Consolidating Multiple Advances Into One Payment: How It Is Priced
Two or three advances remitting daily can take a quarter of a business's cash before it earns a dollar. What a consolidation does, how the net is calculated, and what makes a file eligible.
Stacking happens gradually. A first advance funds something useful. A slow month makes the daily payment tight, so a second advance covers the gap. Then a third. Each one is priced on the deposits, none is priced on the others, and together they can take 20 to 30 percent of daily cash. The business is now working to remit.
What a consolidation does
A consolidation is one new facility that pays off the open advances at closing and replaces them with a single payment on a longer term. The daily or weekly outflow drops, sometimes by half, and the remaining balance is owed to one party on one schedule. The new facility can be an advance with a longer term, a term loan, or, where the business owns equipment, a sale-leaseback.
How the net is calculated
The new lender asks each existing funder for a payoff letter, which states the balance owed today. Those balances are paid directly to the funders at closing. The new facility's proceeds minus those payoffs is the net cash to the business, and it can be small or zero. That is normal: the point of a consolidation is usually the lower payment, not new money, and an honest lender will tell you the net before you sign, in dollars.
What makes a file eligible
Lenders consolidate when the underlying business is sound and the problem is the stack, not the revenue. They look for deposits that would comfortably carry one payment, a reasonable number of low-balance days once the stack is removed, and no more than three or four open positions. A business whose deposits have fallen by half since the first advance is a harder file; a business whose deposits are steady and is simply over-stacked is the ideal one.
What it costs
Consolidation facilities are priced on the same signals as any other, with one difference: the term is longer, so even a similar factor or rate produces a lower payment. Compare on the payment and the total cost in dollars, not on the factor, and ask what the total repaid will be compared with what you would repay if you left the stack in place.
What not to do
Do not take a fourth advance to cover the third. Every stacked position makes the consolidation harder and the eventual terms worse. The right time to consolidate is at two positions, when the deposits still carry the file easily.
List every open position on the application, including the balance as best you know it. It is the first thing a consolidation lender needs and the one thing an owner is most tempted to soften.
Applications reach the desk directly.