SBA’s New Rules Make It Harder to Refinance MCA Debt
Source: SBA SOP Revision Effective June 1
The U.S. Small Business Administration (SBA) has updated its Standard Operating Procedure (SOP) to prohibit the use of 7(a) loan proceeds for refinancing merchant cash advances (MCAs) or factoring agreements. This new policy, effective June 1, 2025, will impact thousands of small businesses that had hoped to consolidate high-cost debt into more affordable SBA loans.
This rule change sends a clear message: the government does not want federally backed funds used to bail out risky MCA lending practices. And while that may protect the SBA’s portfolio, it puts even more pressure on small business owners already drowning in stacked MCA debt.
As a company focused on business debt settlement and MCA debt relief, we believe this change makes alternative debt resolution strategies more important than ever.
Key Changes in the SBA Policy
- No SBA 7(a) Funds for MCA Payoffs: Businesses can no longer use SBA loan proceeds to refinance or pay off merchant cash advances or factoring contracts.
- Limits on Working Capital Uses: Proceeds must now be used for eligible expenses such as payroll, equipment, and rent—not to cover prior predatory debt.
- Risk Shift to Private Sector: With SBA loans off the table, distressed businesses must now turn to non-governmental options for relief.
Why This Matters for Business Owners With MCA Debt
Many business owners have used SBA 7(a) loans as a lifeline to escape the crushing weight of daily MCA withdrawals. These loans offered a path to business debt consolidation at single-digit interest rates and multi-year repayment terms.
But with the new restrictions, those options have been cut off. Now more than ever, business owners need effective, strategic options for business debt relief—especially if they are:
- Carrying multiple merchant cash advances
- Facing default or legal action
- Experiencing negative cash flow from excessive daily payments
This move by the SBA underscores just how critical it is to pursue non-loan-based solutions, such as MCA debt settlement, to resolve your business debt before it escalates.
How Business Debt Settlement Can Step In
Our team specializes in helping businesses like yours navigate situations exactly like this. We negotiate directly with MCA funders to:
- Reduce the total amount owed
- Stop aggressive collection actions
- Prevent bank levies and UCC liens
- Eliminate multiple daily payments
We provide a structured, ethical approach to business debt negotiation, allowing your business to regain financial stability without taking on new loans.
Why SBA Restrictions Make MCA Debt Settlement More Valuable
This policy change validates what we’ve seen in the market: MCA debt is fundamentally incompatible with long-term business success. When even the federal government won’t allow SBA loans to be used for these payoffs, it’s a red flag for how risky and problematic these advances have become.
That’s why merchant cash advance relief must be part of any serious financial recovery plan for a small business. Rather than relying on a bailout, business owners need to seek experienced professionals who understand how to:
- Negotiate reductions in stacked MCA balances
- Consolidate business debt into manageable settlements
- Develop a timeline for full recovery and growth
Final Thoughts
While the SBA’s move will limit options for refinancing, it also reinforces the value of proactive business debt settlement programs. We help small businesses reclaim control from MCA lenders, restructure what they owe, and build a roadmap to future success.
If you’re struggling with daily withdrawals and denied refinancing options, now is the time to act. The window for resolution is closing, and early intervention in MCA debt relief gives you the best chance at a full turnaround.
Get Help Today
Speak to one of our business debt relief advisors about how we can help you restructure and settle your MCA debt. With SBA refinancing no longer available, let us show you how to move forward.
Call now for a free consultation and take the first step toward business debt freedom.
