Can You Refinance an MCA Loan with an SBA 7(a) Loan?

If you’re struggling with a Merchant Cash Advance (MCA) and wondering if you can refinance it with an SBA 7(a) loan, the answer is: maybe. While the Small Business Administration (SBA) has recently clarified that MCA debt refinancing can be eligible, strict qualifications still apply—and many businesses won’t meet the criteria.

On December 6, 2024, the SBA issued Procedural Notice 5000-862692, which, among other updates, confirmed that MCA debt may qualify for SBA 7(a) loan refinancing. However, this doesn’t mean that all businesses with MCA loans will be approved. Here’s what you need to know.

SBA 7(a) Refinancing Requirements for MCA Loans

For an MCA loan to be eligible for refinancing through an SBA 7(a) loan, businesses must meet the following strict criteria:

  1. Demonstrated Ability to Repay – Your business must show sufficient cash flow to support the new SBA loan payments, which can be difficult if your MCA payments have already strained your finances.
  2. Debt Must Have Been Used for Business Purposes – The MCA loan must have been used for legitimate business expenses. If the funds were used for personal reasons, refinancing won’t be an option.
  3. Loan Terms Must Improve the Borrower’s Position – The SBA will only approve MCA debt refinancing if it results in a “substantial benefit” to the borrower, such as lower monthly payments or improved loan terms.
  4. No Excessive Delinquencies – If your MCA loan is already in default or has excessive missed payments, lenders may be hesitant to approve your SBA loan application.
  5. The MCA Lender Must Agree to Refinancing – Some MCA lenders may not be willing to release their lien or negotiate a payoff amount, making it difficult to proceed with MCA debt relief.
  6. Good Business and Personal Credit Scores – While the SBA is generally more flexible than traditional lenders, poor credit history can still prevent approval.

What If You Don’t Qualify? Consider Business Debt Settlement

If you don’t meet the strict SBA refinancing criteria, business debt settlement might be a better option. Through debt settlement, businesses negotiate with lenders to reduce the total debt owed and restructure business loan payments to be more manageable. This can provide immediate relief from high MCA payments and put your business back on track without taking on another loan.

Bottom Line: Refinancing Isn’t Guaranteed

While the SBA’s recent clarification provides some hope for businesses drowning in MCA debt, SBA loan refinancing is not a guaranteed solution. The qualification requirements are strict, and many businesses won’t meet the necessary criteria. If you’re unsure about your eligibility, consulting with a business debt expert or exploring business debt settlement options could be your best course of action.

If you need help assessing your options, reach out today for a free consultation on business debt relief strategies!