Finding Cash Flow Savings with MCA Loans
If you have been paying more than one cash advance at a time, this MCA debt savings calculator will give you some sobering insight into what percent of your business’ available ‘on hand’ cash is being used to pay down expensive MCA debt. The goal of a Reverse Consolidation is to lower this debt servicing amount by extending the timeframe of your total MCA payback. Keep in mind, this is all done without notifying your current MCA funders.
To find your debt servicing rate:
Why does debt servicing matter? To function properly, your business needs to pay for everyday business activities (paying vendors, bills, employees, inventory), so when the business is shouldered with repaying MCAs over a short period of time, on hand cash that normally pays for business operations is now being used to service MCA payments. When we analyze a business with multiple cash advances, we can see that the most recent advances were taken usually for the sole purpose of satisfying the current MCA payments. Basically, the business owner has to borrow more money for the sole purpose of being able to afford current MCA payments. This practice, although seemingly necessary, will further stifle available cash, all while increasing the monthly debt servicing ratio.
A reverse consolidation eases the cash outlay and extends the term of the MCA commitments, by allowing the business to pay less money in the meantime.
This calculator shows the amount of money a business is paying in cumulative MCA payments at a given moment. Here are some things to notice.
Key Takeaway:
If your business is spending more than 20% in debt servicing, your profitability margins are most likely being affected. This is when your business will feel a ‘cash crunch’ due to the quick payback model of Cash Advances.
Why right now is the worst time to have multiple cash advances. As you are paying back multiple cash advances, you are putting your business at serious financial risk.
Don’t risk defaulting on your MCAs. Join the hundreds of small businesses that have gotten out of MCA debt with a Reverse Consolidation. Apply now for a non-committal offer.