Is a reverse consolidation a good option for my current debt?

A reverse consolidation can be a great option because based on what you’re eligible for you can potentially be reducing your current payments up to 50%, you can extend the terms of the loan and potentially access more cash. But there’s more to it and in this article, we’re going to go over how a reverse consolidation works, the pros & cons, & the options for you to choose from.

How do reverse consolidations work?

When doing a reverse consolidation once you get qualified and are officially ready for funding, the lender will deposit the money into your business bank account to cover all the merchant cash advance payments you have pending for the week. Then payment is made each week from the business to the reverse consolidation funder which will be about a fraction of what the business is currently paying each week for the current advances. Being it’s a different type of loan, the term on a reverse consolidation will always be longer than a cash advance term. Furthermore, the payments are made to the reverse consolidation provider after all cash advances are paid in full. 

What are the “pros & cons” of reverse consolidation?

Being that every situation is different for every business owner, ill start with the benefits of a reverse consolidation then I’ll crescendo into the drawbacks of this type of loan. One of the benefits I’ll feel most business owners do a loan of this type because it may be convenient for them to reduce their payments by 50%. Another perk is that it extends the term by 50%, giving you more wiggle room to allocate your finances accordingly. Also, the fact that you may have access to more cash can be beneficial because based on your industry you are able to invest in more equipment or inventory to continue to scale and be profitable. 

Now that being said, there are a few drawbacks you should know before considering a reverse consolidation. One drawback you need to know is that this type of loan will not reduce the total debt that you currently have, but can actually add to it. Again every situation is different but in most cases, you can expect an increase in debt. Another drawback can be the fact that you can see yourself making payments for a longer-term that the original cash advance, again every situation is different and planning ahead of making your decision will definitely avoid any drawbacks. 

Are there multiple consolidation options? 

So before actually considering a reverse consolidation, let’s go over different consolidation options that you can choose from.

  • An SBA Consolidation 

An SBA Consolidation option pretty much uses an SBA loan to consolidate your advances into one conventional loan with an SBA improvement. To qualify for this option you definitely will need excellent credit, must be a profitable business, and have a fair amount of personal & business collateral to cover the loan. The process overall usually takes anywhere from 30-60 days depending on any real estate collateral that’s being used. 

  • Commercial Real Estate Consolidation

When doing a commercial real estate consolidation you are using your businesses or personal real estate as collateral to provide financing to consolidate your cash advances into a first mortgage. In the case of there being a mortgage in place already, the lender will take out the original mortgage and replace it with a larger mortgage that allows the business to net enough cash to consolidate your current advances. 

  • Accounts Receivable 

This type of approach uses your business’s unpaid invoices from its customers as a basis for financing. The factoring company usually purchases the businesses unpaid 30-90 A/R, and forward the majority of the value of the invoices to the business which will then be used to consolidate the current advances. 

  • Alternative Cash Advance Consolidation

This type of financing will buy out the current cash advances you have in place and replace it with more affordable financing over a 1-5 year term. This type of financing requires a minimum of the business showing at least two years of profitability, a 700 fico score & sufficient collateral.

  • Reverse Consolidation

This type of consolidation leaves your multiple merchant cash advances in place, only the reverse consolidation company handles the cost of the daily payments. Furthermore, the business pays the reverse consolidation company a fraction of what they have been currently paying. In addition, you’ll be paying for a longer-term than you were with the original advances.  

Summary

So based on all the options you can see the various ways to go about making your decision when getting a reverse consolidation loan, as explained in the first paragraph a reverse consolidation can be a great option based on what you’re eligible for. therefore, you can potentially be reducing your current payments up to 50%, you can extend the terms of the loan and potentially access more cash. But be sure to go over the pros and cons before making your decisions, hope we were able to answer your questions. For more info go to Uplyftcapital.com or follow us on social media @Uplyftcapital.

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