Can an SBA loan pay off a merchant cash advance?

Only in a narrow case. Since October 1, 2026, Appendix 14, Paragraph A.3 of SOP 50 10 8.1 treats merchant cash advances as Sales-Based Repayment Agreements. Such an agreement is eligible for refinancing only if the agreement has been converted to a term loan, has amortized for at least 24 months and no new agreements followed; an active agreement is not eligible.

Appendix 3 defines that as a funding agreement where a business receives a cash advance in exchange for a percentage of its future sales. Point-of-sale products are in the same family.

What the rule requires

The original agreement must have been converted to a term loan and amortized for the required period. No additional agreement can have been put in place since the conversion. If the agreement is still active, it cannot be refinanced. SOP 50 10 8, in force through September 30, 2026, barred these advances outright.

Tests that still apply

A converted advance is a refinance like any other. It must be current for at least the last 12 months or the life of the loan, whichever is less. It is not excepted from the payment test. The new payment must be at least 10% less than the existing installment amounts in aggregate. SBA-guaranteed loans may not pay a creditor in a position to sustain a loss (13 CFR 120.201).

What SBA does not say

Appendix 14 does not explain what "converted to a term loan" takes beyond those words. Whether a renegotiated advance qualifies is a call the lender makes on the documents. Expect it to ask for the original agreement, the conversion and the payment history.