Is reverse consolidation a good idea for an ecommerce business?
Reverse consolidation is often sold as a way to lower your merchant cash advance payments. It doesn't close your existing advances. It adds a new one that helps you keep paying them. Here is how it works, what it costs, and when it makes sense.
How reverse consolidation works
- Your existing advances stay open and keep debiting on their own schedules
- A new funder sends you money in installments, usually weekly, to help cover those payments
- You repay the new funder with a smaller payment over a longer term
- When the old advances are paid off, you are left with the new balance
Your payment does go down at first. Your total debt goes up, because you are now paying the old advances and a new advance with its own fee.
Reverse consolidation vs payoff consolidation
| Reverse consolidation | Payoff consolidation | |
|---|---|---|
| What happens to existing advances | They stay open until paid on their own schedules | A new funder pays them off and they close |
| How money moves | Installments sent to you to cover old payments | Payoff sent to your existing funders, ideally directly |
| Number of balances | Old advances plus a new one, until the old ones are paid | One |
| Total cost | Old fees plus a new fee | The new fee, compared against what you still owe |
| Main risk | A layer of debt on top of debt | Total payback can be higher than what you owe today |
When it might make sense
Reverse consolidation can work as a short bridge when the business is healthy, the squeeze is temporary, and the old advances are close to paid off. For example, it can carry you through a slow month before a busy season.
It is a poor fit when you need lower payments for the long run, when the old advances have months left, or when the business can't cover the debt at any payment size. In those cases it adds cost without fixing the problem. See MCA debt consolidation for ecommerce sellers for the option that closes your advances.
Questions to ask before you sign
Frequently asked questions
What is reverse consolidation?
Reverse consolidation is a new advance paid to you in installments to help cover your existing merchant cash advance payments. The existing advances stay open, and you repay the new funder over a longer term.
Is reverse consolidation a good idea?
Usually only as a short bridge, when the business is healthy and the existing advances are close to paid off. It lowers your payment at first but raises your total debt, because you pay the old fees plus a new one.
What is the difference between reverse consolidation and MCA consolidation?
MCA consolidation pays off your existing advances so they close, leaving one balance. Reverse consolidation leaves them open and adds a new advance to help you keep paying them.
Does reverse consolidation lower my total cost?
No. It adds a new fee on top of what you already owe. It can lower your payment for a while, which is a timing benefit, not a cost saving.
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