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MCA Refinancing: Why Refinance, Your Options, and the 5 Key Steps

By Richard Wilson

Last Updated on

Estimated read time: 7 minutes

MCAs offer quick capital but often have high rates and daily repayment schedules. If your business revenue is down and daily deductions are causing cash flow problems, refinancing your MCA may be a solution to consider.

This article explores why refinancing your MCA could be beneficial and provides a step-by-step guide to doing so effectively.

Why Should You Consider Refinancing Your MCA?

If daily repayments strain your cash flow or revenue is down, refinancing your MCA can extend your repayment term, potentially lower your daily deductions from credit card sales, and provide a financial cushion. This not only stabilizes cash flow but also gives you more time to recover and simplifies your financial management by consolidating debt.

Ways to MCA Refinancing

You have two main options for refinancing your MCA:

Option 1: Refinance with Your Current Provider

Talk to your current MCA provider about changing your repayment terms. Check your original agreement for a reconsolidation clause; it could let you renegotiate rates if you’re facing financial hardship. Providers usually won’t lower fees but might reduce daily credit card deductions or switch to weekly repayments. You’ll need to show proof of reduced revenue or financial challenges before they will consider refinancing.

Option 2: Refinance with an Alternative Lender

Take out a new loan from another lender to pay off your MCA. This can extend your repayment term and switch you from daily to monthly payments. You might also get a lower interest rate, easing financial stress and reducing your monthly payments and overall debt.

How to Refinance Your MCA

1. Know Your BalanceFind out how much you owe on your MCA. This helps you know how much you need to refinance.
2. Check Your Credit ScoreYour credit score affects the refinancing options available to you. A higher score can lead to better terms.
3. Pick the Right Lender and LoanChoose a lender and loan that fits your needs and credit score. Consider options like SBA loans or commercial loans, which might offer better terms.
4. Apply for the LoanOnce you’ve chosen a lender and loan, apply. You’ll need to provide more documentation than for your initial MCA, like financial statements.
5. Pay Off Your MCAAfter getting your refinancing loan, pay off your existing MCA. Monitor your accounts to make sure all transactions are correct.

By understanding these options and steps, you can make a decision that’s right for your business’s financial health.

Green background with an illustration of a paper document and credit card

Refinancing Options to Consider

If refinancing with your existing MCA provider isn’t appealing or feasible there are several alternative financing options you can consider. 

These include:

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The Bottom Line

Refinancing your MCA offers opportunities and challenges. On the upside, refinancing can extend your repayment term, potentially reduce daily credit card deductions, and offer a financial cushion. This stabilizes cash flow, provides breathing room during revenue dips, and streamlines financial management by consolidating debt. You also have flexibility in choosing between your current MCA provider—especially if a reconsolidation clause is in your agreement—or alternative lending options like business lines of credit or SBA loans.

However, your current provider may not lower fees and will likely require proof of financial hardship or reduced revenue. Choosing an alternative lender might require a higher credit score and more documentation than your initial MCA. Not all alternative options may align with your business needs, requiring careful scrutiny.

Knowing these factors will help you choose a refinancing option that fits your current business financial situation and matches your eligibility to qualify for alternative types of funding.

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