MCA Refinancing: Best Practices

Most MCA borrowers only know their factor rate, not their real APR. A 1.35 factor rate sounds manageable until you convert it. On a 6-month term, that is roughly 70% APR. On a 12-month term, it is closer to 35%. Before exploring refinancing, get your real number. The effective APR determines whether refinancing saves you money, and by how much. Use the MCA Decoder tool to convert your factor rate into a comparable APR in under 60 seconds.

The single most important refinancing rule is to wait until you have repaid at least 50% of the total payback amount. MCAs charge interest on the full original balance upfront, which is what a factor rate does. Early repayment does not reduce your total cost. If you borrowed $50,000 at a 1.35 factor rate, you owe $67,500 total regardless of how fast you pay it off. Once you have cleared more than 50%, the remaining balance is small enough that many SBA and alternative lenders will refinance it. Before that point, most lenders will not consider it because the balance is still too high relative to the remaining term.

The goal is to move from a factor-rate product (MCA) to an interest-rate product such as a term loan or SBA loan. Your best options in order of preference:

1. SBA 7(a) loan. Lowest rates at 11 to 13% APR with terms up to 10 years. Requires a 650+ credit score, 2+ years in business, and documented revenue. Takes 4 to 8 weeks to fund.

2. Business term loan. Faster than SBA at 1 to 2 weeks, with rates typically between 18 and 35% APR. Less paperwork but a higher cost than SBA.

3. Revenue-based financing (RBF). If your credit score is below 650, RBF lenders approve based on monthly revenue instead of credit history. Rates are higher than SBA but significantly lower than most MCAs.

What to avoid: stacking a second MCA on top of the first. This is the most common mistake. It feels like relief but doubles your cost and creates a debt cycle that is very difficult to exit.

Do not refinance without running the numbers first. Here is the calculation:

1. Find your remaining MCA balance by subtracting what you have already paid from the total payback amount. 2. Get a quote from a refinancing lender and ask for the total cost of the new loan, not just the rate. 3. Compare the new loan total cost against your remaining MCA balance.

Example: You owe $22,000 remaining on your MCA. A term loan to cover that costs $27,000 total over 24 months. You are paying $5,000 more in total, but your monthly payment drops by $800. That tradeoff may solve a cash flow problem even if the total cost is slightly higher. Run both scenarios and decide based on your actual situation, not just the APR number.

Getting rejected for refinancing wastes time. Prepare these before you apply:

Three months of business bank statements. Your two most recent years of business tax returns. A copy of your current MCA agreement so lenders can see the exact terms. Proof of revenue such as a recent profit and loss statement or QuickBooks export. Your business license and any relevant industry certifications.

Having these ready can cut processing time by two to three weeks. It also signals to lenders that you are organized, which meaningfully improves approval odds.

Borrowers often assume refinancing means getting a larger loan to pay off the MCA. That is only true if you need additional capital. If your goal is simply to exit the MCA, ask specifically for a refinancing loan sized to cover only the remaining MCA balance and nothing more. Borrowing beyond what you need to escape an MCA just creates new debt in a different form. The goal is to reduce total cost, not increase your total borrowing.