Can you refinance a merchant cash advance?
By Helm, Funding Specialist
- Refinancing an MCA means replacing it with a new advance on better terms
- It is most common when your business has grown since the original advance
- Refinancing can lower your repayment percentage or extend the term
- Not all providers offer refinancing, so you may need to switch providers
- Always compare the total cost of the new advance against your current one
Merchant cash advance refinancing is the process of replacing your existing advance with a new one, typically on more favourable terms. This can be done with your current provider or with a different one.
Refinancing is not the same as a top-up. A top-up adds additional funding on top of your existing advance, while refinancing replaces the current agreement entirely.
When does refinancing make sense?
Refinancing a merchant cash advance can be a smart move in several situations.
- Your card revenue has increased significantly since your original advance
- You want a lower repayment percentage to improve daily cash flow
- You have found a provider offering a better factor rate
- Your current advance terms are putting too much pressure on your business
- You want to consolidate multiple advances into a single agreement
How the refinancing process works
The process is similar to applying for a new merchant cash advance. The new provider will assess your card transaction history and trading performance, then offer you a new advance.
If you still have an outstanding balance on your current advance, the new provider may pay this off directly and then provide additional funds on top. Alternatively, you may need to settle your existing advance before taking a new one.
Refinancing vs top-up comparison
Understanding the difference between refinancing and a top-up is important.
| Feature | Refinancing | Top-Up |
|---|---|---|
| Existing advance | Replaced entirely | Remains in place |
| New terms | Completely new agreement | Added to existing terms |
| Provider | Can switch to a new provider | Usually same provider |
| Outstanding balance | Settled by new advance | Rolled into new amount |
| Cost | New factor rate on full amount | New rate on additional amount only |
Will refinancing save you money?
Not always. Because MCA repayments are based on a fixed total cost, refinancing does not reduce what you owe on your current advance. You will repay the full agreed amount on your existing advance (either directly or through the new provider paying it off), plus the cost of the new advance.
The savings come from getting better terms on the new advance. If your business has grown and your risk profile has improved, you may qualify for a lower factor rate, which reduces the cost of the new funding.
Things to check before refinancing
Before going ahead with refinancing, make sure you:
- Calculate the total cost of your current advance plus the new one
- Compare the new factor rate with your original rate
- Check whether your current provider charges any early settlement fees
- Confirm that the new repayment percentage is comfortable for your cash flow
- Read the new agreement carefully before signing
Frequently asked questions
Can I refinance with my current provider?
Some providers offer refinancing or renewal options. Ask your current provider whether they can offer improved terms based on your updated trading performance.
Do I need to repay my current advance in full first?
Not necessarily. Many refinancing arrangements involve the new provider settling your outstanding balance directly. However, this varies by provider.
Will refinancing affect my credit score?
No. Since MCAs do not appear on your credit file, refinancing one advance with another should not impact your credit score.
How soon can I refinance after taking an MCA?
Most providers prefer that you have repaid at least 50 percent of your existing advance before refinancing. Some may have different thresholds.