SBA Refinancing of Merchant Cash Advances

November 4, 2025

Bob Coleman
Executive Director, NASLB

SBA Refinancing of Merchant Cash Advances

At last week’s B2B Finance Expo in Las Vegas, hosted by deBanked, I led a panel discussion titled “Creating New Income Streams Through SBA Lending”.

The central issue we tackled is SBA’s new prohibition on refinancing merchant cash advance debt. In its 2025 Standard Operating Procedure 50 10 8, the SBA added one short but consequential sentence:

“Merchant cash advance (MCA) and factoring arrangements are not eligible for debt refinancing.”

That single line ends a long-standing path that helped many business owners move from high-cost, short-term financing into long-term SBA loans. For years, MCAs served as a bridge for businesses that needed fast cash but couldn’t yet qualify for bank credit. These advances are structured as purchases of future credit card receivables, usually repaid within twelve months through daily or weekly deductions ranging from 10 to 30 percent of sales.

The cost is steep. Annualized rates often run between 33 and 50 percent—and in extreme cases near 100 percent. With default rates around 10 percent, it’s easy to see why the SBA viewed the product as high-risk.

Brock Blake noted the SBA never defined what exactly qualifies as an MCA. His view is that an MCA is simply an advance against future card deposits. Burke Purcell pointed out that the market is already evolving toward more transparent structures—term loans with stated APRs, repayment schedules, and full amortization. That shift could bring these products back in line with regulatory expectations and make them refinance-eligible in the future.

Historically, refinancing MCA debt into a multi-year SBA loan provided enormous relief for borrowers. Payment reductions of 60 to 80 percent were common, giving owners a chance to stabilize cash flow and rebuild. Now, with that option off the table, lenders and brokers will need to adapt.

Carrisa Sousa reminded lenders that interpretation still matters. While the SOP prohibits refinancing original MCAs, debt used for legitimate working-capital purposes remains eligible under SBA rules. Ultimately, each lender decides how strictly to apply the policy.

For brokers, the takeaway is clear:

Focus on loan products with defined interest rates and repayment schedules.
Assess a borrower’s ability to service short-term debt before recommending an MCA.
Consolidate borrower needs into a single, well-structured SBA request.
Encourage borrowers to maintain strong personal credit for flexibility in future financing.

The new rule also reshapes the MCA industry. Without SBA refinancing as an exit strategy, default management will become harder. Expect to see hybrid “term-advance” products with monthly payments and increased regulatory scrutiny around APR disclosures.

The SBA didn’t close the door on small-business refinancing—it closed it on one specific product. The responsibility now shifts to brokers and lenders to guide borrowers toward transparent, sustainable financing that can stand on its own.