Can an SBA Loan Refinance a Merchant Cash Advance?

No — generally, an SBA loan cannot be used to refinance a Merchant Cash Advance. Effective June 1, 2025, SBA SOP 50 10 8 made Merchant Cash Advance and factoring arrangements ineligible for SBA debt refinancing. Businesses carrying MCA obligations should not assume that an SBA 7(a) or 504 loan can be used to pay off or refinance those positions.

What Changed

The U.S. Small Business Administration updates its Standard Operating Procedures periodically. SOP 50 10 governs the lender and development company loan programs — including the 7(a) and 504 loan programs. The current version, SOP 50 10 8, took effect June 1, 2025, and it specifically addresses the treatment of Merchant Cash Advances and factoring arrangements in the context of debt refinancing.

Under the updated procedures, MCA and factoring arrangements are not eligible for SBA debt refinancing. This is an SBA policy and procedure change — not a new law passed by Congress. It's important to describe it accurately: the SBA changed its lending procedures; Congress did not "ban" MCA refinancing, and no new statute outlawed SBA MCA buyouts.

Why This Matters for Businesses Carrying MCAs

For businesses that were counting on eventually refinancing their MCA debt into an SBA loan, this change closes off that path. It means that the alternatives for restructuring MCA obligations now generally live outside the SBA programs — in private credit, conventional term loans, asset-based facilities, and other non-SBA structures.

What Alternatives May Be Available

Although SBA refinancing is off the table for MCA debt, other structures may still be available for qualifying businesses:

• Business term loans — a lump sum repaid over a defined term, which may be used to replace short-term obligations when eligible.
• Private credit — non-bank financing that can sometimes fund situations a bank may decline.
• MCA buyout structures — replacing one or more existing positions with a different arrangement.
• Business lines of credit — revolving liquidity for ongoing working-capital needs.

Eligibility for any of these depends on underwriting. You can calculate your current MCA payment burden to understand the size of your obligation before exploring alternatives.

Official SBA Source

SOP 50 10 contains SBA loan origination policies and procedures governing the 7(a) and 504 programs. The official SBA documentation is available on the SBA website. Because SBA procedures are subject to change, businesses should confirm the current rules with the SBA or a qualified professional before relying on this information.

Official SBA Source — SOP 50 10 (sba.gov)

Educational information only. Not legal, tax, or financial advice. Businesses with questions about existing agreements or SBA eligibility should consult qualified legal or financial counsel.