longer-term business private credit facility, many small and mid-sized businesses can reduce their cost of capital by one-half to two-thirds, dramatically lower their monthly and annual total debt service payments and free up cash that can go straight back into investment and operations.
This article explains how that works, why private credit investment funds and boutique commercial banks are often the right partners for it, and what the process looks like when an experienced business finance advisor manages the process on your behalf.
If your business has taken on expensive business debt like expensive term loans or merchant cash advances (MCAs) with rates that quietly eat your profit margins, you already know the feeling. It doesn't show up all at once. It shows up in the space between what you thought you'd have left over and what's actually sitting in the account on a Friday afternoon.
The good news is that expensive business debt is rarely a dead end. It's a solvable problem. But solving it takes more than hope, and it takes more than trusting the first friendly voice that calls you promising a way out. This article walks through what actually gets a business owner out of the expensive business debt cycle, and just as important, what keeps well-meaning business owners stuck in it for far longer than they need or want to be.
The problem is rarely that proper business financing doesn't exist. The problem is that most owners shop for it the same way they shop for office supplies: quickly, under pressure and based on whoever answers the phone first. That approach works fine for paper towels. It can be disastrous for capital.
This article walks through five of the most common and most expensive mistakes business owners make when securing funding. None of them are exotic. All of them are avoidable. And most of them share a root cause: treating financing as a transaction to be closed rather than a relationship to be managed. If you recognize your business in any of the sections below, that is not a reason for alarm, it is a reason to make one phone call and start correcting course before the next renewal, the next stack or the next "great rate" offer lands on your desk.
If you are currently paying excessive annualized rates on a 6 to 12-month payback period for business funding such as merchant cash advance (MCAs) or short-term business loans, you are not stuck, you are misinformed and have been misled. Many business owners with strong personal credit (680, 700 and higher) and a stable operating history are placed into expensive, short-term financing not because it is their best option, but because it is the fastest and most profitable option for the broker who arranged it.
This article pulls back the curtain on the specific tactics these brokers use, from the bait and switch to the fake “unsecured” loan pitch to the commission structure that quietly decides which lender gets your business. If you are currently shopping for capital, or you already have a deal on the table, understanding these tricks could save your company from a financing decision you cannot undo.
Benefits of Refinancing & Consolidating Business Debt + Merchant Cash Advance (MCA) loans include:
One monthly payment
Fixed interest rate
One lender
Flexible terms
Working capital
Debt Refinancing consolidation is the process of replacing multiple loans with one single loan. This reduces the number of creditors you are paying by consolidating your debts into one payment through a single lender.
1-Minute or Less Qualification for Business Debt & Merchant Cash Advance (MCA) Refinancing
Payoff all Business Debt & Merchant Cash Advance MCA debt to a term loan
One monthly payment on a 24 to 60-month term loan
All business debt paid off to a $0 balance at closing
Interest rates 14% to 18% (plus closing costs, PIK and legal fees)
Short-term Refinance (12 to 18-month term loan) can close in 3 to 5-business days
Long-term Refinance (24 to 60-month term loan) can close in 3 to 4-weeks
Working capital is available at closing in Refinance consolidation transactions
A new, on-going relationship with a Capital Partner (not just a one-time transaction)
Interest-only for 6 to 9-months after closing is available
Reconcile your Merchant Cash Advance MCA contract and payments
HAVE YOU RECONCILED YOUR PAST AND FUTURE MCA CONTRACT PAYMENTS?
Over payments on your MCA contract(s) may be present right now.
Your business may be owed over payment credits or refunds.
YOU MAY BE OWED MONEY FROM MERCHANT CASH ADVANCE MCA COMPANIES!
STOP TAKING MERCHANT CASH ADVANCE (MCA)!
MCA-taking allows MCA companies to steal your top-line sales.
When you take an MCA, the “factor” rate that you pay is directly related to the amount of top line sales that you are giving away.
$100,000 MCA at 1.38x “factor rate” is the SAME AS IMMEDIATELY GIVING AWAY $38,000.
That is why you don’t have enough cash flow.
That is why you cannot afford the daily or weekly payments.
DEAL TABLE: $1,370,000 IN MCA LOANS PAID OFF TO A SHORT-TERM (18-MONTH) “MCA RELIEF” REFINANCE + $750,000 IN WORKING CAPITAL
SaaS and I.T. Cloud Services Company with Merchant Cash Advance MCA loans and other high-interest, short-term debt totaling ~$1,370,000.
The Company was paying ~$197,072 Total in monthly payments to MCA companies and short-term debt providers.
At closing, all MCAs were paid off for a discounted amount and zero-balance letters (ZBLs) were issued to the Company from the MCA loan companies.
The Company’s new TOTAL monthly payment is now $79,500 (payment reduction of over 60%, down from $197,072), and company was given $750,000 of working capital at closing.
It’s is extremely important to understand the true Cost of Capital when you are considering taking on any type of business debt financing.
This is the #1 reason that MCA loans destroy good, profitable businesses since MCA loan’s Cost of Capital is extremely high compared to all other business debt financing options.
DEAL TABLE: $500,000 IN MCA LOANS PAID OFF TO A SHORT-TERM (18-MONTH) MCA RELIEF REFINANCE + $100,000 IN WORKING CAPITAL
Real Estate Management Company with Merchant Cash Advance MCA loans and other high-interest, short-term debt totaling ~$500,000.
The Company was paying ~$134,972 total monthly payments to MCA companies and short-term debt providers.
At closing, all MCAs were paid off for a discounted amount and zero-balance letters (ZBLs) were issued to the Company from the MCA loan companies.
The Company’s new total monthly payment is now $64,000 (payment reduction of over 52%, down from $134,972), and company was given $100,000 of working capital at closing.
DEAL TABLE: $900,000 IN MCA LOANS PAID OFF TO A LONG-TERM LOAN + $500,000 IN WORKING CAPITAL
General Contractor and Builder with Merchant Cash Advance MCA loans and other high-interest, short-term debt totaling $900,000.
The Company was paying $123,842 total monthly payments to MCA companies and short-term debt providers.
At closing, all MCAs were paid off for a discounted amount and zero-balance letters (ZBLs) were issued to the Company from the MCA loan companies.
The Company’s new total monthly payment is now $48,612 (payment reduction of over 60%, down from $123,842), and they were given $500,000 of working capital at closing.
Merchant Cash Advance MCA refinance and consolidation pays off all your MCAs to a zero balance and stretched your business debt over a longer period, therefore lowering your total monthly debt payments by 50% to 90%+.
We always prefer to hear more details of your business financing situation and goals, now and in the future, prior to making specific recommendations. Please book a consultation call here —>
Kanjorski Partners LLC’s consultants and advisors are equipped to handle most any MCA stressed and/or distressed situations.
Generally we have two types of MCA refinance programs and processes:
1) Short-term MCA Relief (Payoff and Consolidation to a Longer Term)
3 to 5-business-day process (app to closing) for MCA payment relief and working capital
MCAs paid off to a zero balance at closing and UCC removed
Cost of capital ranges from 18% to 28% (pending underwriting risk assessment)
Weekly or Bi-weekly payment options (determined in underwriting)
12 to 18-month term (pending underwriting)
Reduce your total monthly debt service payments by 50% to 60%
2) Long-term Full Refinance (Payoff and Refinance all business debt to a Longer Term)
Full refinance and payoff of all business debt (will leave a bank, SBA or AR factoring relationship in place)
3 to 4-week process (app to closing) for a full refinance (recap) of all business debt
Working capital provided at closing (determined in underwriting)
One monthly payment
2 to 3-year term (and in some cases and industries, 5 to 7-year+ or longer)
SBIC, private equity and investment banking is also available for special situations
MCAs paid off to a zero balance at closing and UCC removed
Cost of capital ranges from 12% to 18% (pending underwriting)
Monthly payment is principal and interest
Interest only (IO) “relief” period for 6 to 9-months after closing
Reduce your total monthly debt service payments by 60% to 90%
SHORT-TERM MCA REFINANCE —> 12 to 18-month term —> weekly and/or bi-weekly payments
—> 3-5 days application to closing —> APPLY HERE
LONG-TERM MCA REFINANCE —> 24 to 36-month term —> monthly payments
—> 2 to 3-weeks application to closing —> APPLY HERE
“…Defaulting (missing or stopping payments) on a Merchant Cash Advance (MCA) can potentially drain your business’ bank account, trigger aggressive collection action under Uniform Commercial Code (UCC) and civil litigation. Default under the provisions of a Merchant Cash Advance (MCA) agreement can put your business and you personally in a difficult position.
If you cannot continue to afford your Merchant Cash Advance (MCA) payments,
there are solutions for you and your business!….”
“….Merchant Cash Advance (MCA) is a trap for small businesses.
Easy to get into and hard to get out of Merchant Cash Advances (MCAs) should be the last resort for small business owners that need funding quickly or who may not qualify for a traditional bank loan.
Before you consider taking a Merchant Cash Advance (MCA), please seek other alternative (non-bank) financing as there are much better options out there for your business…..”
1) MERCHANT CASH ADVANCE (MCA) REFINANCE:
Refinance and payoff your Merchant Cash Advance with a new term loan or line of credit
https://www.kanjorskipartners.com/merchant-cash-advance-refinancing-consolidation
2) MERCHANT CASH ADVANCE (MCA) RESTRUCTURE:
Re-negotiate your Merchant Cash Advance agreement(s) to longer terms with lower payments that your business can manage and afford to pay back on a new weekly, bi-weekly or monthly payment schedule
https://www.kanjorskipartners.com/merchant-cash-advance-and-business-debt-restructuring-services
Continue to full post….
Read our post to hear about all of your options and to setup a
FREE consultation call for Merchant Cash Advance (MCA) Solutions…..
Merchant Cash Advance (MCA) Debt Refinance-
https://www.kanjorskipartners.com/merchant-cash-advance-refinancing-consolidation
Merchant Cash Advance (MCA) Debt Restructuring-
https://www.kanjorskipartners.com/merchant-cash-advance-and-business-debt-restructuring-services
Merchant Cash Advance (MCA) Help & Information for Business Owners-
https://www.kanjorskipartners.com/merchant-cash-advance-information-and-resources-refinancing-restructuring-stop-merchant-cash-advance-lower-merchant-cash-advance-payments
“…Merchant Cash Advance (MCA) has many disadvantages that you should be aware of before you enter into a MCA receivables purchase agreement. Weigh these disadvantages against the potential benefits.
1. MERCHANT CASH ADVANCE (MCA) IS AN EXTREMELY EXPENSIVE FORM OF FINANCING
2. MERCHANT CASH ADVANCE (MCA) IS A SHORT-TERM FINANCING OPTION, NOT A SOLUTION
3. MERCHANT CASH ADVANCES (MCAs) DO NOT SOLVE CASH FLOW PROBLEMS
4. SELLING FUTURE SALES IN A MERCHANT CASH ADVANCE (MCA) AGREEMENT IS DANGEROUS…”
Read our full post about the “Disadvantages of Merchant Cash Advance (MCA)”
“…When your business financing broker is presented with an “Approval” from the Merchant Cash Advance (MCA) company, your broker chooses from a list or tier of “Offers” at each Merchant Cash Advance (MCA) company. This list of offer options contains variable commission rates and payback terms and cost to the borrower. (Ex.- $100,000 in “funding” at a 1.35x factor rate or $135,000 payback). Your “trusted, friendly broker” adds from 0.10x to 0.15x to the offer and presents it to you as: $100,000 in “funding” at a 1.50x factor rate of $150,000 payback…”
“…On a $100,000 Merchant Cash Advance (MCA), a broker who sold the advance to their client (you) receives between 10% and 15% of the total amount funded. So your broker receives $10,000 to $15,000 (10% to 15% of the total “funding”) the day after you get “funded”…
Yes. That is not a typing or mathematical mistake on our end. We assure you of this. This is the reality of how grossly over-compensated your broker is for selling you a high-cost and very short-term business financing option…”
FREE Consultation with our Merchant Cash Advance (MCA) Refinancing & Restructuring experts.
Fill out the inquiry form below and we will get you started on MCA refunds STARTING TODAY!
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