6 Options for Refinancing MCA Debt Into a Cheaper Loan

Welcome to Delancey Street. If you’re reading this, you’re probably paying daily or weekly to an MCA funder, and you’ve done the math, and the math is bad. The factor rate is eating you alive. You want out. You want to replace expensive short-term money with cheaper longer-term money, and you want to know what’s actually available, not what sounds good on a broker’s sales call.

Short answer: There are six real paths to refinance MCA debt into something cheaper – an SBA 7(a) loan, a traditional bank term loan, a non-bank term loan from a reputable online lender, a business line of credit, an asset-based loan against your equipment or receivables, and a home equity loan or HELOC if you’re personally willing to put your house on the line. Each one has a different approval bar, a different speed, and a different catch. Most business owners who are drowning in MCA debt will not qualify for the cheapest options on this list, and this is the part brokers don’t tell you.

If you’re behind on payments, or stacked on 3+ MCAs, some of these options are off the table entirely. Read carefully.

What “refinancing” actually means in the MCA world

Before we get into the six options, you need to understand something. An MCA is not a loan. It’s a purchase of future receivables. So when we say “refinance,” we don’t mean the same thing you’d mean with a mortgage. You’re not modifying the MCA. You’re taking new money from somewhere else, paying off the MCA balance in full (usually at a small discount if you negotiate it), and walking away. The new lender doesn’t care that it’s an MCA you’re paying off, they care whether you can pay them back.

This matters because:

• The MCA funder has no obligation to cooperate with a refinance. Some will. Some won’t.
• Most MCA agreements have a stacking clause, which means the moment you take new financing without their consent, you’re technically in default. You need to close the MCA on the same day the new money funds, not before.
• The “payoff amount” the MCA funder gives you is often negotiable, especially if you’re close to default. More on that below.

Option 1: SBA 7(a) Loan

This is the cheapest money on the list, and the hardest to get.

SBA 7(a) rates right now are roughly prime + 2.75% to prime + 4.75%, with terms up to 10 years for working capital. That’s single digit interest on a loan you can actually afford to pay monthly, not daily. If you qualify, this is the answer.

The catch – you probably don’t qualify if you have active MCAs. SBA lenders see MCA debt on your bank statements and they get nervous. They’ll want:

• Two to three years of tax returns showing profitability
• A personal credit score usually above 680
• A debt service coverage ratio above 1.25
• No active defaults, no recent bankruptcies, no unresolved tax liens
• A business that’s been operating for at least two years

Timeline is 45 to 90 days in most cases. If your MCA is choking you out this week, SBA is not going to save you. It’s a planning tool for business owners who are stressed but not yet in crisis.

One nuance most people miss – some SBA lenders will do what’s called a debt refinance 7(a), where the entire purpose of the loan is to pay off high-cost debt including MCAs. The ones that do this are specialists. A regular community bank will not touch it.

Option 2: Traditional Bank Term Loan

A step down in difficulty, a step up in rate. Rates on a traditional bank term loan right now are usually in the 9% to 13% range for a healthy business, with terms of 3 to 7 years.

Banks care about the same things the SBA cares about – profitability, time in business, credit, cash flow. The difference is they’re lending their own money without a government guarantee, so they’re often more conservative, not less. If you’ve got MCA debits hitting your account daily, the bank underwriter sees chaos on your statements and declines. This is just reality.

Who actually gets these – businesses that took one MCA as a bridge, are paying it down, and have otherwise clean financials. If that’s you, your local bank (not a big national bank, a community or regional bank where you have a relationship) is worth a call before you do anything else.

Option 3: Non-Bank Term Loan From a Reputable Online Lender

Now we’re in the space where most MCA-burdened business owners actually land.

Lenders like Funding Circle, Bluevine, Credibly, and others offer term loans in the 15% to 35% APR range, with terms of 1 to 5 years. That’s still significantly cheaper than an MCA, where the true APR on a 6-month 1.45 factor is often north of 80%. Cutting your cost of capital in half is not nothing.

The approval bar is lower than a bank – credit scores in the 625+ range, one year in business, $200k+ in annual revenue are typical minimums. They’ll still look at your bank statements, and they’ll still see the MCAs, but some of these lenders specialize in exactly this situation. They know what they’re underwriting.

The catch – the rates are still expensive by any normal standard, and the origination fees can be 3% to 6%. Run the numbers carefully. If you’re replacing a 1.49 factor rate MCA with a 28% APR term loan, that’s a real win. If you’re replacing it with a 45% APR product loaded with fees, you may have just repackaged the problem.

Option 4: Business Line of Credit

A line of credit is different from a term loan because you only pay interest on what you actually draw. Rates range from 8% on a bank LOC to 25%+ on a non-bank LOC.

The reason this shows up on a refinance list – if you have an unused line already, or you can get one approved, you can draw the full balance, pay off the MCA, and then pay the LOC back on your own schedule. Lines of credit are harder to get than term loans in most cases, but if you have one, use it before you take anything else.

The catch – most business owners with heavy MCA debt are not going to get a new line of credit approved. The underwriting is similar to a bank term loan. This option is mainly for people who set the LOC up before they ever took the MCA and forgot they had it.

Option 5: Asset-Based Loan

If you have equipment, inventory, or receivables of real value, you have collateral, and collateral changes everything.

Asset-based lenders don’t care as much about your credit or your bank statement chaos. They care about the asset. Rates on equipment refinancing are often in the 10% to 20% range. Invoice factoring or AR financing is different, closer to 1% to 3% per month on outstanding invoices, which sounds cheap but adds up fast if your customers pay slowly.

Who this works for – contractors, manufacturers, trucking companies, wholesalers, any business with real physical assets or a book of B2B receivables. Who this doesn’t work for – service businesses, restaurants, e-commerce with no hard assets.

The catch – you’re pledging the asset. If you default on the new loan, they take the equipment or the receivables. That’s the whole trade.

Option 6: Home Equity Loan or HELOC

This is the option nobody wants to talk about, and the option that actually saves some business owners.

A HELOC right now is in the 8% to 10% range. That is dramatically cheaper than any business-side option on this list. If you own a home with equity, and you’re confident in your business’s ability to recover, pulling a HELOC to pay off MCA debt is mathematically a strong move.

The catch is obvious and it’s severe – you are moving the risk from your business to your house. If the business doesn’t recover, you lose the business and the house. This is not a theoretical risk. It is the single most common way business owners who survived an MCA crisis end up in the worst shape of their lives two years later.

I’m not telling you don’t do it. I’m telling you understand exactly what you’re doing before you do it. Talk to your spouse, talk to an attorney, run the worst case scenario honestly.

What most business owners actually end up doing

Here’s the part the broker won’t tell you. Most business owners with heavy MCA debt do not qualify for options 1, 2, or 4. The cheap money requires financials that the MCA itself has already damaged. By the time you’re desperate enough to refinance, your bank statements show the damage, and the cheap lenders decline you.

What’s left is options 3, 5, and 6, and sometimes none of those either. When that happens, the real answer is not refinancing. The real answer is MCA debt settlement or restructuring, which is a different conversation, and one we have every day.