Big News from the SBA: MCA Debt No Longer Eligible for Refinancing

As of June 1, 2025, the U.S. Small Business Administration (SBA) has made a decisive change to its 7(a) loan program: Merchant Cash Advances (MCAs) and factoring arrangements can no longer be refinanced using SBA-backed capital.

This shift has major implications for small business owners, lenders, and ISO brokers nationwide.

What Changed?

In its most recent update, the SBA explicitly stated that MCA debt and factoring are ineligible for debt refinance under 7(a) loan guidelines. This means:

• SBA lenders cannot use 7(a) loan proceeds to pay off any existing MCA obligations.

• MCA-related balances are now treated as "ineligible debt" in SBA loan applications.

• Underwriters are being instructed to disqualify deals involving MCA payoff strategies.

This policy shift was confirmed by multiple lending platforms, including FastwaySBA, and is already being enforced by banks and non-bank SBA lenders.

Why It Matters

Over the past few years, many small businesses struggling with high-cost MCA balances looked to the SBA’s lower-interest loans as a way to consolidate debt and regain financial stability.

Now, with the door closed:

• Business owners carrying MCA debt lose a valuable exit strategy.

• Loan brokers and ISO partners must be more selective with the deals they bring to SBA lenders.

• Debt restructuring options are shrinking, especially for distressed companies.

Industry Reaction

This change is part of a broader push by regulators to distinguish regulated lending from non-bank cash advance products. While MCAs are not technically classified as loans in many jurisdictions, the SBA is treating them as high-risk financial obligations that don't qualify for federally backed relief.

In related discussions on Reddit, business owners have expressed concern about being “stuck” in their MCA positions without a viable path forward.

Rowan Advance’s Take

“We’ve always believed in offering structured, transparent funding that helps small businesses—not traps them. This SBA update reinforces why our model is the right one,” said a senior funding specialist at Rowan Advance.

At Rowan Advance, our focus is on realistic, revenue-based financing that empowers small businesses. That means:

• Clear, fixed repayment terms

• No compounding interest

• Factor rates starting at 1.28

• Terms from 8 to 12 months

• Early payoff discounts—not penalties

And for ISO brokers: We offer same-day commissions, up to 12 points, and a compliance-first underwriting process that fits the current regulatory landscape.

What Business Owners Should Do Now

If you're currently carrying MCA debt and were considering an SBA loan to refinance it, here are your next steps:

✅ Talk to a qualified funding partner who understands your current capital stack
✅ Explore non-SBA alternatives—revenue-based financing, consolidation loans, or structured settlements
✅ Avoid stacking additional MCA debt without a long-term plan

Final Thought

The SBA’s new policy is a wake-up call: Not all capital is created equal.

At Rowan Advance, we’re committed to providing funding solutions that make sense today—and hold up tomorrow. If you're a small business owner or an ISO broker navigating these changes, we’re here to help you structure smarter, safer deals in this new funding environment.