How does small business refinance work?

Why refinance — the five drivers

Rate reduction is the most common driver: replacing an MCA effective APR of 60–150% with an SBA 7(a) rate of 9–15% saves thousands per month on a $200K debt. The other four drivers are: (1) term extension — stretching a 12-month MCA into a 5-year term loan lowers the monthly payment even without a rate drop; (2) debt consolidation — replacing 3–4 separate monthly obligations with one payment simplifies cash-flow management; (3) removing a personal guarantee — some established businesses can refinance into unsecured or business-only collateral structures once credit history is established; (4) switching to SBA-backed pricing — SBA guarantees allow community banks to offer below-market rates to borrowers who don't qualify for conventional credit alone.

Path 1 — Bank-tier refinance

Conventional banks offer the lowest rates (7–12% APR) for businesses with 700+ FICO, 3+ years of operating history, clean financials, and collateral. Banks rarely offer a standalone refinance of MCAs without collateral. Best suited for businesses with real estate, equipment, or significant AR to pledge. Application typically requires two years of business tax returns, current P&L, and a debt schedule showing all current obligations.

Path 2 — SBA 7(a) refinance

The SBA 7(a) program explicitly permits loan proceeds to retire existing business debt — including high-cost MCAs — when the refinance provides a 'clear benefit' to the borrower. Rates are prime + 2.25–4.75% (per SBA SOP 50-10-7); terms up to 10 years for working capital and 25 years for real estate. Minimum requirements: 680+ FICO, 2+ years in business, ability to document the debt being retired, and DSCR ≥ 1.25x post-refinance. Payoff letters from all existing lenders are required at closing.

Apply for business funding through ClearValue Lending to get matched with a lender for your needs.

Path 3 — Debt consolidation loan

Debt consolidation loans from online and specialty lenders work at 650+ FICO and 1+ year in business. Rates typically 18–40% APR — higher than bank or SBA but far below stacked MCAs. The single payment structure reduces administrative burden and makes cash-flow forecasting predictable. Lenders require a full debt schedule and verify that post-consolidation DSCR exceeds 1.25x. Loan amounts typically $50K–$500K.

Path 4 — Private lender refinance

Private and alternative lenders offer bridge-refinance products for businesses that can't yet qualify for bank or SBA pricing: 550+ FICO, 6+ months in business, and verifiable monthly revenue. Rates are higher (30–60% APR) but the approval window is shorter and documentation lighter. Appropriate as a transitional step — use a private refinance to exit a stack of MCAs, stabilize cash flow for 6–12 months, then refinance again into SBA pricing once the credit profile recovers.

Apply at ClearValue Lending

Start. Your file routes to the funding partners best matched to your current debt profile, FICO, and refinance goal. ClearValue Lending is a funding platform, not a lender or financial advisor.