Can you refinance a MCA loan?

Can You Refinance a Merchant Cash Advance Loan?

Merchant cash advances, also known as MCA loans, have become an increasingly popular form of financing for small businesses. However, due to their high costs and stringent repayment terms, many business owners find themselves struggling under the weight of MCA debt. This leads many to ask: can you refinance a merchant cash advance loan?The short answer is yes, you can refinance an MCA. However, it‘s important to understand your options and pursue refinancing strategically. Blindly getting another MCA or high-cost financing may only worsen your situation.This article will cover:

  • What is a merchant cash advance and why do businesses struggle with them?
  • Your options for refinancing an MCA loan
  • Steps to refinance your MCA properly
  • Alternatives to consider besides refinancing

We’ll also provide some examples of common refinancing mistakes to avoid as a small business owner.

What Is a Merchant Cash Advance?

A merchant cash advance provides an upfront lump sum of capital in exchange for a percentage of your future credit card and debit card sales.

  • Repayment terms are usually quite short, around 3-18 months
  • There is no fixed interest rate or payment schedule
  • The provider collects repayments by making daily or weekly withdrawals from your bank account

This repayment process tied to card receipts, rather than a fixed schedule, is what classifies MCAs as an advance rather than a loan.MCAs appeal to small business owners because they are easy to qualify for. Approval decisions emphasize card sales volume rather than credit scores or financial statements.However, there are some major downsides to merchant cash advances:

  • Cost – MCAs carry very high equivalent interest rates, often between 60-200% APR when fees are included.
  • Payments Fluctuate – Since payments are based on a percentage of daily/weekly sales, they go up and down rather than remaining consistent. This unpredictability strains cash flow.
  • Short Repayment Time – Typical MCA terms rarely exceed 18 months. This short timeline pressures cash flow.
  • Repayment Challenges – It can be very difficult to fully repay an MCA since new fees constantly accrue. This leads to debt cycles.

As a result of these issues, many small business owners find MCA payment deductions straining their finances. They may then consider refinancing their MCA loan to alleviate the pressure.

Refinancing Your Merchant Cash Advance Loan

The good news is refinancing an MCA is possible. You have a few options to choose from:

MCA Refinancing Options

  • Get another merchant cash advance
  • Use a business installment loan or line of credit
  • Apply for an SBA loan

However, you need to be very careful in your approach. Replacing an MCA with another expensive financing option often leaves you worse off.Below we‘ll compare the pros and cons of each refinancing method for an MCA loan.

Refinancing an MCA With Another MCA

The easiest option is to get a new merchant cash advance to pay off your existing one. However, this carries significant risk.


  • Fast funding and easy qualification
  • Immediate access to funds to repay old MCA


  • Very high cost
  • Perpetuates cash flow issues
  • Risk of debt cycle (“stacking” MCAs)

Refinancing with another MCA means taking on more high-cost debt to pay off previous obligations. You end up paying off interest with more interest, without solving the underlying problems.It also doesn’t provide more favorable repayment terms. You still make payments from daily credit card batches with another MCA.As a result, “stacking” multiple merchant cash advances often leaves small businesses worse off. We do not recommend replacing one MCA with another.

Refinancing an MCA With a Business Installment Loan

A better option is to refinance your MCA with a business installment loan (or business line of credit).Installment loans provide a lump sum up front, which you then repay in fixed installments over a set term. This helps by:

  • Lowering your costs
  • Giving consistent loan payments
  • Extending your repayment period


  • Lower interest rates than MCAs
  • Fixed monthly payments
  • Terms typically up to 5 years


  • May need strong credit
  • Limited flexibility
  • Difficult to qualify if finances strained

The catch is that traditional lenders have stricter eligibility standards. They review personal/business credit and want to see healthy revenue and profits.If your finances are strained from MCA payments, it can be hard to qualify. But for those with good credit, installment loans present a viable MCA refinancing option.

Refinancing an MCA With an SBA Loan

Another alternative is to refinance your merchant cash advance with a loan backed by the Small Business Administration (SBA).SBA-guaranteed loans provide affordable capital by incentivizing lenders to relax eligibility standards. This makes them easier to qualify for than regular bank loans.Benefits include:


  • Very low interest rates
  • Up to 10-year repayment term
  • Fixed monthly payments


  • Requires solid credit history
  • More documentation needed
  • Slower application process

If you have a strong credit profile, SBA loans present the most affordable way to refinance an MCA. Rates start around 6-7% and terms reach 10 years.Just be prepared for a more extensive application process. SBA lenders review tax returns, profit-loss statements, business plans, and other documentation.

Steps to Refinance Your Merchant Cash Advance Properly

If you determine refinancing your MCA makes sense, follow these key steps:

1. Calculate Your Payoff Amount

Contact your MCA provider to determine the outstanding balance and total payoff figure needed to close your account. Make sure this payoff amount covers all fees and draws.You’ll need to borrow enough to fully repay this balance with your new financing.

2. Shop Around With Lenders

Research multiple lenders to compare interest rates and terms for installment loans, lines of credit, and SBA loans.Online lender marketplaces like Lendio allow you to complete one application for consideration by multiple financing sources.

3. Submit Your Application

Prepare all required documents and complete the full application for your chosen loan option. Be ready to submit tax returns, bank statements, and other financial details.

4. Accept Loan Terms

Review the loan offer carefully and make sure you understand all fees, restrictions, and repayment specifics before signing. Don‘t gloss over important fine print.

5. Verify MCA Payoff

Once your refinancing loan is funded, contact your MCA provider to ensure they receive the payoff payment. Follow up to confirm closure of your merchant cash advance account.Following these steps will help ensure your MCA refinancing goes smoothly and saves you money over the long run.

Alternatives to Refinancing Your MCA

While refinancing an oppressive MCA loan can provide relief, it also swaps one debt for another. You take on repayment of a new financing option instead.Here are two alternatives to refinancing that allow you to pay off your merchant cash advance without new borrowing:

Renegotiate MCA Terms

One option is to contact your MCA provider and try to negotiate the terms. While rare, some may agree to changes like:

  • Lowering the payment percentage
  • Extending the repayment term
  • Allowing fixed weekly payments

Any concessions help ease the MCA burden without new financing. Just temper expectations, as most providers won’t negotiate terms after origination.

Pay Off MCA Aggressively

If renegotiation isn‘t possible, focus aggressively paying off your advance early. For example:

  • Institute spending cuts to drive profits higher
  • Inject new capital from owners or investors
  • Liquidate assets to put extra toward payoff

Paying off the balance early limits how much you pay in fees and interest. Just make sure you have a plan to cover operating expenses.The key is increasing cash flow available to route toward your MCA. This sidesteps new borrowing while closing your account.

Common MCA Refinancing Mistakes to Avoid

To wrap up, let’s discuss some all-too-common mistakes business owners make when trying to find MCA relief through refinancing:

Using Another MCA to Pay Off Previous Advance

As discussed earlier, this perpetuates the high-interest debt cycle. It likely worsens cash flow rather than improving it.

Failing to Read the Fine Print

Not carefully reviewing new loan terms can result in unexpected fees or restrictions down the road. You need to understand what you’re getting with new financing.

Not Increasing Cash Flow

If the MCA strained your finances, swapping it for another fixed monthly payment may also prove difficult long term. Look to increase sales or cut costs.

Poor Timing

Don’t wait until missing payments or defaulting on your MCA before considering refinancing options. This damages your credit and financing alternatives. Act sooner than later.

Wrap Up

While once easy to obtain, merchant cash advances often become an albatross dragging down small business finances. The good news is you can take proactive steps to relieve the burden.Refinancing your MCA with better-priced installment financing allows you to pay off the balance at a lower cost over time. Just avoid repeating past mistakes.With the right approach, refinancing can help free up cash flow and restore stability to your business.For more information on debt relief options, contact our business financing experts at Delancey Street. Our number is 212-210-1851. With customized advice and our network of lenders, we can find the right solution for your situation.

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