A merchant cash advance (MCA) can provide your business with ready access to working capital. But if there is a receivables shortfall, you may not be able to repay the advance. While the option to refinance an MCA is possible, it takes an experienced debt relief specialist to explore all your options.
At ReconcileMyMCA.com, we provide merchant cash advance assistance to businesses around the country. We can help you refinance your advance, as long as you meet the credit criteria for obtaining a refinance loan, or look for other ways to pay it off.
Since defaulting on a merchant cash advance places both your business and personal assets at risk of being seized, it is crucial to act quickly. Contact us now by completing the convenient intake form. Our team is available 24/7.
How Can I Refinance My Merchant Cash Advance?
Refinancing a merchant cash advance involves applying for a loan with a bank or other commercial lender. Instead of paying back the MCA through daily deductions from your credit card and debit card sales, you pay back the loan in monthly installments. Options to refinance a merchant cash advance include:
Traditional banks may refinance an MCA as part of a larger business loan, however, there are strict credit criteria, so it could be challenging to refinance an MCA through your local bank.
Loans from Alternative Lenders
Non-bank business lenders such as Community Development Financial Institutions (CDFIs) – certified banks and credit unions that serve low-income communities – also provide refinance loans to businesses that may not meet the borrowing requirements for traditional loans.
If you qualify for a refinance through a bank, the loan term is typically between 1 and 10 years with an interest rate ranging from 5 to 10 percent. A refinance through an alternative lender may come in at a higher interest rate – from 9 to 50 percent – with terms ranging from 4 months to 5 years.
In addition, there are closing costs, fees, and penalties associated with refinances, typically ranging from 3 to 6 percent of the total loan amount. These closing costs include:
Origination fee – 1 to 5 percent of the loan amount
Underwriting fee – 1 percent of the loan amount
Late fees – 3 to 6 percent for overdue payments
Prepayment penalty – 0 to 2 percent of the outstanding principal balance for paying down debt before the term ends
In short, the cost of refinancing should not outweigh the savings of paying back the MCA. If you believe your business will return to profitability, our debt relief specialists can help you explore other options. Also, if you are carrying more than one merchant cash advance, a better option may be a business debt consolidation loan, which involves rolling all the advances into one loan.
Pros and Cons of Choosing to Refinance a Merchant Cash Advance
There are benefits and downsides of refinancing an MCA to consider. The pros include:
- Reduced cost of funding – Merchant cash advances can be far more costly than business loans. An MCA is based on a factor rate which is typically expressed as a decimal in the range of 1.2 to 1.5 but when converted into an APR the figure could rise into the double or triple digits.
- Improved cash flow – Since there are no daily deductions from your credit and debit card sales, your cash flow will improve, allowing you to invest in payroll, inventory, equipment, or improvements to your business.
The cons of refinancing a merchant cash advance include:
- Impact of your credit score – The lender will probably order a credit report, and a hard credit inquiry will have a short-term negative impact on your credit score, which may limit your access to additional funding.
- Collateral – While MCAs come with confessions of judgment and personal guarantees, business loans typically require business and personal assets as collateral; the lender could seize those assets if you default on the loan.
Before agreeing to a refinance, it is wise to talk to an experienced debt relief specialist with knowledge of the merchant cash advance market.
Why Choose Us?
At ReconcileMyMCA.com, we regularly assist businesses around the country that are having problems with merchant cash advances. If you are struggling to meet the terms of an MCA agreement, we can help determine whether refinancing your merchant cash advance is the best solution and, if so, direct you to a qualified lender.
But this is not your only option. MCA agreements typically include a reconciliation clause that requires the MCA provider to restructure the repayment plan if you experience a business downturn. You are required to notify the funder of a receivables shortfall, however, and show that your business will return to profitability.
Our team will negotiate new payment terms with the MCA provider on your behalf, which will give you breathing room until your financial picture improves. You must act quickly because the funder may try to seize your business and personal assets if you default on your merchant cash advance.
Contact ReconcileMyMCA.com Today
Refinancing a merchant cash advance is a viable option if you meet the borrowing requirements and are able to make the loan payments. However, with the help of our experienced debt relief specialists, you can also reconcile your MCA. Complete the convenient intake form to get started.