An SBA 7(a) loan cannot pay off a merchant cash advance that is still active. Under version 8.1 of the SBA's lending rules, SOP 50 10 8.1, which took effect on October 1, 2026, an MCA qualifies for SBA refinancing only after the funder has converted it into a term loan, that loan has been paid for at least 24 months, and the business has taken no new advance since. If you want an SBA loan to pay off an MCA you carry now, that route is at least two years away. Loans from outside the SBA program can pay off advances sooner, including the SBA-equivalent loans we offer through our partners and loans against commercial property you already own, because the SBA's refinancing rules do not apply to them.
Can an SBA loan pay off an MCA under SOP 50 10 8.1?
It can, but only for an advance that has already been turned into a term loan. Appendix 14 of SOP 50 10 8.1, which sets the debt refinancing rules for every 7(a) program, introduces the term Sales-Based Repayment Agreement, which the SOP defines as an agreement where a business receives a cash advance in exchange for a percentage of its future sales, and names the merchant cash advance as its example. The rule reads:
"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."
So an SBA lender can pay off advance debt only when all three of these are true:
- The funder has converted the original advance into a term loan with a set repayment schedule.
- That term loan has been paying down for at least 24 months.
- The business has signed no new advance or other sales-based agreement since the conversion.
Factoring agreements stay ineligible under the same appendix. Nothing in the SOP requires a funder to offer a conversion, so the first step on this path is a conversation with your current funder, and the 24 months start from the date the conversion takes effect.
How SOP 50 10 8 and 8.1 changed MCA refinancing
The rule has changed three times in under two years. In December 2024 the SBA allowed lenders to refinance advances. SOP 50 10 8, effective June 1, 2025, banned it, and version 8.1 reopened a narrow path for advances that have been converted. Which version applies to your application depends on the date the SBA issues the loan number, according to the SBA's Information Notice 5000-880695.
| Date | What happened | Can a 7(a) loan pay off an MCA? |
|---|---|---|
| December 6, 2024 | Procedural Notice 5000-862692 lets lenders refinance merchant cash advances, factoring agreements and non-amortizing credit facilities, and exempts them from the 10 percent payment test. | Yes |
| April 22, 2025 | The SBA announces SOP 50 10 8. | Yes, until the new SOP takes effect |
| June 1, 2025 | SOP 50 10 8 takes effect and states that merchant cash advances and factoring agreements are not eligible for refinancing. | No |
| May 2026 | The ranking members of the Senate Finance and Senate Small Business committees write to the SBA administrator, asking among other things why the agency changed its policy to stop SBA loans from paying off advance debt. | No |
| August 14, 2026 | The SBA publishes SOP 50 10 8.1 with Information Notice 5000-880695. | No, until 8.1 takes effect |
| October 1, 2026 | SOP 50 10 8.1 applies to applications issued an SBA loan number on or after this date. | Only after conversion to a term loan, 24 months of payments and no new advance |
The law firm Starfield & Smith quotes the December 2024 notice, the Congressional Research Service's summary of the 2025 SBA changes gives the 2025 dates, and the senators' letter is linked from the Senate Finance Committee's release.
The other SBA refinancing tests a converted advance has to pass
A converted advance that clears the 24 months still has to meet the general tests in Appendix 14 that apply to any debt an SBA loan refinances.
- The debt must be current, and must have been current for at least the last 12 months or the life of the loan if that is shorter. The SOP counts a payment as late once it has gone unpaid for more than 29 days.
- The new SBA installment must be at least 10 percent lower than the installments it replaces. When several debts are refinanced together, the SOP measures the drop in aggregate across all of them.
- The lender must write an analysis of each debt being refinanced, covering why it was taken on, why it is being restructured, why it no longer fits the business and how the new loan improves the business's finances.
For an owner with active advances, an SBA refinance therefore depends on three things: a funder willing to convert, two clean years of payments on the converted loan, and a payment drop the SBA lender can document. Our guide to SBA loan requirements covers the rest of what an SBA lender checks.
Other SOP 50 10 8 changes that affect a business with advances
The 2025 and 2026 versions of the SOP also changed who qualifies for a 7(a) loan and how lenders underwrite it.
| Rule | SOP 50 10 8 (from June 1, 2025) | SOP 50 10 8.1 (from October 1, 2026) |
|---|---|---|
| 7(a) Small loan maximum | $350,000, down from $500,000 | $350,000 |
| Credit score screen for 7(a) Small loans | Minimum FICO SBSS score of 165, up from 155 | SBSS screen ended March 1, 2026; the lender runs its own credit analysis, including the two most recent months of business bank statements |
| Who may own the business | All direct and indirect owners and guarantors must be U.S. citizens, U.S. nationals or lawful permanent residents (previously 51% ownership was enough) | All owners and required guarantors must be U.S. citizens or U.S. nationals; lawful permanent residents are ineligible under a policy effective March 1, 2026 |
| Equity injection for a start-up (1 year or less of revenue) | At least 10% of total project costs | Unchanged at 10% |
| Debt service coverage on a business purchase | 1.15 | 1.25 for initial acquisitions and owner buyouts, 1.15 for business expansions |
| Refinancing a seller note from a business purchase | Allowed after 24 months in place and current | Allowed after 36 months in place and current |
For a business with advances, daily or weekly payments reduce the cash flow a lender measures when it tests whether the business can carry the new loan, and the 7(a) Small loan, the faster track, tops out at $350,000. Each advance also usually comes with a UCC filing against business assets, which any new lender will see on a search; our guide to UCC liens and clean collateral explains how a filing is released after a payoff.
What the SBA rules mean for owners using advances
A merchant cash advance still does what it was built to do. It funds in a day or two, it is sized on the business's usual revenue rather than on collateral or a high score, and it is repaid with a set daily or weekly payment. The SBA rules changed only the way out of one. The plan of taking an advance now and moving it into a long-term SBA loan a few months later no longer works for an active advance, so ask anyone promising a quick SBA takeout how they will get the advance converted and through 24 months first.
Because a converted advance is the only kind the SBA will refinance, the rule gives funders and owners a reason to talk about restructuring. A new advance after a conversion closes the SBA door for the converted debt, so an owner who wants that option later should plan two years of working capital before signing anything new.
SBA-equivalent loans through our partners can pay off advances
SOP 50 10 governs only loans that carry an SBA guarantee. Through our partners we offer SBA-equivalent loans, which are long-term loans with monthly payments built along the lines of SBA lending, with the partner setting the terms. They sit outside the SBA program, so the conversion requirement, the 24 months and the ban on active advances do not apply, and these loans can pay off merchant cash advances, including advances that are still active, when the partner approves the file.
The partner decides how much it will lend, over what term and against what collateral. Expect the file to take weeks rather than days. Expect to provide financial statements, tax returns, a debt schedule and a payoff letter from each funder. We assemble the file with you, send it to partners that lend at your size and in your industry, and the payoffs are made from the new loan so the daily or weekly debits stop.
Commercial equity loans when you own your building
If the business or its owner already holds commercial real estate with equity in it, a commercial equity loan can be sized to pay off every advance. It can be a loan in second position behind the existing mortgage, an equity line, or a cash-out refinance that replaces the mortgage with a larger one, and it is repaid monthly over a long term. Because it is not an SBA loan, the SOP's refinancing rules do not apply.
The trade-off is security. The lender records a mortgage or deed of trust on the property, so the building secures the loan, and missed payments put the building itself at risk. There are appraisal, title and closing costs, and closing commonly takes weeks because of that work. We go through the total cost and the payment with you before anything is signed.
How a cash-out loan on a commercial building retired one business's advances
One client, an established early-learning center in the Midwest, was carrying open merchant cash advance positions and a land-contract balance on its building. Because the advances were active, an SBA loan was not an option under SOP 50 10 8.1. The file also had a few things to clear, including recorded title items, the land contract, and some recent late payments on the owner's credit, which the lender treated as conditions to resolve.
We arranged a $187,500 cash-out loan secured by the business's commercial building, with title held by the owner's real estate holding LLC. It took about two months from title review in mid-August to closing in late October 2026, in these steps:
- We worked with the lender and the title company to sort the title items, separating those that attached to the property from informational entries that needed no action.
- We obtained formal payoff statements from the existing lienholder and from the land-contract holder.
- Title was vested in the client's holding LLC.
- We collected payoff letters from the funder holding the open advance positions.
- At closing the existing liens on the property were paid, and the cash-out proceeds were used to retire the advances.
The business now makes one monthly payment on a long-term loan in place of its daily debits.
MCA consolidation when you need relief within days
Owners without property to borrow against, or without the time a long-term loan takes, can use MCA consolidation. The new funder pays your existing funders directly from their payoff letters, the separate debits stop, and you make one weekly or monthly payment over a longer term. The payment that leaves the account each week goes down, and the total you repay may not, because you are paying over more time. Most applicants are funded within one to two business days of choosing an offer.
Our guide to MCA consolidation walks through the cost in dollars and when it fits. When the balances are too large to pay off at once, a reverse consolidation covers part of the existing debits for a set period instead. If you are also aiming for the SBA route later, tell us before you sign anything, because the SOP looks at every sales-based agreement taken after a conversion.
How to refinance MCA debt with the route that fits
The right option depends on what you own, how far back your records go and how soon you need the debits to stop. Our overview of business debt consolidation also covers loans and cards.
| Your situation | Route to ask us about |
|---|---|
| You or the business own commercial property with equity | A commercial equity loan sized to pay off each advance |
| An established business with two to three years of financials and tax returns | An SBA-equivalent loan through our partners |
| No property to borrow against and several daily or weekly debits | MCA consolidation into one weekly or monthly payment |
| Balances too large to pay off in one step | Reverse consolidation for a set period |
| Your funder will convert the advance to a term loan and you can go 24 months without a new one | An SBA refinance later, if the other Appendix 14 tests are met |
To start, list each advance with its remaining balance, its daily or weekly payment and the funder's name, and ask each funder for a payoff letter. Then fill in our short application with four months of business bank statements, uploaded or connected read-only. Getting matched does not need a hard credit pull, there is nothing to pay to apply or to see offers, and you are under no obligation to accept one. If you would rather talk it through first, call us at (818) 351-0225.
Questions about SBA loans and MCA refinancing
Can you use an SBA loan to pay off a merchant cash advance?
Not while the advance is active. Under SOP 50 10 8.1, which applies to applications issued an SBA loan number on or after October 1, 2026, an advance qualifies only after it has been converted to a term loan, that loan has been paid for at least 24 months, and no new advance has been taken since, and it then has to pass the usual tests of 12 months current and a 10 percent lower payment.
Can I get an SBA loan if I have a merchant cash advance?
Possibly, for other purposes such as equipment or working capital, but the proceeds cannot pay off the active advance, and the advance's payments reduce the cash flow the lender counts when it tests whether the business can carry the new loan.
Can you refinance a merchant cash advance?
Yes, with financing from outside the SBA program, such as an SBA-equivalent loan through our partners, a commercial equity loan against property you already own, or MCA consolidation, each of which pays the existing funders off and replaces their debits with one payment.
Does SOP 50 10 8.1 allow MCA refinancing?
Only for advances the funder has converted into a term loan that has amortized for at least 24 months with no new sales-based agreement since, while active advances and factoring agreements stay ineligible.
Why can't I get a loan to pay off my merchant cash advances?
Usually because the SBA route is closed to active advances and conventional lenders weigh the payments already leaving the account, so the options that tend to work are lenders outside the SBA program, a loan against commercial property, or consolidation.
