Can You Refinance a MCA Loan?
Refinancing, in the traditional sense, means replacing one obligation with another at better terms: a lower rate, a longer timeline, a smaller payment. In the MCA context, “refinancing” typically means taking a new advance to pay off an existing one. This is not refinancing. It is stacking, and it is the mechanism by which a manageable obligation becomes an unmanageable one.
The Word the Industry Misuses
The distinction matters because the merchant who searches for “MCA refinancing” is often directed to brokers who will originate a new advance, at a new factor rate, with a new set of daily debits, layered on top of the first. The merchant’s total obligation increases. The daily cash outflow increases. The UCC liens multiply. The funder calls this a solution. It is a second wound dressed as a bandage.
When Refinancing Is Possible
True refinancing, replacing the MCA with a conventional loan at a lower rate, is available to a narrow category of businesses: those with strong enough credit profiles and revenue histories to qualify for traditional financing. For these businesses, an SBA loan, a bank line of credit, or a term loan from a community development financial institution can retire the MCA at a fraction of the cost.
The irony is precise. The business that can refinance its MCA is the business that should not have taken the MCA in the first place. The business that needs to refinance, the one whose credit has been damaged by the MCA’s daily debits and whose UCC lien blocks access to traditional lending, cannot qualify.
The MCA does not merely extract revenue. It forecloses the alternatives that would end the extraction. The UCC lien is the mechanism. The daily debit is the enforcement. The refinancing that would solve the problem requires the absence of the problem.
When Settlement Is the Better Path
For the business that cannot qualify for traditional refinancing, which is the majority of businesses carrying MCA debt, settlement is the instrument that addresses the actual obligation. Settlement reduces what is owed. It does not replace one predatory product with another. It does not require the business to take on new debt. It requires the business to retain counsel who can identify the contract’s vulnerabilities and negotiate a resolution the funder will accept.
The Honest Assessment
If you can qualify for a conventional loan to retire the MCA, pursue that option. If you cannot, do not take a second advance. Do not “refinance” through the same broker who originated the first. Contact an attorney who understands MCA contracts, and begin with a reading of the documents.
The first conversation is not a commitment. It is a diagnosis.
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Disclaimer: This content is for informational purposes only and does not constitute legal advice. Results vary based on individual circumstances. Past results do not guarantee future outcomes. If you are in legal distress, consult a licensed attorney.