What the New SBA Refinancing Policy Means for Loan Brokers

Starting June 1, 2025, the Small Business Administration (SBA) is introducing a significant policy shift that will prohibit the use of SBA loans to refinance Merchant Cash Advances (MCAs) or factoring agreements under the SBA 7(a) loan program. This landmark decision represents a pivotal change in the small business financing landscape and will impact both small business owners and loan brokers.

This post examines the motivations behind the SBA’s decision, its implications for small business owners with MCA debt, and what loan brokers can do to adapt.

For small business owners currently carrying MCA debt, this new policy introduces additional challenges. While businesses with MCA debt will still be eligible for SBA loans, they won’t be able to use these loans to refinance their MCA obligations.

Key Implications

Harder Access to SBA Loans

From an underwriting perspective, lenders will need to reevaluate borrowers’ debt servicing capacity. The inability to refinance MCA debt could lower the chances of approval for businesses already burdened with such obligations.

Impact on Financial Health

Many small business owners turn to SBA loans to replace high-interest MCA debt with more sustainable financing. Without this option, they may need to explore alternative strategies to improve their financial health.

Alternatives for Small Business Owners

While the new policy limits refinancing options, it doesn’t mean business owners are out of options. Here are some alternatives to consider:

• Term Loans

Fixed-rate term loans offer clarity with predictable monthly payments, often at much lower interest rates than MCAs.

• Business Lines of Credit

A flexible solution for entrepreneurs, lines of credit allow borrowing as needed, with interest charged only on the amounts drawn.

• Equipment Refinancing

For businesses with valuable assets, refinancing equipment can provide capital while maintaining manageable repayment terms.

• MCA Debt Relief Programs

These programs specialize in renegotiating MCA repayment terms, such as extending repayment schedules or reducing balances, to provide immediate relief.

Each option provides more stability than MCAs, helping businesses mitigate financial stress and transition to healthier financial habits.

What This Means for Loan Brokers

The new policy also creates unique challenges for loan brokers, especially those accustomed to helping clients refinance MCA debt through SBA loans. However, it also presents a valuable opportunity to adapt and provide deeper financial expertise.

How Loan Brokers Can Adjust

Educate Clients

Many small business owners may not fully understand how MCA debt impacts their ability to secure traditional financing. Brokers should take on an advisory role, helping clients recognize these challenges and guiding them toward viable alternatives.

Diversify Lending Solutions

Staying updated on alternative financial products like term loans, lines of credit like the Bankroll Revolving Line of Credit with Principal Pause from ARF Financial, or equipment financing is crucial. By broadening the range of solutions offered, brokers can better address the unique needs of small businesses with MCA debt.

Align with the Right Lenders

Some SBA lenders who avoided refinancing MCA debt will be less affected by the upcoming policy change. Brokers should establish relationships with lenders who understand the challenges of MCA obligations and are open to offering alternative solutions. Lenders like ARF Financial offer true bank loans that are not affected by this policy change.

Steps Loan Brokers Should Take

To stay ahead of this policy shift, loan brokers need to prioritize education and networking. Here are actionable steps to prepare:

• Deepen Your Understanding of MCA Debt

Study how MCA obligations affect cash flow, repayment schedules, and overall creditworthiness. This knowledge will help you better articulate options to clients.

• Explore Alternative Lending Options

Familiarize yourself with financial products outside of SBA refinancing, such as alternative lenders like ARF Financial who offer true bank loans that won’t be impacted by this new change.

• Stay Updated

Keep an eye on SBA updates, attend industry webinars, and join professional networks that provide insights into changes in small business lending. The more informed you are, the better equipped you’ll be to serve clients effectively.

Building a Resilient Financial Strategy

The SBA’s new refinancing policy underscores an important reality for small business owners and brokers alike. Sustainable financial practices are key to long-term success. While the prohibition of MCA debt refinancing may seem like a setback, it also encourages businesses to seek more responsible and manageable funding solutions.

By staying informed, exploring alternatives, and educating clients, brokers can turn this policy shift into an opportunity to elevate their role as trusted advisors. Together, businesses and brokers can build a more resilient financial future.