How do I refinance a merchant cash advance?
Reviewed by Turan Zeynal, Managing Partner, Outset Funding Partners ·
You refinance an MCA by qualifying for a cheaper product — a bank term loan, SBA 7(a), or a business line of credit — that funds enough to pay off the MCA balance at closing. It's the single highest-value exit from an MCA because it swaps 40–70% effective APR daily-debit capital for 10–30% APR monthly-payment capital. The catch: refinance lenders underwrite you as if the MCA weren't there, so credit, time in business, revenue, and DSCR all have to actually clear their box.
Quick facts
- Best fit
- One MCA + 12+ months in business + 640+ credit
- Typical APR drop
- 40–70% APR → 12–30% APR
- Payment structure change
- Daily → monthly
- Products to target
- SBA 7(a), bank term loan, business LOC
- Deal-killer #1
- 3+ open MCAs on the file
- Deal-killer #2
- Recent NSFs or negative balance days
The 60-second answer
Refinancing an MCA isn't a special product — it's just qualifying for a cheaper loan and using the proceeds to pay off the MCA at closing. The refi lender wires the payoff amount directly to the MCA funder on funding day; the daily debit stops the same day; you make one monthly payment on the new loan going forward.
That's the mechanics. The reason most owners can't do it is that refinance underwriters look at your file as if the MCA weren't there. If the MCA is the only reason your DSCR looks weak, they'll fund. If your bank statements show NSFs, negative days, or a stack of 3+ positions, they won't — because those signal the same problem will show up again after the refi.
How it works, step by step
- Confirm your refinance target productSBA 7(a) is cheapest but slowest (30–90 days). A bank term loan or SBA Express is faster. A business line of credit is the fastest and gives you ongoing flexibility. Match to your timeline and credit.
- Get your MCA payoff letterCall the funder, request a payoff letter good for 10 business days. This is what the refi lender wires against at closing.
- Pull the underwriting packageSame package as any bank deal: 2 years business tax returns, personal tax returns, YTD P&L and balance sheet, 4 months business bank statements, debt schedule (including the MCA), personal financial statement.
- Apply — and disclose the MCA up frontUnderwriters find MCAs on the bank statements anyway. Disclosing on the application saves the deal from being pulled at underwriting.
- Fund and wire payoff directly to the MCAAt closing, the refi lender wires the payoff amount to the MCA funder. The MCA is paid off; the daily debit stops that day. You start monthly payments on the new loan the following month.
Why the same bank statements decide the deal — and how to fix them before you apply
Refi underwriters read four months of bank statements looking for three things: average daily balance, number of negative days, and number of NSFs. The MCA daily debit isn't the disqualifier — the pattern caused by an oversized MCA is. If the debit routinely puts you negative on Fridays before the weekend deposits, that's what kills the deal.
Owners who successfully refinance almost always spend 60–90 days cleaning the statements first. That means: request reconciliation to lower the daily debit temporarily, hold a bigger cash reserve in the operating account, time large disbursements to land after batch deposits, and avoid any NSFs even on non-MCA charges. Three clean months of statements often makes the difference between "declined" and "approved at prime + 4."
For files that can't get to clean statements in 90 days, the practical order is: pursue consolidation first (drops the daily debit immediately), then use the six months of clean statements after consolidation to qualify for a real refinance. That's the two-step exit path most workable files eventually take.
Refi target products at a glance
| Option | When to use | Watch out for |
|---|---|---|
| SBA 7(a) working capital | Best rate; you can wait 30–90 days | Requires strong 2-year tax returns and personal guarantee |
| Bank term loan | Existing bank relationship, 660+ credit | MCAs on the file often trigger auto-decline at banks |
| SBA Express | Up to $500k, 30-day close, LOC or term | Slightly higher rate than 7(a); still fastest SBA option |
| Business LOC (non-bank) | Need speed and flexibility; credit 640–700 | APR 15–35% — cheaper than MCA but not cheap |
| Equipment refi | MCA proceeds went toward equipment you now own | Only works if you have the invoices and the asset is title-able |
Frequently asked questions
Can I refinance an MCA with a traditional bank?
Yes, but most banks decline files with an active MCA on the bank statements. The exceptions are strong files (700+ credit, 2 years of profitability, existing deposit relationship) or SBA-guaranteed products through the same bank, where the SBA guarantee gives underwriting more flexibility.
Will an SBA loan pay off my MCA?
Yes. SBA 7(a) working capital proceeds can be used to refinance existing business debt including MCAs, provided the SBA lender agrees and the refi is at least a 10% payment savings. This is one of the most common uses of SBA 7(a) refi authority.
How long does an MCA refinance take?
A business LOC can fund in 3–10 business days. A bank term loan runs 2–4 weeks. SBA Express is typically 30 days. Full SBA 7(a) can take 30–90 days depending on lender and completeness of the file. Match the product to your urgency.
How much does refinancing an MCA actually save?
A typical MCA with a 1.30 factor over 8 months carries a 60%+ effective APR. Refinancing that balance into a 5-year SBA 7(a) at prime + 3 (call it ~11%) cuts the interest cost by 80%+ over the life of the balance and turns the daily debit into a manageable monthly payment.
Do I need to pay off the MCA before applying?
No — that's the whole point. The refi lender wires the payoff to the MCA funder at closing. Trying to pay off the MCA first with cash you don't have is what creates the problem the refi is supposed to solve.
What if I have multiple MCAs — can they all be refinanced at once?
Yes, if the total combined balance fits inside the new loan and each existing MCA funder will provide a payoff letter. In practice, files with 3+ MCAs usually need consolidation first (to drop the daily debit and clean the statements) before a real refi will underwrite.
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