Policy change by SBA to exclude MCA obligations from refinancing eligibility has created a crisis for small businesses trapped in high-cost debt. This void presents a significant opportunity for the private lending and secured finance ecosystem to step and offer a path to credit rehabilitation.

Main Street’s debt crisis isn’t new—but its policy backdrop just changed. 

With Small Business Administration (SBA) funds no longer available to refinance Merchant Cash Advance (MCA) obligations, thousands of small businesses once able to escape high-cost advances through government guaranteed refinancing are now locked inside them. Daily withdrawals continue to drain cash flow and stacked positions collapse working capital. For secured lenders and advisors, the consequence is not just borrower distress but collateral erosion—and with no viable exit path, value is lost on both sides. 

Yet this same constraint reveals a structural opening. The secured finance ecosystem already holds the discipline, risk-pricing and creditor-priority order needed to convert MCA chaos into a recoverable asset class. By adapting restructuring logic to Main Street scale, lenders and borrowers alike can preserve value, protect collateral and rebuild bankable credit. 

And herein lies the emerging opportunity for alternative lenders to fill the void left by the SBA’s exit from the MCA refinance market. For the first time, a large segment of the small-business market must graduate back into structured credit through private lenders—because no other path exists. If the SBA is no longer the bridge out of MCAs, the secured-finance community can be. 

The Missing Middle 

Between the predatory fringe of “business debt relief” and the well-structured processes of middle-market turnaround lies a vast gap—where most Main Street borrowers now sit. 

Traditional restructuring tools—bankruptcy, receivership, Article 9 restructurings and formal out-of-court engagements, are designed for larger balance sheets with the resources to support counsel, advisors and transaction costs. 

At the same time, main street “debt help” schemes that dominate search results do not offer debt restructuring best and accepted practices. 

The result is a structural void in the small-business recovery landscape: value and opportunity worth preserving, but in a segment priced out of, and underserved by middle market restructuring solutions. 

It’s in this space that the secured finance ecosystem can bring real order—by applying the same discipline that governs middle-market recoveries but scaled to the economics of Main Street. 

The Mirage of “Debt Relief” 

When small businesses in MCA distress search for help on the Internet, they are met not with restructuring professionals but with marketing pitches. “Cut payments by 80 %.” “We’ll negotiate with your lenders.” Behind the claims lie two models previously dissected in ABL Advisor. 

The first and most damaging is the familiar “stall-and-save” model. 

Borrowers are typically instructed to halt all payments to all creditors and divert funds into a third-party account for a future lump-sum settlement. Fees accrue while operations unravel. Upon payment default, MCA creditors issue UCC § 9-406 notices, intercepting receivables and freezing working capital, including accounts already pledged to senior lenders. What began as “relief” ends in paralysis, impaired collateral and liquidation. 

By contrast, in a true restructuring scenario, when insolvency has been established, controlled payment suspension serves as a necessary function. 

Whether judicial or out-of-court, payment control is a core fiduciary function. In insolvency scenarios, trustees, receivers, assignees and secured party representatives alike are bound by duty and law to preserve enterprise value and maximize recovery for senior secured creditors. That requires halting payments to junior or unsecured parties when continued outflows would erode collateral. 

A debt relief shop’s ‘stall and save’ tactics are fundamentally different from payment triage, which is a fiduciary act and legal responsibility. By aligning creditor behavior with priority rights, it protects both the going concern and the waterfall of recovery—while avoiding the moral hazard of encouraging borrowers to defy contractual obligations and instead enforcing responsibility to the order of priority in service of creditor recovery. 

More recently, a softer variant in the main street debt-relief space has emerged. The “payment-renegotiation” model (i.e., “cut your payments by 80%”) seeks voluntary reductions across multiple MCA positions without stopping payments. But success here depends on unanimous cooperation—a rarity among five or six stacked MCA funders. One holdout can trigger default and the same 9-406 enforcement spiral. These firms propose negotiation as the solution, where a restructuring professional would correctly identify this as only a first step to near-term operational viability. 

“Payment renegotiations can align the interests of MCA creditors and borrowers. However, this can only be understood as a first step toward graduating MCA borrowers back into conventional credit markets. Renegotiated payments are a starting point only, because often, even those new terms are unsupportable long term, and they don’t establish the building blocks that graduate a business back into lower cost, responsible financing – which is a cornerstone of a true turnaround, beyond temporary relief,” says Michael Petrecca, CEO, Rise Alliance. 

A Structured Path from Distress to Bankability 

Recovery begins once the business is stabilized and cash flow becomes predictable. But a true turnaround plan must offer a holistic path to graduating the business up the credit hierarchy toward conventional refinance and credit compliance. In practice, the progression from crisis to conventional credit unfolds in three linked stages, each building on the last. 

Stage 1: Re-Amortization and Stabilization 

The immediate priority is to stop the cash bleed caused by daily MCA withdrawals and restore a positive debt-service coverage ratio (DSCR). Through the cooperation of the senior secured lender, MCA obligations are re-amortized; obligations are stretched from daily to weekly or monthly installments proportionate to actual operating cash flow. 

For example, a business producing $100,000 in monthly net operating income (NOI) but paying $60,000 in MCA withdrawals shows a DSCR of 0.6X—insolvent. Extending those obligations over a longer horizon can reduce payments to, for example, $25,000 per month, lifting DSCR above 1.25× and restoring solvency in real time. 

“Unlike blind payment renegotiations, a restructuring professional should peg renegotiated payment goals to a debt service coverage ratio, in order to bring a credit back into formula with their senior lender,” adds Petrecca. 

What distinguishes this process from “debt relief” settlement mills is the broader context behind it. Working through the senior lender, a restructuring professional can invoke first-position priority rights to insulate receivables and operating accounts from legally unwarranted 9-406 accounts receivable interception. That protection keeps the business functioning while payment schedules are reset across the MCA stack. 

This is the stabilization phase: the company remains operational, cash flow becomes measurable again, and the senior lender’s collateral is preserved instead of liquidated. With performance data and predictable coverage ratios in hand, the borrower can now be positioned for underwriting by incoming capital. 

Stage 2: Rehabilitation through Structured Sub-Debt and Secured Facilities 

Once the business demonstrates a track record of consistent performance under the re-amortized plan, it reaches the next rung of the credit ladder—structured rehabilitation. 

Here, the company leverages improved liquidity and compliance history to attract a junior and/or collateral-backed facility designed to refinance the remaining MCA balances. 

This phase has two complementary credit components: 

• Subordinated Cash-Flow Lending: A short-term, underwritten facility priced for risk but structured under formal documentation, covenants and reporting requirements. It refinances or pays down re-amortized MCA obligations while re-establishing a performance record under legitimate credit instruments. 

• Collateral-based or Asset-Backed Facilities: As collateral value stabilizes—inventory, receivables, equipment, the borrower may qualify for an ABL, factoring or equipment-finance line. This secured layer supports working-capital needs and, in combination with the sub-debt note, replaces the remaining MCA stack entirely. 

As the market responds to the vacuum left by the new SBA policy precluding MCA refinancing, we can expect the emergence of dedicated underwriting models, specialty finance products, and even private funds designed specifically to serve this segment. These vehicles will offer structured refinance capital to businesses emerging from MCA distress. For private lenders and funds, it represents a high-yield opportunity supported by measurable cash flow, collateral and senior cooperation. 

To bridge data and transparency gaps, new intermediaries are also likely to develop including third-party billing or cash-management platforms that temporarily take over A/P and A/R functions to produce verifiable financials for underwriters. By controlling collections and disbursements, these entities can provide lenders with documented visibility into performance, enabling broader capital deployment and streamlined underwriting. 

For lenders, this phase marks the return of structure and transparency: cash flow is monitored, collateral is perfected, and all capital flows operate within established priority rights. For the borrower, it represents genuine credit rehabilitation—a measurable bridge from predatory finance to legitimate underwriting. 

“The alternative finance market understands the opportunity to serve as the bridge between MCA distress and the conventional financing once represented by the SBA. The challenge, in a non-government-guaranteed environment, is building structures that can reliably move a business from opaque financials to transparent, underwritable ones—clearing the path for new capital,” David Balcom, BDO, Breakout Finance. 

Stage 3: Graduation to Conventional or SBA-Eligible Finance 

After six to twelve months of documented compliance under structured facilities—clean reporting, covenant adherence, and consistent payments—the company is no longer an “MCA borrower.” It is now a performing small business with bankable credit metrics. 

At this point, conventional lenders or SBA-participating institutions can refinance the structured debt. While SBA policy now prohibits the direct use of guaranteed funds to retire MCA balances, it does permit refinance of the structured sub-debt or asset-backed facility that replaced them. This final stage “graduates” the borrower fully back into the traditional credit ecosystem. 

The end result is not just survival, but rehabilitation: a business that has rebuilt its capital structure, restored compliance discipline, and re-entered bankable territory. 

Each stage protects collateral, restores cash flow, and rebuilds lender trust. Together they form a repeatable framework—a practical ladder that moves distressed Main Street borrowers out of extraction finance and back into the formal credit economy. 

Why This is the Lenders’ Opportunity 

This evolution does not require new regulation or pricing models; it requires the secured-finance community to extend its existing discipline downward, made possible by demonstrated settlement payment history and the emergence of monitoring structures that produce auditable financials, thus reducing the diligence burden for incoming funders. 

For lenders, the upside is clear: 

• Preserve collateral value that would otherwise vanish through MCA seizures.
• Retain borrowers who can again service senior debt.
• Expand lending reach into a rehabilitated Main Street segment once written off as unfinanceable. 

In short, what began as a threat to secured creditors can become a pipeline of recoverable, financeable enterprises. 

Restoring Order at the Base of the Capital Stack 

With SBA refinance routes closed to MCA borrowers, the path forward runs through secured finance itself—through the same principles of priority, intercreditor agreement and cooperative restructuring that protect value. 

By distinguishing predatory stalling from fiduciary stabilization, and by offering a structured ladder from re-amortization to refinance, the industry can turn a market failure into a growth channel. 

As credit markets tighten and MCA exposure proliferates, the need for transactionally focused, lender-aligned small-business restructuring will only grow. For businesses that will never be viable candidates for a bankruptcy plan or the installation of a full-scale turnaround consultant, one of the most powerful tools available is the lending ecosystem itself—paired with the guidance of restructuring professionals who can navigate it. 

Market forces, not regulation, have always been the true engine of innovation in finance. The rise of MCAs themselves proves the point: a new product filled a vacuum faster than policymakers could respond. And so, too, will the solution. The same market logic that created an unregulated alternative-finance sector can be harnessed—through structure, lawful priority, and lender cooperation—to restore order and rebuild value where policy has failed to reach. 

That is the opportunity before secured finance. With a structural model that aligns creditor rights and business viability, the industry can do what regulation has not: create scalable recovery pathways for Main Street.