How To Get Out of Merchant Cash Advance Debt

For new businesses that do not have a credit history and access to traditional sources of funding, one alternative is a merchant cash advance. Given that MCA providers take a significant portion of a company’s daily profit to recoup the advance, businesses often face cash flow shortfalls and are unable to continue operating. If your business has incurred significant debt because of one or more merchant cash advances, there are ways to get out of a merchant cash advance debt, here’s how:

Replace Your MCA with a Term Loan

One way to refinance merchant cash advance debt is through a term loan. These loans offer more favorable terms than cash advances, including:

  • Lower interest rates
  • Longer repayment periods
  • Monthly payments

Ultimately, a term loan makes it easier to manage your cash flow, however, some lenders place restrictions on the use of funds and MCA debt may not be eligible under some term loan programs.

Consider an Asset-backed Loan to Refinance Your MCA

An asset-backed loan is guaranteed by your business’s assets. These loans are typically collateralized by property, inventory, and personal guarantees. If you don’t pay back the loan,  the lender can seize these assets to recoup the debt. 

At the same time, an asset-backed loan allows you to refinance your merchant cash advance debt at a lower interest rate with a longer repayment term. Additionally, repaying an asset-based loan will help to establish your credit history since lenders often report to credit bureaus. 

Consolidate Your Cash Advances

If you are facing insurmountable debt from multiple merchant cash advances, consider a debt consolidation loan. Instead of making multiple daily payments to different funders, you have one loan with lower repayment interest. It is important to work with a lender experienced in the merchant cash industry that offers suitable loan products that make repayment easier and less expensive. 

File for Bankruptcy

If your business is facing too much merchant cash advance debt, consider filing for bankruptcy, but only as a last resort: bankruptcy can mean losing your business and will cause lasting damage to your credit rating. 

Reconcile Your Merchant Cash Advance

A properly structured cash advance agreement will include a reconciliation clause that provides remedies if your future receivables decline and you cannot meet the repayment terms of the cash advance. In short, this clause requires the funder to work with you to reduce the number of daily withdrawals until your receivables meet the original target. You are required to promptly notify the funder of a receivables shortfall, however, and provide documents confirming the decline.

The Takeaway

If your business is facing an event of default under the terms of an MCA agreement, don’t go it alone. Given that you may not qualify for a term loan or asset-backed loan, your best option is to reconcile your cash advance. By working with the debt relief specialists at ReconcileMyMCA. Com, you can get out of merchant cash advance debt and save the business you’ve worked so hard to build.