How to Pay Off an MCA With an SBA Under The New Rules Effective Oct 1

Small business owners looking to swap high-cost merchant cash advances (MCAs) for lower-interest SBA loans face new hurdles starting October 1. The SBA’s updated guidelines specifically target 'Sales-Based Repayment Agreements.' If you are currently using an MCA to fund your operations, you can no longer simply flip that debt into a standard term loan and immediately seek SBA refinancing to lower your rates. The new rules impose a significant waiting period. If you convert an MCA into a term loan, you must wait a substantial amount of time before that debt qualifies for an SBA refinance. This change is designed to prevent businesses from using term loans as a 'bridge' to bypass SBA eligibility requirements for alternative financing. For retailers and service providers, this means your exit strategy from expensive daily or weekly debit financing just got more complicated. You should review your current debt structure immediately. If you were planning to refinance to improve cash flow, the window to do so without these new restrictions is closing. Work with your lender to ensure any debt consolidation plans account for these October 1 SOP changes, or you may find your capital trapped in higher-interest products longer than anticipated.

Source: deBanked

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