Merchant Cash Advance Module 3 Consolidation and More
Many merchants can abuse Merchant Cash Advances and find themselves in trouble. They become so excited that money is being offered to them that they overextend. It’s easy to do! Once the business owner is contacted and has an interest in funding, the vultures come out, The business owner is inundated with calls and offers for 2nd, 3rd, and even higher positions. Everyone is eager to provide money.
The business owner is preyed on. But, in the business owners’ defense, they are usually of limited credit and may have been turned down by banks and other lenders. Now they are being offered money, cash, dinero, moola, and now they see green and rationalize the payments in their heads and the cycle begins.
Then comes the day that the cash flow slows down, it only takes one day and the fall from grace happens. The business owner realizes he is overextended and the multiple ACH payments coming out of the bank account have destroyed the cash flow needed to run the business properly.
This is the time to think rationally. Because the business owner feels defeated and knows they are in trouble, they go into protection mode. This is the normal instinct, but this just sets them up for failure and their business closing for good. Many owners instinctively move their bank account to stop the ACH’s from being deducted daily. This move violates the contract that was signed at the time of funding. This will cause the lender to start their process of trying to collect the money.
When a business is in trouble with Merchant Cash Advances speed is something you don’t want to have. Speeding up the process means the filing of the judgments, harassment calls, and worse, Merchant cash advance lenders are filled with all types of characters. Yes, there are good people in the industry, and yes there are really bad people in it too. There are stories about some really bad tactics used against business owners who are in default which I won’t get into but the best thing to do is make sure if you have a client who is in trouble with merchant cash advances warn them and have them follow the proper procedures. Also, beware of which lenders you work with because you may run into a situation where you could be taken advantage of also. Remember, the business is filled with high-pressure salespeople trying to make a lot of money, and don’t care how they do it.
When a business owner first realizes they are in trouble they should contact a professional who can look at the whole situation and develop a plan of action that will save their business. Like I said speed is not your friend, but negotiations and talking with the lenders will keep them at bay. The problem is if they file the judgment and start their recovery methods the business is blacklisted and it takes a very long time to reverse that and put the business back in a position where they can borrow again.
When reviewing the situation there may be available options……
- If the client is qualified for another lower interest type of financing, they can obtain the financing amount to pay off the higher rate loan. For business term loans and lines of credit, this means good credit and acceptable financials. The problem with this is that most merchants who find themselves in this situation do not have the financial, nor the credit to do business finance.
Another option would be if they owned any commercial/investment
Property that could be refinanced. With this type of real estate
Financing there are options for borrowers with bad credit,
- Another option is the reverse consolidation program which is another merchant cash advance that provides the client a longer payoff period and even some extra cash. What this does is totals all the daily payments and figures out the weekly total and funds that amount each week into the business account to cover the payments of the existing positions. But because the term is longer it reduces the payment by up to 60% making the payment more affordable. It does not reduce the amount owed it increases it with closing costs and cash oi the client, it just simply takes the money and spreads it over a longer time.
- The other option is to have someone negotiate the balances owed and structure a payment that is comfortable for the business owner. This can reduce the amount owed by up to 70% while utilizing the payments to eliminate the debt.
Getting to the business owner before they irrationally make decisions that could hurt them is imperative. The amount of businesses that go out of business because of them being stacked and getting into trouble is bothersome. The merchant cash advance can be a good product for those businesses who need it while they are working to get the business in better shape with financials, business credit, and personal credit, to obtain prime financing that will help their business grow.
At Ebizmore we will professionally handle all negotiations with lenders and design a program that will get the business back on track and growing. We will also prepare the business to be viable and credible. When a client is in trouble please submit the following items so that we can analyze them
1- 4 months of bank statements
2- List of all lenders, balance due, daily payment, original funding amount
3- 1 Page MCA app
4- a copy of photo ID
5- Funding contracts (if available)
Have questions, please contact us at firstname.lastname@example.org. Remember at Ebizmore you will Learn More, Do More and Earn More.