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Consolidation
Also called debt consolidation, MCA consolidation, restructure.
Replacing several outstanding advances or loans with one facility, which genuinely helps only if the old balances are paid off and the total cost falls.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
A true consolidation pays off the existing positions. Payoff letters are obtained, the new funder wires the incumbents directly, their UCC filings are terminated, and the merchant is left with one balance and one payment. Whether that is an improvement depends entirely on the payoff figures and the new pricing.
The arithmetic is unforgiving in factor-rate products. If each existing advance pays off at its full unpaid purchased amount, every unearned fee is rolled into the new principal, and a new factor is applied on top. The daily payment falls because the term extends, while the total repayable rises, sometimes sharply. A lower daily debit is not the same as cheaper debt.
Genuine consolidation is worth pursuing when the payoffs include an early-payoff discount, when the new facility is a materially cheaper product such as an SBA loan, an asset-based line or a factoring facility replacing advances, or when the term is extended in a way that makes an unsurvivable payment survivable and the business uses the room to fix the underlying problem.
Reverse consolidation is a different product and is often marketed as consolidation. There, the funder deposits a weekly amount into your account to help cover existing payments while debiting a larger amount, leaving all the original positions in place. Nothing is paid off, exposure increases, and the original contracts remain in force.
Where this one catches people
Consolidation offers arrive when a business is already struggling, and the pitch is always the reduced daily payment. Ask three questions in writing: which balances are being paid off in full, what the total repayment obligation is before and after, and what the net cash to the business is. A consolidation that leaves any original position live has not consolidated anything, and taking new financing while advances are outstanding usually breaches the anti-stacking clause in every one of them.
Worked through
Three advances with unpaid purchased amounts of 40,000, 35,000 and 25,000, total 100,000, costing 1,800 a day combined. Consolidation at 1.35 over 12 months: 100,000 payoff plus 8,000 fees means a purchase price of 108,000 and a purchased amount of 145,800, repaid at about 550 a day. The daily payment falls by 70 percent and the total obligation rises by 45,800.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
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Consolidation — common questions
What does consolidation mean?
Replacing several outstanding advances or loans with one facility, which genuinely helps only if the old balances are paid off and the total cost falls.
Where does consolidation catch people out?
Consolidation offers arrive when a business is already struggling, and the pitch is always the reduced daily payment. Ask three questions in writing: which balances are being paid off in full, what the total repayment obligation is before and after, and what the net cash to the business is. A consolidation that leaves any original position live has not consolidated anything, and taking new financing while advances are outstanding usually breaches the anti-stacking clause in every one of them.
Is consolidation the same as an interest rate?
Consolidation is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does consolidation apply to?
Merchant Cash Advance, Working Capital, Term Loan, SBA Loan, MCA Reverse Consolidation.
Is there a worked example of consolidation?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside consolidation?
Anti-stacking clause, Buyout, Double dipping, Payoff letter, Reverse consolidation.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.