For a brief moment, it looked like the Small Business Administration (SBA) had thrown a lifeline to entrepreneurs stuck in predatory financing traps like Merchant Cash Advances (MCAs).
In late 2024, the SBA updated its guidance to allow the refinancing of MCAs and factoring agreements using 7(a) loan proceeds—an unprecedented shift toward borrower relief.
But just months later, in April 2025, that guidance was quietly rolled back. The SBA’s newest SOP, effective June 1, 2025, explicitly states that MCAs and factoring agreements are once again ineligible for refinancing under the 7(a) loan program.
Let’s break down what happened, why it matters—and what your options are now.
What the SBA Got Wrong
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Mixed Messaging Creates Confusion
The December guidance gave lenders and borrowers hope that SBA funds could be used to replace high-interest, non-amortizing debt. Businesses began planning refinances. Lenders adapted underwriting criteria. Then April’s reversal pulled the rug out from under those efforts.
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The Policy Ignores Economic Reality
MCAs and similar cash-flow loans became a necessary evil for many small businesses during the post-pandemic recovery. Their daily repayment schedules and triple-digit APRs are unsustainable, but often the only option when banks say no. The SBA’s short-lived policy acknowledged this. Its reversal ignores it.
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It Hurts the Businesses SBA Claims to Support
The SBA aims to uplift minority-owned, rural, and underbanked businesses that are most likely to use MCAs. By shutting down a sensible path to restructure this toxic debt, the SBA limits recovery tools for the businesses that need them most.
What You Can Still Do
Just because the SBA won’t help refinance your MCA doesn’t mean you’re stuck.
Private lenders and structured capital providers are still willing to help small businesses:
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Refinance high-cost daily/weekly repayment loans
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Consolidate debt into longer terms
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Restructure cash flow so you can grow, not just survive
If you’re paying 25%–75% effective APR on your cash flow financing, there are still solutions—they just aren’t SBA-backed.
Another Quiet Change with Loud Implications: SBA Scraps Equity Rollover Guidance
Here’s something buried in the SBA’s latest SOP update that most folks missed:
They removed guidance on equity rollovers and partial ownership transitions.
Why? Maybe too many bankers didn’t know how to underwrite or analyze it, so they deleted it.
That’s a problem.
Equity rollovers can reduce sellers’ tax burdens, keep key staff on board during a transition, and reduce buyers’ risk. They aren’t exotic Wall Street maneuvers but smart tools for everyday Main Street deals.
Maybe the mechanics were too nuanced for a one-size-fits-all policy. Not every lender is built for complex structures. That’s exactly why good brokers and experienced exit planners matter.
It’s not just about closing a loan. It’s about structuring the right deal.
This is one more reason to work with someone who knows how to navigate succession, not just financing. Don’t rush to close if you’re serious about doing it right. Partner with someone who’s part of a real advisory network, like an M&A/ABB association or exit planning group, who knows what great deals look like.
Take the Next Step
If your business is struggling under the weight of an MCA, credit cards, or a high cost working capital loan or you are thinking about preparing to sell your business, let’s talk.
There are better paths forward. Ones that preserve your cash and protect your business.
See if you qualify for a lower-cost solution without impacting your credit:
https://cbc.marcelobermudezinc.com/
Your options haven’t disappeared.
They’ve just shifted outside the SBA.
Let’s explore them together.
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