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How Does Merchant Cash Advance Consolidation Work?

How Does Merchant Cash Advance Consolidation Work?
Susan Guillory
Susan GuilloryUpdated September 17, 2021
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
For businesses that don’t have great credit and that can’t qualify for conventional or SBA loans, a merchant cash advance (MCA) can be a useful tool. An MCA can help the business get access to cash to cover expenses or to expand.Sometimes, however, a business might take out more than one merchant cash advance. Then it could end up paying different interest rates and fees for each. Plus, it will have to deal with different payment schedules for each.A merchant cash advance consolidation is an option that lets you roll up all of those advance payments into one. Ideally, an MCA consolidation has the potential to cut down on what you’re paying in interest and fees.  

What Is a Merchant Cash Advance?

Not every business qualifies for a traditional bank or SBA loan. Perhaps it hasn’t been in business long enough to be eligible, or maybe it doesn’t meet the credit requirements. That’s when a merchant cash advance may be useful.An MCA is not a loan, but rather an advance on future sales. To determine eligibility, MCA providers may not rely heavily on criteria like time in business and/or credit scores, but instead consider revenues. That may make it easier for some businesses to get than other types of financing. When you get an MCA, you receive a lump sum payment. Typically, MCAs express the interest they charge as a factor rate (a decimal figure) rather than as a percentage and prepaying them would not reduce the amount of money you owe, but it’s usually not an option anyway. As your business sells its products or services, repayment is automatically debited daily or weekly until the balance (including factor rate and other fees) is paid off.The downside is that, when it comes to conventional vs. SBA loans vs. merchant cash advances, MCAs tend to have much higher fees and interest than the other two, making them a costly financing option. This is because businesses that don’t qualify for traditional or SBA loans may be viewed as more of a risk to lenders. Typically, lenders try to mitigate that risk by charging borrowers more for the privilege of having access to capital.

What Is Merchant Cash Advance Consolidation?

A business may take out multiple merchant cash advances over time. As a result, the company may end up with multiple repayment schedules and pay different factor rates for each.A merchant cash advance consolidation rolls multiple MCAs into one advance or loan with one repayment schedule and one factor rate. Ideally, that merchant cash advance consolidation loan would have a lower interest rate than the business was paying on the multiple advances.

When to Consider Merchant Cash Advance Consolidation

If your business has taken out multiple merchant cash advances, you may be able to save money with a merchant cash advance consolidation loan. You may also be able to simplify repayment by having a single automatic debit rather than multiple payments. If you run the numbers and it looks like you can save money and avoid inconvenience, it may be a good time to consider a merchant cash advance consolidation. 

What to Consider with Merchant Cash Advance Consolidation

Before applying for a consolidation loan, look at what you’re currently paying in interest and what you’d qualify for with a new loan. There’s probably no sense in taking on a new consolidation loan unless that interest is lower than what you’re currently paying.Also look at the repayment period and what your payments might be. A shorter repayment period means bigger payments that you might not be able to afford. But a longer period would offer smaller payments, albeit more of them. Extending the time frame, however, will likely mean that you end up paying more in total.Examining the options can help you find one that will work well for you.

Refinancing vs. Consolidation

If you’ve heard of refinancing, you may think it’s the same as merchant cash advance consolidation, but the two are not exactly the same. It’s true that both can potentially lower your interest rate and/or lengthen your payment term. But when you refinance, you’re replacing one MCA with a new one or a loan. When you opt for an MCA consolidation, you’re rolling multiple MCAs into a new one of a loan.
Replaces one MCA with a new one or a loanRolls multiple MCAs into a new one or a loan with a single rate and repayment schedule

Types of Consolidation Loans

There are a few types of cash advances and loans you can use for consolidation, depending on what you qualify for. Lenders may have different approaches to help you with consolidating your loans. Some will buy out the loan and pay it off directly, while others will lend you the money, after which it’s your responsibility to pay off the loans.

Merchant Cash Advance

If you’ve taken out multiple MCAs, it’s likely because your business doesn’t have great credit and doesn’t qualify for other types of loans. If that’s the case, you might consider a merchant cash advance with bad credit option to consolidate your existing MCAs. Be aware that you will likely have a short repayment period, perhaps between a few months and three years.

Online Lenders

Another consolidation option if you don’t have excellent credit is taking out a consolidation loan with an online lender. Interest rates may be lower than with a merchant cash advance, and repayment terms may be longer.

SBA Loans

SBA loans like the 7(a) program can be used for a number of expenses, if you qualify. Repayment terms can be up to 25 years, and rates on SBA loans are among the lowest of any financing option for businesses.

Traditional Bank Loans

If you’ve improved your credit since taking out the MCAs, you may qualify for a bank loan with low rates and long repayment terms.

Examples of Merchant Cash Advance Consolidation Lenders

Here are some of the top lenders that offer merchant cash advance consolidation, based on an internet search for “merchant cash advance consolidation lenders” in August 2021.

Strong Capital Funding

Strong Capital Funding offers merchant cash advance consolidation loans of between $3,500 and $200,000, with same-day approval and funding. You may be able to qualify, no matter what your credit profile is.

GUD Capital

GUD Capital also offers consolidation options, including term loans, lines of credit, alternative loans, and SBA loans. Each may have different requirements for eligibility.

New York Tribeca Group

The New York Tribeca Group offers business cash advance debt consolidation of $3,000 to $5 million, and provides discounts if you pay your advance off early. Repayment terms are four months to two years, and interest rates start at 8%.


Fundrite offers what are called reverse consolidations to businesses that are underwater with multiple merchant cash advances. Rather than rolling all MCAs into one, you can receive a lump sum of working capital up front and Fundrite will pay your first week of MCA payments, while only debiting 70-80% of the existing payments due.As your MCA debts are paid off, Fundrite deposits less until all you are paying on is the reverse consolidation. This system allows you to pay less on those daily or weekly payments and retain cash flow.

Kanjorski Partners

Kanjorski Partners is another MCA consolidation option to consider. You can consolidate all your MCAs into one loan that you’ll repay over 24 to 36 months. You might be able to lower your monthly debt payments by 50% to 90%.

The Takeaway

If you feel like you’re drowning because you’re paying too much for multiple merchant cash advances, consolidating could be a solution to help you lower the interest you pay overall and roll everything up into one monthly payment.Ready to take control of your business finances? Lantern by SoFi can help you find a business loan online and compare multiple offers from different lenders.
Photo credit: iStock/recep-bg

About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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