A reverse consolidation, also known as a merchant cash advance consolidation or a reverse factor, is a financing strategy that involves consolidating and refinancing a merchant cash advance (MCA) with a longer-term loan.

In this strategy, a business that has taken out an MCA from a lender will work with a reverse consolidation funder who will provide the business with a loan to pay off the MCA. In exchange, the business will agree to make payments to the reverse consolidation funder over an extended period of time, often with more favorable terms than the original MCA.

The reverse consolidation funder essentially takes over the daily or weekly payments that the business was previously made to the MCA lender, providing the business with more breathing room to manage its cash flow. This type of financing can be particularly useful for businesses that have taken out an MCA but are struggling to meet the daily or weekly payment requirements, as it can help them extend the repayment term and lower their payment amounts.

It’s important to carefully evaluate the costs and terms of a reverse consolidation before pursuing this strategy, as it may result in higher overall interest charges or fees compared to the original MCA. Additionally, some lenders may not allow reverse consolidations, so it’s important to check the terms of the original agreement before pursuing this strategy.