The Short Answer
If your business is paying a merchant cash advance or revenue-based financing right now, getting an SBA 7(a) debt consolidation loan to refinance the MCA is one of the highest-ROI moves you can make. Annual savings on a $250K MCA can exceed $80K-$150K depending on the original factor rate. The trade-off is the 60-90 days to close.
Side-by-Side
| Factor | SBA 7(a) | MCA / Revenue-Based |
|---|---|---|
| Rate (APR equivalent) | 8-9% APR | 50-200% APR equivalent (factor 1.2-1.5) |
| Headline pricing | Interest rate | "Factor rate" (1.20-1.50) |
| Term | 7-10 years | 6-18 months |
| Payment frequency | Monthly | Daily or weekly |
| Underwriting | Cash flow, credit, collateral | Bank statements only (revenue history) |
| Credit score requirement | 650+ typical | 500+ accepted |
| Personal guarantee | Required | Sometimes (confession of judgment) |
| Close time | 45-90 days | 1-3 business days |
| Prepayment | No penalty (7a) | Often full factor due regardless of payoff |
| Stacking allowed | No (one SBA at a time) | Common (multiple MCAs — dangerous) |
Why MCA "Factor Rate" Hides the True Cost
An MCA at a 1.30 factor rate on $100K means you repay $130K. Sounds like 30% — but the repayment happens over 9-12 months via daily ACH debits. That compresses 30% into a fraction of a year, which translates to an effective APR of 60-110%.
Compare to SBA: an 8.5% APR on $100K over 10 years means $46K total interest. The MCA costs $30K in < 1 year. The SBA costs $46K over 10. For long-term capital, SBA is roughly 4-7x cheaper than MCA.
The SBA Debt Consolidation Refinance
The SBA 7(a) program allows refinancing of higher-cost business debt (including MCAs, business credit cards, and lines of credit) into a single fully amortized term loan. Requirements:
- The debt being refinanced must be on standard business terms (no personal credit card or HELOC)
- The new SBA payment must be at least 10% lower than the sum of payments being refinanced
- The borrower must demonstrate ability to service the new debt from business cash flow (DSCR 1.15x+)
For details on the refinance process, see how to get an SBA loan and SBA alternative if denied.
When MCA Makes (Brief) Sense
- Bridge to SBA closing: covering payroll for 60 days while SBA processes.
- Emergency working capital with no other source and clear short-term repayment.
- Inventory cash advance for businesses with high gross margins and fast inventory turn.
In every other scenario, MCA is significantly more expensive than alternatives. If you've been told "you don't qualify for SBA so MCA is your option," get a second opinion — many MCA-only "no" decisions are wrong.
Currently paying MCA? Refinance into SBA.
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