Can You Refinance a Merchant Cash Advance With an SBA Loan?

Updated November 07, 2026

What the SBA Rule Says

Appendix 14 of SOP 50 10 8.1 covers 7(a) debt refinancing. It calls an MCA a sales-based repayment agreement: a cash advance repaid from a percentage of future sales. The key sentence is direct: these agreements are only eligible if the original agreement “has been converted to a term loan, has amortized for at least 24 months, and no additional Agreements have been implemented since the conversion.” If the agreement is still active, it isn't eligible. A separate line says factoring agreements aren't eligible either.

Why You May Have Read the Opposite

Older guides, including some older pages on this site, said SBA could pay off MCAs, because the rule has changed three times in about two years. Confirm which version any source is describing.

Version 8.1 took effect October 1, 2026. If someone promises an SBA payoff of an active advance, ask them to show you the section. Lender overlays can be stricter than the SOP, and they can differ, but no lender can make an ineligible use of proceeds eligible.

The Other Tests a Converted MCA Must Pass

Meeting the 24-month condition only gets the debt to the starting line. The general refinance rules in Appendix 14 apply as well:

• Current for 12 months. The debt must have been current for the last 12 months or its life, whichever is less. A payment unpaid for more than 29 days isn't current.
• No creditor in a position to lose. Proceeds can't pay a creditor that would otherwise take a loss, so settled or workout balances raise questions.
• 10% lower payment. The new installment must generally be at least 10% below the existing installments, in aggregate. An existing $4,000 monthly payment would need to fall to $3,600 or less.
• A written case. The lender must document why the debt was taken on, why restructuring helps, and itemize creditors being paid $10,000 or more.
• On your tax returns. Debt on the balance sheet needs to appear on the business return with its interest expense.

Ask for the conversion in writing as a real term loan with a fixed schedule. A modified holdback percentage may not be a conversion at all, so have the lender read the agreement before you count months.

Worked Example: A Converted Advance Against Each Test

Illustrative, not a quote. Say a business had its only advance converted in writing to a term loan 30 months ago, with a fixed $4,000 monthly payment and about $100,000 still owed. It's looking at a new loan with a payment of about $2,224, which assumes 12% over five years.

Change one fact and the answer flips. Converted 14 months ago, the same business has to wait 10 more months. If it took a new advance in month 20, it fails the no-new-agreements test however long it waits. Passing only makes the debt eligible for refinancing. The lender still underwrites the whole file.

What to Do With an Active MCA

You can't wait 24 months on a debit that's choking the business, so the realistic paths are outside SBA:

Illustrative math from our refinance playbook: $100,000 at 12% over five years is about $2,224 a month, against roughly $10,400 in daily debits on the advance in that example. These aren't quotes, and the FTC has warned funders against misrepresenting terms, so get every figure in writing. For more on the exit itself, read how to get out of an MCA.

Can You Get an SBA Loan for Something Else While You Have an MCA?

This is a different question, and it's often missed. The appendix limits what proceeds can refinance. Having an advance isn't, by itself, the same as being barred from an SBA loan, but the debits reduce the cash flow a lender can count and may be treated as a warning sign. Lenders vary widely here. Many will want the advance gone, or will decline until it is. See SBA loan alternatives if you get a no, and why SBA loans get denied before you reapply.

A Plan That Leads Back to SBA

1. List every agreement. Note the funder, balance, debit, and whether it's still sales-based.
2. Stop adding. Any new agreement after a conversion breaks the condition.
3. Exit or convert. Use one of the options above, and get any conversion in writing.
4. Stay current. Keep 12 clean months, because a payment over 29 days late counts against you.
5. Revisit SBA later. Lower-cost, longer-term debt may be open once the file is clean.

Talk to an SBA specialist at (561) 268-0465, or get matched and we can review which path your file supports. See the SBA loans overview for the wider program.

Frequently Asked Questions

Sources & Further Reading

• SBA SOP 50 10 8.1 (effective October 1, 2026) — The SBA's rules for 7(a) and 504 loans, including equity injection, Appendix 15 on changes of ownership, and eligibility.
• SBA 7(a) Loans — Program overview and the $5 million maximum loan amount.
• Starfield & Smith: Refinancing MCA Debt (December 2024) — Law-firm summary of Procedural Notice 5000-862692, which briefly allowed MCA refinancing.
• Starfield & Smith: SBA Issues SOP 50 10 8 (April 2025) — Law-firm summary of the June 2025 SOP, which made MCAs and factoring ineligible for refinancing.
• FTC: Protecting Small Businesses Seeking Financing — FTC guidance on misrepresented financing costs and terms offered to small businesses.

Figures above describe ranges commonly seen across lenders and reflect published guidance as of the date on this page. Confirm current terms with the cited source or your lender before acting.

Talk to an SBA Specialist