Best Ways to Replace an MCA With a Bank Loan

Replacing a merchant cash advance is entirely possible. The real question is what you want to replace it with. You have three options.

• First, consider bank financing in the form of either a term loan or a working capital loan that pays off the MCA at closing.
• Second, find a business line of credit to cover your cash gaps as you dig your way out of the MCA.
• Third, an SBA 7(a) can step in later, but not while the MCA is active.

As a bridge, look to revenue-based financing.

Bank Term Loan

While a bank term loan is harder to get, it offers the most favorable interest rate and term. It’s also the safest bet if you’re trying to fight your way out of daily payments. An MCA with a factor rate of 1.3 that gets repaid in six months is an annual percentage rate of around 60-80%. A 1.4 or 1.5 can pass 100%. MCAs also typically don’t require any APR disclosure on the advance, but bank term loans often do. And banks typically price out their loans at around 7-25% APR.

Compare the numbers, using $100,000 as an example. An MCA carrying a factor of 1.35 works out to about $35,000 in fees over roughly eight months. Compare that with the same $100,000 bank loan repaid over three years at 12% interest. That costs $19,556 interest, at $3,321 a month.

Bank loans typically make a fixed monthly payment, so that you can see the balance shrinking. Your lender also reports those payments to credit bureaus, building the kind of credit history that the next loan is based on. An MCA usually doesn’t report its payments. If you carry a line of credit instead, you can draw what you need.

An open MCA balance is not always a barrier. Some lenders, looking at the debt service coverage ratio (DSCR), want that ratio at least 1.25. They count the MCAs in that DSCR, but they only want to know if the business is generating enough cash to cover its debts. The UCC-1 filed on your MCA also makes the MCA filing public, so the smart move is to admit its presence and have a plan to deal with it.

Lenders also check personal credit. At least a 620-650 is usually needed, 700+ for the best rates. Two years in business is another usual barrier, and the lender typically wants to see 3-6 months of clean statements with no NSF fees.

Lenders vary. Some banks decline anyone with an MCA balance, while others are used to MCA borrowers. In a 2025 Federal Reserve survey, small banks reported 57% of all applications were fully approved, the highest of any lender type.

An SBA 7(a) Cannot Refinance an Active MCA

Shifting from an MCA to an SBA 7(a) loan to pay off the MCA and other debt has a significant catch, made clear by new SBA rules in effect October 1, 2026. The new SOP 50 10 8.1 states an SBA 7(a) cannot refinance an active MCA. Once the MCA is fully converted to a term loan, amortized for at least 24 months without any new advances, the SBA 7(a) can step in. Generally, the new payment should be at least 10% lower than the old payments. The SBA also asks for proof the borrower can’t get credit on reasonable terms anywhere else.

A 7(a) is cumbersome. Working-capital proceeds can’t refinance debt, so the MCA payoff has to be a separate line on the use of proceeds. An SBA 7(a) also typically has a term of 10 years or less, and SBA processing can take 30-90 days.

Make Sure You’re Ready Before Applying

Make an inventory. Gather every MCA contract you can find, add up the total balance owed, and figure out what you’re paying each day. Calculate the effective APR of each MCA. Run a personal and a business credit report. Dispute any errors.

Start gathering financial records. Most lenders ask for two years of filed tax returns, a year-to-date profit and loss statement, and 3-6 months of bank statements. Smaller balances on MCAs look better to a lender, so shrink those balances first. Some MCA providers accept a payoff discount.

Prequalify using soft pulls, but apply to only one or two lenders using hard pulls. Each hard pull drops your score a little, so apply only where your chances are good. Also, your loan should pay off the MCA at closing. Have the new lender and the MCA provider talk directly about paying the balance at closing. A payoff discount of 10-20% is not uncommon. This works best if you have a committed loan. And get a UCC-3 termination from the MCA provider to clear your record.

Applying too soon, before your MCA balances are low enough, almost always means rejection. Falling into the common trap of taking yet more advances while trying to qualify also hurts your DSCR. If you need a bridge between getting out of the MCA and qualifying for a bank loan, consider revenue-based financing.

How long the switch takes depends on your starting point. If you’re ready now, an alternative lender can close in 1-2 weeks. If you need to build credit or reduce the balances first, it can take 3-12 months. Start planning before a crisis.

Replacing an MCA with bank debt, a line of credit, or an SBA 7(a) demands time, discipline, and a plan. Work the problem. The sooner you start the process, the quicker you can escape the MCA.