[Thewolfofallstreetz]

Hello everyone,

Can an expert please explain how a Reverse Consolidation works. Every time I come across one I think I understand how it works but then I end up getting confused.

[Ehenek]

Yes. Think of an MCA. Then the instrument is to be used to give short term to intermediate relief. As the other positions fall off then "voila" an MCA. It is to be used to disburse payments to help pay off your existing MCA positions. I hope that helps.

[Thewolfofallstreetz]

I understand what it’s used for and the point of it I just get confused when trying to interpret and understand the term sheet.

[abfunders]

I understand what it’s used for and the point of it I just get confused when trying to interpret and understand the term sheet.

They have a weekly disbursement schedule on one side. That goes according to the amounts owed and to cover the payments. As the payments drop off, the disbursements are reduced and adjusted accordingly. Meanwhile, there's also a daily payment going out to the funder as well.
Some funders (like GFE) will put on their term sheet an optional add-on. They'll stack the merchant and include it into the reverse.

[Bcooper]

Hello everyone,

Can an expert please explain how a Reverse Consolidation works. Every time I come across one I think I understand how it works but then I end up getting confused.

as someone whos closed roughly 10 mil in reverses they are a waste of time, they don't help your client and I've only seen one actually go to completion in my time. i will personally never offer a reverse again which is why my firm now offers debt restructuring. We may make less but we actually keep the commission and it genuinely helps the merchant.

[AMERICApital1]

Yeah I got a reverse consolidation offer and I'm having a hard time pitching it as the merchant points out that now he's paying interest on the reverse at a 1.49 on top of the interest on his existing positions, without actually receiving any funds up front, and they won't be able to take out another position as long as they are receiving these weekly installments or else they default.

[Bcooper]

Yeah I got a reverse consolidation offer and I'm having a hard time pitching it as the merchant points out that now he's paying interest on the reverse at a 1.49 on top of the interest on his existing positions, without actually receiving any funds up front, and they won't be able to take out another position as long as they are receiving these weekly installments or else they default.

best way to get them sold is to go to an sba lender/broker explain the situation and see if the lender is willing to buy out the debt with rc involved if they are willing to do the deal with the rc sell it as a bridge to an sba consolidation. Make sure to have a hard approval first though, I've seen a lot of brokers never issue an eoi or term sheet before doing it and leave the merchant high and dry after funding the rc. but if done right you can make far more money and actually help your client.