Refinancing an MCA Into a Line of Credit or Term Loan

This guide is general information, not legal or financial advice. Loan terms, SBA rules and your existing agreements all affect what's possible, so confirm the details with the lender, and have a business attorney review anything you're unsure about.

How refinancing an MCA works

Refinancing means new financing pays off the advance you have now. The new lender, or you with the loan proceeds, pays your funder the exact amount on a written payoff letter. The advance is then closed, and you ask the funder for a zero-balance letter and a UCC-3 termination. Our guide to paying off an MCA early covers those closing steps and what the payoff letter should show.

Most refinances follow the same order: you apply and get approved, you request a payoff letter dated close to the closing day, the lender pays the funder at closing, and you confirm in writing that the advance is closed and the debits have stopped. Keep paying the advance as agreed until that confirmation arrives.

The difference you feel is in the payment. A merchant cash advance is a purchase of future receivables, collected by fixed daily or weekly remittances. A term loan or a standard line of credit is a loan, with interest and a scheduled weekly or monthly payment. That change can free up cash flow, but it doesn't automatically lower what you pay in total.

Which option fits

All of these are subject to underwriting and approval. Bylt Capital offers more than one line program, and one of them, a revolving advance line, works like a merchant cash advance on each draw rather than a loan. Your offer shows exactly which one you're getting, and how its draws, payments and costs work. Read that part before you compare it with your advance.

Line of credit or term loan?

A term loan is one lump sum, paid back on a fixed schedule until it's gone. That suits a refinance where the goal is simply to replace the advance with a predictable payment.

A line of credit is a limit you draw from. As you repay what you've drawn, that amount becomes available again. On our line of credit page, the example is a $100,000 limit: you draw $30,000, make payments only on that $30,000, and still have $70,000 available. Using a line to pay off an advance means the payoff becomes a draw, and the rest of the limit stays there for uneven months. The risk is drawing it back up and ending with the same pressure plus a new balance.

Example only, not an offer.

What lenders look for

A refinance is underwritten as a new application. Expect the lender to look at:

• Deposits: steady, and enough to carry the new payment.
• Time in business and credit.
• Payment history on the current advance: on time, with no returned payments.
• Your other obligations: every other advance, loan and lease you're paying.

If something in your file needs context, such as one returned payment during a slow week or a dip in deposits that has since recovered, explain it in a sentence or two on the application. An underwriter reading the statements will see it either way, and a short explanation is better than a guess.

For a Bylt Capital line of credit, the line of credit page lists the documents. Beyond recent bank statements, owner ID and a voided check, it asks for two years of business tax returns plus a profit and loss statement for the current year to date. For a refinance, add a written payoff letter from each funder and a debt schedule. Our free MCA debt schedule template has the columns a lender expects.

The SBA question in 2026

The plain answer: an active merchant cash advance can't be refinanced with an SBA 7(a) loan. The SBA's updated lending rules, which took effect on October 1, 2026, say this in the section on debt refinancing:

"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."

Source: SBA SOP 50 10 8.1 (effective October 1, 2026), Appendix 14: 7(a) Debt Refinancing Requirements.

In plain English, debt that started as an MCA can only be considered after three things have happened: it has been converted to a term loan, that loan has been paid on schedule for at least 24 months, and no new advances have been taken since. The SBA's normal refinancing tests still apply on top of that. If you're planning toward an SBA loan, confirm the details with an SBA lender. Bylt Capital places SBA loans with partner lenders.

You may still see older pages saying SBA refinancing of MCAs is simply banned. That described the earlier rule, in effect from June 2025. The 2026 rule opens a long, narrow path, but not for an advance you're still paying.

The Federal Reserve's October 2026 Beige Book for the Kansas City District gave some context. It noted that "organizations reported that the Small Business Administration had implemented tighter lending standards," alongside reports of small businesses turning to merchant cash advances (source). That was one district's contacts, not a national measure.

Run the numbers: lower payment, but check the total

Here's a simple comparison. The loan rate is assumed for illustration only.

Example only, not an offer. The rate is assumed for illustration.

The monthly payment falls by about $4,773, which can make a real difference to cash flow. But in this example you pay about $6,645 more in total, spread over a much longer time. The remaining balance on an MCA is fixed, so a loan only saves money in total if its full cost, interest and fees included, comes in under that balance. Decide on cash flow and total cost, together.

Check for an early payoff discount

If your MCA agreement offers an early payoff discount, it can lower the amount the new loan has to cover. Some agreements only honor it when you pay from your own funds, so ask your funder in writing before you apply. Our guide to paying off an MCA early explains what to ask.

When refinancing isn't the right move

• The advance is nearly done. If only a few weeks of payments are left, the cost and paperwork of a new loan may outweigh the relief. Finishing it may be simpler.
• Deposits are falling. A lender will see the same trend you do. If sales have dropped, asking your funder about a lower payment through reconciliation may come first.
• You'd keep taking advances anyway. If the business will need another advance soon after, a refinance can leave you with a loan payment and a new advance at the same time.
• The total cost is much higher and you don't need the cash-flow relief. Then the trade isn't worth it.

Get ready in 30 days

• Pull 3–4 months of business bank statements as PDFs from your bank.
• Get a written payoff letter from each funder, close to the date you expect to close.
• Build a debt schedule, or add every advance to the free tracker so the totals are ready.
• Stay current on your existing payments while the application is reviewed.
• Avoid taking any new advance while you apply.

If you're refinancing several advances at once, the comparison works the same way with more than one payoff. Our guide to consolidation vs. refinancing walks through a two-advance example. And if you're already behind on payments, start with what to do first if you can't make your MCA payment before applying for anything new.

What to do next

1. See your current total balance and monthly payments in the free tracker.
2. Check your remaining balance on each advance against the funder's latest statement.
3. Ask for payoff letters and confirm any discount terms in writing.
4. Gather the documents listed above.
5. Apply once to compare a line of credit and partner term loan offers in writing, subject to underwriting and approval.