Reverse Consolidation
Reverse consolidation is the MCA structure where a new funder takes second-position behind existing first-position MCA, providing additional capital to a merchant who needs working capital while existing position remains in place — distinct from consolidation that pays off existing positions.
Why This Matters
Reverse consolidation serves merchants needing additional capital who can't qualify for full consolidation but have existing first-position MCA in good standing. The structure: new funder issues second-position MCA, payments are split between first-position holder and second-position holder (often through ACH coordination), merchant accesses additional capital while existing position continues. Specialty funders (typically charging 1.40-1.50 factor rates reflecting elevated second-position risk) operate in this segment. The structure is often appropriate when first-position is nearly paid off and merchant needs additional capital before first-position resolution.
Frequently Asked Questions
Frequently Asked Questions
How does reverse consolidation differ from standard consolidation?
Standard consolidation pays off existing positions and replaces them with single new advance. Reverse consolidation adds new advance behind existing positions without paying them off. Standard consolidation reduces total positions; reverse consolidation increases positions to provide additional capital access.
When does reverse consolidation make sense for merchants?
When merchant needs additional capital, existing positions are in good standing, first-position is nearing payoff (so total payment burden won't be sustained long), and alternative funding sources unavailable. Specialty product for specific merchant situations rather than general-purpose financing.