New SBA Rules Released: MCA Debt Can’t Be Refinanced

In addition to recent SBA rule changes so far in 2025, most notably the re-institution of SBA Guarantee Fees, the SBA has now announced that Merchant Cash Advance (MCA) debt will not be allowed to be refinanced by the SBA lender for 7(a) SBA loans.

This new round of rules goes into effect with any new SBA loan application submitted after June 1, 2025.

NEW SBA RULE ON Debt Refinancing: “Merchant cash advances and factoring agreements are not eligible for refinancing.”

Normally, the SBA lender would be interested in paying off expensive MCA debt to make the SBA loan repayment more affordable for the business. If there is less money being used for debt servicing, the bank’s loan would be more likely to be satisfactorily paid. From an underwriting perspective, if cheaper money is used to refinance more expensive money the business will be healthier. This practice of refinancing more expensive debt with SBA loans has actually turned out to be a reason for SBA loan defaults.

With recent higher than normal SBA loan defaults, the SBA has been looking into changing rules to help curb the default rate. Banks have reported that after SBA loan closings, once the bank paid off the MCA debt and directed the remaining money to the business…a noticeable amount of businesses were funded with new MCA debt.

What the ‘No Refi MCA’ rule means for Small Business Borrowers

We have seen many instances where the refinancing of MCA debt helps the business enormously to become more profitable. Exiting from multiple MCA positions means that the cash crunch pressure of high paced servicing of MCA debt will drastically improve. Almost all business owners who have MCA loans are interested in refinancing with less expensive options like an SBA loan.

From an approval perspective, if the MCA debt can’t be refinanced this will affect some underwriting models as it relates to debt servicing. Banks will need to alter their underwriting factors when accounting for businesses with MCA debt and unfortunately this will most likely result in more declines for businesses with MCA debt.

What to do if you have MCA loans and want a SBA loan

SBA loans are still doable if you have current MCA loans. FastWaySBA works with many different SBA lenders and we know which lenders didn’t refinance MCA loans in the past, so will not be much affected by this new rule. There are a lot of new changes happening at the SBA and FastWaySBA is the trusted advisory to make sure your business gets approved the Fast Way!