SBA rules · SOP 50 10 8.1

Can an SBA loan refinance a merchant cash advance?

An active merchant cash advance cannot be refinanced with an SBA loan; it is eligible under the 7(a) program only if it was converted to a term loan, has amortized for at least 24 months, and no additional agreements were taken.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Active MCAs: If a Sales-Based Repayment Agreement (such as a merchant cash advance) is still active, it is strictly ineligible for refinancing.
Refinancing conditions: An MCA is eligible for 7(a) refinancing only if the original agreement has been converted to a term loan, has amortized for at least 24 months, and no additional agreements have been implemented since the conversion of the prior agreement(s).
Standard 7(a) refinance rules: Once converted and amortized for 24 months, the debt must also comply with general 7(a) refinancing rules, including that the debt must be current for at least the last 12 months and the new payment must satisfy the 10 percent payment improvement requirement.
504 program limitation: Under the 504 program, debt refinancing is restricted to Qualified Debt where substantially all (75% or more) proceeds financed eligible fixed assets, or certain business lines of credit or credit cards for eligible business expenses; it does not permit refinancing MCAs.

The source

What the SOP says

“Sales-Based Repayment Agreements (e.g., Merchant Cash Advances) are only eligible for refinancing if the original agreement has been converted to a term loan, has amortized for at least 24 months, and no additional Agreements have been implemented since the conversion of the prior agreement(s). If the Sales-Based Repayment Agreement is still active, it is not eligible for refinancing.

SOP 50 10 8.1, Appendix 14: 7(a) Debt Refinancing Requirements > Home Equity Line of Credit (HELOC) (lines 4945-4952)✓ Verified

“Sales-Based Repayment Agreement: A business funding agreement where a business receives a cash advance in exchange for a percentage of its future sales. (e.g. Point-of-Sale or Merchant Cash Advance (MCA)).

SOP 50 10 8.1, Appendix 3: Definitions > Sales-Based Repayment Agreement (lines 4403-4414)✓ Verified

“The debt to be refinanced must be, and must have been, current for at least the last 12 months or for the life of the loan, whichever is less.

SOP 50 10 8.1, Appendix 14: 7(a) Debt Refinancing Requirements > General Requirements (lines 4932-4944)✓ Verified

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