Direct answer
Reverse consolidation is a new advance that doesn't pay off your existing MCAs. Instead, the new funder deposits money into your account each week to cover some or all of your current payments, while it collects a smaller payment from you over a longer term. It lowers your weekly cash pressure, but you usually pay more in total, and it is still an MCA, with its own contract, factor rate and UCC lien.
Key takeaways
- Your existing advances stay in place and keep debiting you.
- The new funder's deposits cover those debits; you repay it more slowly.
- Weekly pressure goes down; total cost and time to finish go up.
- If the deposits stop early, you owe both the old advances and the new one.
How it compares with the other options
Worked example: weekly relief versus total cost
Say you have two advances, each debiting $500 per business day, so $5,000 a week together. Advance A has $30,000 left (12 weeks); advance B has $20,000 left (8 weeks). That is $50,000 still to pay.
A reverse consolidation offer deposits, each week, exactly what A and B take, until both are paid. It funds $50,000 in total at a 1.45 factor rate, so you owe it $72,500, collected at $2,500 a week. Your net outflow is $2,500 a week from the start, until the $72,500 is paid in week 29.
The result: $2,500 a week of breathing room for the first 8 weeks, $20,000 in all, in exchange for $22,500 more in total cost and 17 more weeks of payments. That trade only makes sense if the breathing room prevents a default or pays for something that earns more than it costs. These numbers are illustrative; real offers often deposit less than your full payments and add fees.
Questions to ask before you sign
- Which of my advances will the deposits cover, and for how much of each payment?
- What happens if you stop depositing before my current advances are paid?
- What is the total payback, the weekly payment, and every fee?
- Do my current contracts prohibit additional financing? (Many do.)
- Does the new contract have a reconciliation clause?
- Will you file a UCC-1, and will it sit behind or ahead of my current funders?
- The main risk: Your current advances keep debiting you the whole time. If the new funder's deposits stop, for any reason, you are back to the full payments plus the new one.
Common questions
- Is reverse consolidation a loan? It is usually structured as another merchant cash advance: a purchase of future receivables with a factor rate, not a loan with an interest rate.
- Does reverse consolidation pay off my MCAs? No. Your existing advances stay in place and keep debiting you. The new funder's deposits help you make those payments until they finish.
- Is reverse consolidation cheaper than my current advances? Rarely. It lowers what you pay each week, but you usually pay more in total because the new advance has its own factor rate and fees.