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Understanding the Different MCA Restructuring Options Available

BY Value Capital Funding

December 25, 2023

A Roadmap of Options: Understanding the Different MCA Restructuring Options Available

Merchant cash advances (MCAs) can be a lifesaver for small businesses in need of quick cash. However, the high interest rates and daily or weekly repayment terms can quickly become overwhelming, especially for businesses with fluctuating cash flow.

If you’re a small business owner struggling with MCA debt, there are options available to help you quickly restructure your business debts and get back on your feet. In this blog post, we’ll discuss the different types of MCA debt restructuring options available and how Value Capital Funding can help you find the best solution for your unique needs.

Types of MCA Debt Restructuring Options

There are a number of different MCA debt restructuring options available, each with its own advantages and disadvantages. Some of the most common options include:

  • Reduced payment plans: To get something more than a temporary reprieve, a business owner should engage attorney-led teams negotiating with your MCA lender to reduce your payments. This is always a basic tenet when dealing with the sky-high cost of MCA business debts.  Naturally, it’s important to make sure that the new payment plan is affordable and sustainable in the long run.
  • Extended repayment terms: This option involves extending the length of your repayment term, which can lower your payments. Reputable companies in the space like Value Capital Funding will help you eliminate all daily repayments, so you can pick from weekly, bi-weekly, or monthly for your new MCA debt restructuring plan – whatever is the most budget-friendly for you.  Also, when dealing with the attorney-led teams through Value Capital Funding, they’ll be able to freeze any additional penalties or added on interest costs for you to absorb.  In other words, they’ll be able to get your balances frozen, despite extending the repayment period and drastically cutting your payment. 
  • Interest rate reduction: This option using qualified attorney-led teams to  negotiate with your lenders on your behalf to reduce your factor rate, or cost. This can be a great way to lower your payments and save money on interest over the life of your MCA debt restructuring journey, which usually last 9-12 months, or sometimes longer.
  • Debt consolidation: This option involves taking out a new loan with less cost to pay off your existing MCA debt. This can be a good option if you can qualify for a lower interest rate on the new loan. However, it’s important to compare the terms of the new loan carefully before consolidating your debt.  Value Capital Funding can help refinance your higher cost MCA financing, with lower-cost FDIC monthly pay bank term loans, or lines of credit. 

Tailored Solutions to Client Needs

Value Capital Funding understands that every business is different, and there is no one-size-fits-all approach to MCA debt restructuring. That’s why we offer a variety of tailored solutions to meet the individual needs of our clients.

When you work with Value Capital Funding, we’ll start by taking the time to understand your financial situation and your business goals. Then, we’ll quickly develop a customized restructuring plan that is designed to help you get out of debt and achieve your financial goals.

Benefits of Tailored Solutions

There are a number of advantages to choosing tailored MCA debt restructuring solutions over one-size-fits-all approaches. Tailored solutions will help you:

  • Reduce your monthly payments
  • Save money on interest in the long run
  • Get out of debt faster
  • Improve your cash flow
  • Achieve your financial goals

Evaluate Client Circumstances

Before we can recommend the most suitable restructuring option for your business, we need to evaluate your financial circumstances. This includes factors such as:

  • The amount of MCA debt you have
  • Who your MCA creditors are
  • Your monthly income
  • Your business expenses
  • Your credit profile
  • Your business goals

Once we have a good understanding of your financial situation, we can develop a customized MCA debt restructuring plan that is designed to help you get out of debt and achieve your financial goals.

Structured Payment Plans

One of the most common MCA debt restructuring options is a structured payment plan. This involves using specialized attorney-led teams negotiating with your lender to create a new repayment plan that is tailored to your business’s unique financial circumstances.

Structured payment plans will typically include features such as:

  • Reduced weekly, bi-weekly, or monthly payments
  • Extended repayment terms
  • Interest rate, factor rate and other cost reductions for you
  • Seasonal payment adjustments

Structured payment plans can be a great way to get your MCA payments under control and improve your cash flow.

Reduce Interest Rates and Fees

Another important aspect of MCA debt restructuring is reducing high interest rates and fees. Value Capital Funding and our highly qualified teams have experience negotiating with MCA lenders to reduce interest rates and fees on behalf of our clients.

By reducing your interest rates and fees, you can save money in the short and long run and get out of debt faster.

Negotiating with Lenders

Negotiating with MCA lenders can be a challenging process for many individuals, but it’s important to remember that you have leverage. MCA lenders are highly motivated to stay away from court, so they will usually be willing to work with you to temporarily restructure your debt.  These DIY (do-it-yourself) approaches will usually work if your hardship is short term in nature.  Say you have a large account receivable coming in within a week – that’s a good example.  You only need a payment break for a short period of time and that’s a good fit.

Most clients that Value Capital Funding deals with on a regular basis include these who have already exhausted the DIY approach.  Here, the VCF team utilizes their experience negotiating with MCA lenders on behalf of our clients. We can help you get the best possible restructuring terms, so you can get out of debt and achieve your financial goals.

Pros and Cons of Different Restructuring Options

Each MCA restructuring option has its own advantages and disadvantages. It’s important to weigh the pros and cons carefully before choosing the right option for your business.

Here is a brief overview of the pros and cons of some of the most common MCA restructuring options:

Self-Negotiated Reduced payment plans

Pros:

  • Reduce your payments
  • Improve your cash flow
  • Avoid default

Cons:

  • May increase the total amount of interest you pay over the life of the loan
  • May extend the length of your repayment term
  • Very short term – usually good for 2 weeks or so and is not a long term fix.

Self-Negotiated Extended repayment terms

Pros:

  • Reduce your payments
  • Improve your cash flow

Cons:

  • Will likely increase the total amount of interest you pay over the life of the loan
  • Will likely extend the length of your repayment term

Reducing your interest cost, or factor rate

Pros:

  • Reduce your payments
  • Save money on interest in the long run
  • Get out of debt faster

Cons:

  • Almost impossible to DIY
  • Will likely require you to sign a new loan agreement
  • Will likely have additional fees

FDIC Bank Financing: MCA debt consolidation

Pros:

Cons:

  • Requires you to qualify for a new loan
  • New loan will have additional fees
  • May increase the total amount of interest you pay over the life of the loan if you cannot qualify for a lower interest rate on the new loan

Make an Informed Decision

When choosing an MCA debt restructuring option, it’s important to make an informed decision. Weigh the pros and cons of each option carefully and choose the option that is best for your unique financial situation and business goals.

Choose Clarity, Choose Success

If you’re struggling with MCA debt, Value Capital Funding can help. We offer a variety of tailored MCA restructuring solutions to meet the individual needs of our clients.

We understand that every business is different, and there is no one-size-fits-all approach to MCA debt restructuring. That’s why we start by taking the time to understand your financial situation and your business goals. Then, we quickly develop a customized restructuring plan that is designed to help you get out of debt and achieve your financial goals.

Contact Value Capital Funding today to learn more about our MCA restructuring services. We’re here to help you get back on your feet and achieve your financial goals.  If it’s easier for you, just text us 24/7 at 561-486-9731.