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MCA debt refinancing

BY Value Capital Funding

February 2, 2024

Reshaping Your Business Finances: How to Manage Excessive Merchant Cash Advance Loans with MCA Debt Refinancing

How to Manage Excessive Merchant Cash Advance Loans with MCA Debt Refinancing

The entrepreneurial journey can be a real rollercoaster ride. While securing funding is crucial for fueling growth, many businesses find themselves burdened by the weight of existing Merchant Cash Advance (MCA) loans. These high-cost financing solutions, often used to bridge temporary cash flow gaps, can quickly morph into financial anchors, dragging down your business’s stability and hindering its ability to thrive. If you’re struggling to navigate the complexities of MCA debt and its impact on your cash flow, MCA debt refinancing can be a powerful tool for financial transformation.

Understand the Complexity of MCA Debt

Traditional MCAs come with a unique set of challenges, making them a less than ideal long-term solution. Very high daily or weekly repayments can significantly impact your daily cash flow, creating a constant strain on your financial resources. This can limit your ability to invest in your business, hire new talent, and take advantage of growth opportunities. Additionally, the factor rates associated with MCAs can be significantly higher than traditional interest rates, further amplifying the financial burden.  In addition, MCA debt is often called short maturity debt, meaning that the total time to repay the financing is relatively short, measured in months, not years.  This dynamic creates an excellent cash flow business model for the MCA lenders, that unfortunately comes at the users (business’s expense).  Excellent cash flow for the MCA lender equals lousy cash flow for you, the borrower. 

Leverage the Power of MCA Debt Refinancing

MCA debt refinancing offers more than just hope for businesses grappling with the limitations of their current financing. By replacing your existing MCAs with a single, long-term FDIC bank loan, you can unlock several key benefits:

  • Reduced monthly payments: Longer repayment terms translate to lower monthly payments, easing the strain on your cash flow and freeing up resources for other critical business needs.
  • Lower interest rates: Refinancing typically results in significantly lower interest rates compared to factor rates associated with MCAs, leading to substantial cost savings over the life of the loan.
  • Simplified repayment structure: Refinanced loans often have predictable monthly payments, eliminating the complexities and uncertainties of daily or weekly repayments associated with MCAs.

Your Guide to the MCA Debt Refinancing Process

Refinancing your MCAs is a straightforward process, but it requires careful planning and preparation. It is often in your own best interest to work with experts in this type of refinancing.  Here’s a breakdown of the key steps involved:

  • Gather your documentation: Prepare, if needed, or gather your financial statements, tax returns, and other relevant documents to demonstrate your business’s financial stability and creditworthiness.
  • Research and compare lenders: Evaluate different lenders offering MCA debt refinancing and compare their interest rates, fees, and eligibility criteria. Using a platform approach like that offered through Value Capital Funding will substantially increase your likelihood for approval plus reduce your time, effort and energy expended in this endeavor.
  • Choose the right loan: Select a loan that best aligns with your business’s needs and financial goals, considering factors like interest rate, repayment terms, and loan amount.  If you qualify, you’ll have choices from interest-only line(s) of credit to fully amortizing FDIC bank term loans.
  • Submit your application: Complete the application process and provide all required documentation to the lender(s) for review.  As a reminder, with just 1 application, you can have your MCA debt refinancing application reviewed by multiple banks simultaneously.
  • Get approved and receive funding: Once approved, receive the loan funds and use them to pay off your existing MCAs.

Secure a Line of Credit for Sustainable Financing

In addition to refinancing your MCAs, consider utilizing a line of credit as a valuable tool for managing your cash flow. A line of credit provides access to revolving credit, allowing you to borrow funds as needed, up to a predetermined limit. This flexible financing solution can be incredibly useful for covering unexpected expenses, seizing new opportunities, and managing seasonal fluctuations in your business revenue.

Calculate the Real Costs: APR Vs. Factor Rates

When evaluating different financing options, it’s crucial to understand the true cost of borrowing. Many lenders express the cost of MCAs through “factor rates,” which can be misleading and difficult to compare. For instance, a 90-day MCA with a factor rate of 1.30 means that you’ll pay 30% cost (or interest) for the privilege of using the MCA company’s money.  But, that’s just for 90-days.  If you annualize that cost, the 30% figure soars to 120% annual cost of financing.  Very few businesses can afford that predatory cost, yet many small businesses use multiple MCA instruments at the same time.  Instead, focus on the Annual Percentage Rate (APR), which provides a standardized and transparent way to compare the true cost of different loans.   

Revolutionize Your Financial Landscape with Value Capital Funding Today!

Don’t let the burden of high-cost MCAs hold your business back. Take control of your finances and unlock a brighter future with MCA debt refinancing. At Value Capital Funding, we understand the unique challenges faced by businesses and are committed to providing personalized solutions that promote financial stability and long-term success.

Contact us today for a free consultation. Our team of experts will guide you through the refinancing process, help you find the best solution for your needs, and empower you to reshape your financial landscape for sustainable growth.

Let’s work together to unlock your business’s true potential and watch it thrive!

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