Reverse Consolidation: Meaning in a Merchant Cash Advance
A reverse consolidation is an arrangement where a new funder sends you regular deposits to cover the payments on your existing merchant cash advances, rather than paying them off at once, in exchange for one smaller payment back to the new funder over a longer term.
What does reverse consolidation mean?
In a standard consolidation, a new funder pays off your advances at funding. In a reverse consolidation, it doesn't. Instead, it deposits money into your account each week, enough to cover your existing debits. Your old advances keep running and gradually end. You make a single, lower payment to the reverse consolidation funder, stretched over a longer period.
Why does reverse consolidation matter to your business?
It can bring immediate relief to a business buried in stacked payments, especially when the existing funders won't provide payoff letters or a standard consolidation isn't available. But it's usually expensive, adds another funder to the stack for a while and runs long. Read the terms carefully and understand the total cost before agreeing.
How does it compare with a standard consolidation?
Where a standard consolidation is available, it's usually simpler and cheaper. A reverse consolidation fits when that door is closed.
What happens when the old advances end?
As each existing advance finishes, the weekly deposits for it should stop. Track this carefully.
Where will you see it?
In offers aimed at businesses with several advances and in the contract's funding schedule, which lists the weekly deposits.
What should you ask?
Ask how much the funder will deposit each week, for how long, what the total you'll repay is and what happens if your existing funders change their payments. Ask whether you can pay it off early and at what cost. Clear answers to those questions tell you whether the arrangement actually lowers your burden over time.
Which terms are related to reverse consolidation?
The full list is in the glossary. Owners ask about this in Is an MCA renewal cheaper than the first advance?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.