By: Claudia Stefano
May 18, 2023
1:03 am
While owning a franchise business can be a profitable venture, managing debt can become a significant challenge. Merchant Cash Advance (MCA) loans are a quick solution for businesses to gain cash flow, but they also come with high-interest rates and a daily repayment schedule, putting businesses at risk of being trapped in a debt cycle. In this comprehensive blog post, we will explore what Merchant Debt Relief entails and how it can help franchise owners break free from the chains of debt.
MCA loans are becoming increasingly popular with small businesses across the US due to their accessibility and quick funding. MCA is a type of business funding that offers upfront cash in exchange for a percentage of future credit card sales.
For example, if a business receives $50,000 in MCA funding and has a repayment term of 12 months with a factor rate of 1.2, they will have to pay back $60,000 ($50,000 x 1.2) over the year. However, if the business has slow sales during certain periods, they may still be required to make daily payments of the agreed percentage, making it difficult to manage cash flow.
MCAs work similarly for franchise businesses, but with more complexities. A franchisor may approve an MCA for a franchisee but may limit the amount borrowed due to the franchisee’s limited ownership rights or collateral. Franchisees may also need franchisor approval for an MCA advance and may need to assign future credit card payments to the franchisor as collateral.
There are pros and cons to using MCAs. One of the most significant advantages is that they are easy to qualify for and receive quicker approval than traditional bank loans. Another is that businesses can make daily payments proportional to their sales. However, MCAs come with high-interest rates that can range from 20-250% APR, on top of the principal amount.
Franchise owners may turn to MCAs for short-term funding to cover expenses such as payroll, inventory, or marketing without putting up collateral. However, accepting these loans when sales are not consistent may lead to being trapped in a cycle of debt.
Franchisees may find themselves in financial trouble when facing slow sales, common expenses, and creditor pressure. Here are some signs that your franchise needs MCA debt relief.
Regroup Partners is a team of experienced MCA debt advisors who can help franchise owners navigate the complex landscape of MCA debt relief. Here is how the process works.
The first step is to evaluate your franchise’s financial situation to determine the best course of action to address your MCA debt. Regroup Partners will assess the business’s monthly sales, financial obligations, outstanding debts, and cash flow patterns to create a comprehensive debt-relief strategy.
After assessing your business’s financial situation, Regroup Partners will create a tailored plan to help you successfully manage and eliminate your MCA debt. The strategy will take into account your business’s unique situation and goals and will include a budget as well as a plan for addressing creditor pressure.
Regroup Partners will work with your creditors to secure the best possible terms for your debt relief plan, potentially reducing interest rates and extending repayment terms. Our team of attorneys will also work towards preventing creditors from pursuing legal action against the franchise.
Once a plan has been developed and agreed upon, Regroup Partners will work with you to ensure it is implemented effectively and efficiently. We will provide guidance and support every step of the way, including budgeting, cash flow management, and creditor communication.
Regroup Partners will continue to monitor your progress throughout the debt relief process and make any adjustments needed to ensure success. This includes revising the budget based on daily financial reports and guiding franchisees on how to address unexpected expenses.
Regroup Partners also offers a range of other debt relief services tailored specifically to the needs of franchise owners. These services include vendor debt negotiation and restructuring, business debt consolidation, and restructuring, and legal protection against lawsuits and creditor harassment.
Opting for Merchant Debt Relief with Regroup Partners can provide numerous benefits to your franchise, including:
Here are some examples of franchise owners who have successfully navigated the MCA debt relief process with the help of Regroup Partners:
A franchise owner with $130,000 in MCA debt and three MCAs with daily payments of $883 negotiated a reduced payment plan. After four months of negotiations, Regroup Partners reduced daily payments to $575, resulting in a savings of $308 per day.
A franchise owner with three MCAs totaling $130,000 had a total monthly payment of $8,000. Regroup Partners consolidated the three MCAs under one loan with a 12-month term at an interest rate of 8%, resulting in a monthly payment of $11,000.
A franchise owner was facing vendor pressure due to delayed payments. Regroup Partners negotiated with the vendors who agreed to reduce the balance owed, extend terms to six months, and waive interest.
Franchise owners should take steps towards a debt-free future after completing the MCA debt relief process. Here are some strategies:
MCAs can offer quick funding for franchises, but they can quickly lead to financial trouble. With Regroup Partners as your trusted advisor, you can navigate Merchant Debt Relief and work towards a more financially stable future for your business.
Don’t let MCA debt continue to hold your franchise back. If you’re struggling with MCA debt, take action today and schedule a FREE consultation with Regroup Partners to discuss a customized debt relief plan tailored specifically to your needs.
PHONE: (954) 234-2300
EMAIL: legal@regrouppartners.com
Regroup Partners provides business distress solutions to businesses of all sizes that aid in the mission to ultimately ensure peace of mind to business owners in a time of need.
