Should I use a merchant cash advance to consolidate debt?

18
January 2019

Dealing with multiple debts can feel overwhelming especially when you consider the fact that you have to deal with a range of payment dates and varying interest rates. If you happen to miss a payment for one reason or another, you’ll also have to suffer penalties and late fees.

It should come as no great surprise that so many business owners fall behind on their payments when they’re overwhelmed by debt. This is why many individuals turn to debt consolidation.

Debt consolidation entails seeking out a single financing option to pay off multiple debts. In other words, one debt will pay off many others – the primary benefit being that the debtor will now only have a single payment to worry about.

How debt consolidation works

Debt consolidation involves taking out one debt to pay off many others. This eliminates any confusion that may arise from paying multiple loans with different terms and interest rates.

You can use debt consolidation to pay off a number of debts that include:

• Business loans • Utility bills • Taxes • Bills that have gone to collection • Credit cards • Unsecured consumer debt (such as medical bills or student loans)

Debt consolidation is a massive business. Because of the high number of people who deal with out of control debt, consolidation companies exist in the thousands. People are often attracted to these businesses because they promise easy payments and reduced interest rates.

In actuality, there’s no guarantee your interest rates will be lower when you work with a debt consolidation company.

The interest rate on your debt consolidation loan is typically set at the discretion of the creditor or lender and factors such as credit score, and past payment behavior can affect how high or low this rate will ultimately be.

Even if you’re approved for a lower interest rate, no one can make you guarantees that it will stay at a low level.

Using an alternative method to consolidate debt

When consolidating debt you should focus on two primary factors – reducing the number of debts you’re paying each month and lowering the amount of interest you’re paying. You can accomplish both of these goals by taking out a Merchant Cash Advance (MCA).

Because funds are made available immediately, merchant cash advances are often used for expenses such as expanding inventory, equipment, or payroll. However, MCAs can also be used in a more unorthodox manner – consolidating existing debt.

Leveraging a merchant cash advance to consolidate your debt comes with a number of advantages.

The Advantage

A merchant cash advance isn’t a loan, so there’s no interest but there are fees. The primary distinction to be made is that the payback amount of an MCA does not inflate beyond the fees owed to the lender. If you owe $65,000 (with fees included) that amount will not change, unlike a business loan.

Easier Payment Schedule

The funder and the merchant work out an agreement where regularly scheduled payments are made automatically based on incoming revenue to the business. The business owner never has to worry about due dates because payment is always on time- and given that, there are no financial penalties for being late.

Easy to qualify

When working with a debt consolidation company your credit score plays a big factor. However, MCAs are more concerned with the volume of revenue incoming to your business rather than your credit score. That means that many small, successful businesses will find it easier to qualify for an MCA.

Consolidate your debt the smart way

Taking out a merchant cash advance to consolidate debt is an excellent alternative to other forms of debt consolidation for your business. With a set payment schedule and fixed amounts, you will have never have to worry about fees increasing and you can focus on what’s most important – running your business.

If you’re looking for alternative methods of consolidating debt than we can help you. One Park Financial can provide the assistance you need in finding the right funding options for your business. We work closely with a large network of funders who provide many options for small business owners. Apply today to get the funding you need to take your business to the next level.