Best Options When You Cannot Qualify for MCA Refinancing

It can be infuriating to be turned down when you think you need a business loan, and just as maddening when you realize that now, you have to start the search again, maybe with an even more limited set of options, especially for someone needing to refinance merchant cash advances. But don’t get discouraged. You have other options. You can work out deals with the funders directly to settle balances for less than you owe, you can borrow against the value of business assets you own outright, and yes you can file for bankruptcy. Try as many options as you can and leave bankruptcy as a last resort instead of the only way out.

Banks and other lenders see the stacking of MCA as a clear sign of cash flow distress. Since October 1, 2026, a 7(a) SBA loan can refinance a merchant cash advance only after that MCA has converted to a term loan and amortized for 24 months, but you’ll have to wait. Microloan lenders will not make a loan to your business simply to refinance debt.

First, make a list of your merchant cash advances. Write down the total balance, the daily debit, and who the lender or funder is. Add together the daily total debits. If the daily debits alone are above 25% of your daily revenue, that is severe pressure on your cash flow. If total debits are above 40%, that is a clear sign of failing business operations. Do the math on what you are taking in and paying out and find the difference.

Negotiating Down the Balance on MCAs

Each funder you have should have a collection department. Call them directly and explain that business is not what it was and you cannot meet the daily debit. Ask to stretch the remaining balance over a longer term with a lower daily debit. Funders want to recover their investment, and they prefer slow pay to default. Some funders will agree to a reconciliation if your business revenue is different from when you received the advance. If your business suffered from a decrease in revenue for reasons you can point to, bring evidence of that. Any deal you work out to reduce the remaining balance and reduce the pressure on your business income should be in writing before you stop making daily or weekly payments.

If you have only one or two merchant cash advances, you can usually get the funders to listen to a new proposal. But as soon as you owe to three or more funders, they are going to think their money is in danger.

You could also work with a firm or a lawyer that specializes in negotiating down the balance on MCAs and business debts in general. Debt settlement firms will negotiate each funder down to a lump sum you can usually get for between 40-70% of the remaining balance. The funds may come from a business consolidation loan if your creditworthiness allows for that, or you may pay the settlement out of your business funds.

The fees for a settlement are usually between 20 and 25% of what you save. There should not be a large upfront fee, and no fee if the funder decides not to settle. If that happens, there is usually a possibility the funder will sue to collect their money. Your credit rating takes a hit, less than from bankruptcy. Unless an exemption on Form 982 like insolvency or bankruptcy applies, most debt forgiveness will be counted as income. If there are specific tax implications to your situation, it may be smart to consult with an accountant.

Collateral-based Loans

Look at whether you have enough assets like business real estate, equipment, accounts receivable or inventory to secure a business loan that would pay down or off your MCA balances. When you use your business assets as collateral for a loan, the assets do the underwriting.

You could try for an equipment refinance loan to pull money out of paid-down or paid-off equipment and apply it toward your MCAs. There is also an option to sell accounts receivables to a finance company for a lump sum. That’s called factoring. Collateral-based loans put your business assets at risk. You can even take out a cash-out loan on your own home to pay off your debt. Beware though: a cash-out mortgage and a home equity loan puts your own assets at risk.

When you are desperate, you get targeted by bad actors promising fast bailouts. Real consolidation lenders pull credit. Guaranteed approval with no credit check is the scam signal. If an MCA company offers to “consolidate” your debts at a factor rate, that’s another merchant cash advance offer. While New York has restricted its enforcement since 2020, a confession of judgment can allow a funder to file a judgment if you default. Other states still enforce these clauses, so be sure to read your contracts.

The Bankruptcy Process

Bankruptcy is a big step, but when creditors aren’t willing to negotiate, a business seems almost certain to fail, and lawsuits are piling up at your door, it may be the best of many bad alternatives. Small businesses with debts up to $3,424,000 have the option of using the bankruptcy process under Subchapter V of the bankruptcy code. Subchapter V requires you to file a reorganization plan within 90 days, unless the court extends the deadline. You should consult with a bankruptcy attorney before deciding which chapter to file for bankruptcy, especially if the loans were personally guaranteed.

None of this starts, or should start with taking out a new MCA. Dealing with old debt does not require new debt. But if you just stop taking new advances and look at your options, you can start to take back control of your finances.