Iron Capital Equities launches platform for small businesses mired in costly alternative debt |
NEW YORK, February 15, 2022 /PRNewswire/ — Fintech Group, Iron Capital Equities, which operates several small business web properties, announces its all-new platform, www.reverseconsolidation.com. Through the use of bank intermediary technology, the fintech platform analyzes a company’s cash flow and determines how to refinance costly Merchant Cash Advance (MCA) debt.
Businesses need to shore up high interest and high payments for MCAs, especially now that thousands of businesses have received MCAs after emerging from post-pandemic government lockdowns.
Small subprime businesses struggle to obtain traditional financing. Their options for obtaining cash being limited, many accept short-term advances, most with a cost of capital above 30% and repayment terms of less than 12 months. Businesses use this expensive money for working capital, upcoming projects, inventory, payroll, etc. Think of a payday loan, but for a small business whose future accounts receivable are put on the line as repayment security for a private lender.
“We find that companies that pay more than 3 MCA at a time often have a monthly debt service ratio of over 30% to their gross sales. This is well above the break-even point for many companies” , declares Matthew Elling, founding partner of Iron Capital Equities. Businesses can use this platform with more than one Merchant Cash Advance (MCA).
After the money is used, companies often get another MCA to pay the daily or weekly automatic payments for the 1st MCA. This method can get out of hand, as with every position, the company’s cash flow is not used to run the business but is used to pay for the MCA positions.
Reverse consolidation allows the business to save up to 50% of the weekly cash flow allowance by providing cash to the business to pay its current MCA payment obligations. This is not a debt restructuring, and the original finance companies are not defaulting. The duration is essentially extended, so that the company can pay off its MCA debts and possibly deleverage.
While Iron Capital Equities has offered this reverse consolidation program for years, this is the first time that underwriting decisions with the use of bank account rectification software can determine the right savings.
“We know that reverse consolidation helps alleviate a company’s cash flow issues due to MCAs. Now using bank account connectivity products and our fintech software can make better underwriting decisions,” Explain Matthew Elling.
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SOURCE Iron Capital Actions