TL;DR: The new SBA rules mean lenders can’t use loan proceeds to pay off MCA debt but you can still qualify for an SBA loan if you apply the right way. Learn how, and use SBAScore.com to boost your odds.

If you're thinking about getting an SBA loan to replace your high-cost daily payments, you’re not alone. Thousands of business owners stuck in expensive Merchant Cash Advances (MCAs) are exploring SBA options, but a recent policy change has made it more complicated.

As of June 1, 2025, the new SBA rules have officially banned the use of SBA loan proceeds to pay off MCA debt. This shift was part of a broader policy rollback covered in the SBA’s official release: SBA Eliminates Disastrous Biden-Era Underwriting Standards.

The update came straight from the revised SBA Standard Operating Procedures, which now states:

“Merchant cash advances and factoring agreements are not eligible for refinancing.”

Before the rule took effect, SBA lenders could use part of your loan amount to pay off your MCAs. This was a major benefit because it immediately freed up cash flow and helped more businesses qualify for SBA loan terms.

Example: SBA Approval Before the Rule Change

In December 2024, a small business was approved for a $325,000 SBA loan. At closing, the lender paid off two MCA positions directly from the loan proceeds, and the remaining funds were wired to the business as working capital.

That same business, applying today under the new rules, would likely be declined. Why? Because the MCA debt can no longer be cleared, and the debt service burden would be too high for approval.

What This New Rule Means

Until recently, many SBA lenders allowed borrowers to pay off MCA debt as part of the loan proceeds. This made sense: by replacing high-cost, daily or weekly MCA payments with a long-term SBA loan at low interest rates, businesses could stabilize cash flow and operate more efficiently.

But in many cases, businesses returned to MCA funding shortly after their SBA loan was disbursed. This cycle contributed to a rise in defaults, prompting the SBA to put an official stop to refinancing MCA debt.

Can You Still Get an SBA Loan If You Have MCA Debt?

Yes, you can.

Even though the MCA debt itself can’t be paid off directly with SBA funds, your business can still be approved for an SBA loan while MCA debt is outstanding. However, only a small subset of SBA lenders will consider these applications, and the underwriting has become stricter.

From an approval standpoint, the existence of MCA debt adds pressure to your business’s debt service coverage ratio, one of the most important SBA approval metrics. If your cash flow is stretched too thin between MCA payments and proposed SBA loan payments, your chances of approval drop.

This is where the right lender and the right pre-qualification insight matters. If your MCA debt ratio is too high, you may need to restructure your existing debt before applying. One potential solution is working with Reverse Consolidation to lower your daily MCA burden and improve your debt profile before applying for SBA financing. Calculate your monthly payment savings HERE

Can I Still Qualify for an SBA Loan With MCA Debt?

Yes, but now you need to take the right steps to make your file work.

The presence of MCA debt doesn’t automatically disqualify you from getting an SBA loan, but it does make your approval trickier.

You’ll need to:

• Show strong cash flow, even with MCA payments still in place
• Meet the updated requirements for SBA loan underwriting
• Apply through a lender familiar with the new SBA rules and comfortable reviewing deals with MCA exposure

Wondering, “Can I get an SBA loan if I took MCA money last year?”

Start by using SBAScore.com to analyze your pre-qualification status based on updated lender criteria.

How SBAScore.com Helps

At SBAScore.com, we help small business owners understand if their current financial situation qualifies for SBA funding, even with MCA debt. Our prequalification tool looks beyond basic credit and revenue and includes your SBSS score, the same score banks use to screen applicants.

If an SBA loan is not the right fit, we can guide you toward consolidation loans, bank lines of credit, or MCA exit strategies that improve your financial profile before you reapply.

SBA Loan Requirements (Updated for 2025)

The core requirements for SBA loan eligibility haven’t changed:

• 2+ years in business
• 650+ credit score
• No current tax liens or federal defaults
• Healthy cash flow & positive DSCR
• Strong personal financials

What Should You Do Next?

If you have MCA loans but still want access to low-interest SBA capital:

1. Get your SBSS Score

• Use SBAScore.com to check where you stand and get lender-matched

1. Restructure MCA payments if needed

• Try this Reverse Consolidation Calculator

1. Book a Call With Our SBA Experts

• Schedule here and see what you can qualify for in today’s SBA environment

This rule change doesn’t mean your business is out of options. It just means you need a smarter path to SBA approval, and that’s exactly what SBAScore.com is here to help with.