Refinancing an MCA Into a Term Loan: The Honest Truth

I just got off the phone with a business owner in Texas—runs a pretty solid logistics company—who asked me the same question I hear almost every single day.

"Can I get out of this Merchant Cash Advance and just get a normal term loan?"

It makes sense why he's asking. He took an advance about six months ago to fix a couple of trucks. It solved the problem instantly, but now those daily payments are hitting his bank account every-single-morning, and it's eating up his cash flow. He just wants a monthly payment with a lower interest rate. He wants to breathe a little.

So, is it possible to refinance an MCA into a term loan?

The short answer is yes. But I'm gonna be real with you—it's not as easy as just walking into a Chase or a Wells Fargo and asking for a check. There are specific hurdles you have to jump over, and honestly, a lot of brokers won't tell you the truth about this because they just want to sell you another advance.

Here at LoanQuail, we handle both MCAs and term loans (plus real estate backed funding), so I can give you the straight story on how this actually works.

Why Banks Usually Say "No" to MCA Refinancing

Here creates the biggest conflict in our industry. You want a term loan to get rid of the MCA. But traditional lenders see the MCA on your bank statements and get scared off.

When a bank underwriter looks at your last three months of statements, they are looking for stability. They want to see consistent balances. When they see a daily debit of $400 or $1,200 coming out to a funding company, they view that as high-risk debt. To them, it looks like you're struggling to manage cash flow.

I’ve seen clients with 720 credit scores get denied for SBA loans or standard term loans purely because they had two active MCAs. The bank basically says, "Pay those off first, then come back to us."

But you can’t pay them off without the loan. It's a catch-22. It's frustrating as hell, I know.

The "Secret Weapon": Real Estate Collateral

If you want to refinance an MCA into a true term loan—I'm talking monthly payments, lower APR, 2-to-5 year terms—the absolute best way to do it is with collateral.

Specifically, real estate.

This is something we do a lot at LoanQuail. If you own commercial property, or sometimes even if you have significant equity in a residential investment property, we can often structure a loan against that asset.

Since the loan is secured by property, the lender cares a little less about the daily debits on your bank statement and more about the Loan-to-Value (LTV) of the real estate.

I remember working with a pizza shop owner earlier this year. He was drowning in three different stacked advances. He was paying something like $2,500 a day. It was brutal. However, he owned the building his shop was in. We were able to leverage the equity in that building to give him a real estate backed business loan.

We paid off all three MCAs directly. His payments went from daily to monthly, and his total cash outflow dropped by about 60%.

If you have real estate, mention it immediately when you talk to us. It changes the conversation completely.

What if you don't have real estate?

This is where it gets trickier, but you aren't out of luck. If you don't have property to pledge, we have to look really closely at your revenue and credit.

To get a term loan without collateral (an unsecured term loan) to pay off an MCA, you usually need:

• Strong Credit: usually 680 or higher.
• Time in Business: At least 2 years, often more.
• Profitability: Your tax returns need to show a profit, not a loss.

If you have those things, we might be able to find a lender who will do a "buyout." This is where the new lender sends the money directly to the old funding company to clear the balance.

However, if your credit has taken a hit or your tax returns show a loss (which many businesses do to save on taxes), a traditional term loan might not be on the table right now.

The "bridge" strategy

Look, sometimes I have to tell a client, "You don't qualify for a bank term loan today." It's not what they want to hear, but it's the truth.

But that doesn't mean you're stuck with your current bad deal.

We often do what I call a "betterment" consolidation. It might not be a bank loan with 8% interest, but it's a hell of a lot better than what you have now. We might be able to get you a Revenue Based consolidation that pay off your current positions and extends the term out from 4 months to 12 months.

Does it lower your rate? Maybe a little. But mainly, it lowers your payment.

Think about it this way. If you're paying $500 a day now, and we can get that down to $300 a day or a weekly payment, that frees up $1,000+ a week in cash flow. You can use that money to buy inventory, fix equipment, or just build up your bank balance.

Once your balances are higher and your credit improves, then we try for the term loan again in six months.

Beware of "Stacking"

I need to warn you about something I see all the time.

You call a broker asking to refinance. They tell you, "I can't pay off your current balance, but I can give you a second position. You can use the cash to make the payments on the first one."

Please, don't do this unless you absolutely have to.

This is called stacking. You take a second loan to pay the first. Then a third to pay the second. Suddenly you have three payments coming out daily and you're working just to pay the lenders.

At LoanQuail, we try to avoid putting you in a second position unless there is a very specific ROI for that money (like you need to buy material for a job that pays next week). If the goal is refinancing, adding more debt on top usually isn't the answer. The goal should be netting you more money or lowering the payment.

So, what should you do?

If you are tired of the daily hits and want to see if a term loan is possible, you need a funding partner who sees the whole picture. Not just a computer algorithm that auto-declines you.

We need to look at:

1. Your current payoff letters (how much do you actually owe?).
2. Your real estate situation (do you have any collateral?).
3. Your monthly revenue average.

If we can do the term loan, we will. We love writing those deals because they keep clients happy for years. If we can't, we'll be honest about it and show you the next best option to improve your cash flow.

Head over to our application page or just give us a ring. We can usually tell you within a few hours if a refinance or consolidation is on the table. No hard sell, just options.