For factors and asset-based lenders, merchant cash advance debt has long represented one of the most frustrating obstacles in commercial finance.
The opportunity often appears attractive at first glance. The company generates revenue. Customers continue buying. Accounts receivable remain active. Management appears capable. The underlying business may retain meaningful operating value. Yet after reviewing the existing obligations, the lender declines the opportunity.
From the business owner’s perspective, the decision can be confusing.
“If the business is still operating, why won’t anyone refinance us?”
For lenders, however, the answer is usually straightforward: the transaction is not financeable.
Historically, many lenders treated MCA encumbrances as an automatic decline. Increasingly, however, factors and asset-based lenders are recognizing that the obstacle may reside less in the underlying business than in the capital structure surrounding it.
Across the commercial finance market, factors and asset-based lenders are leveraging restructuring professionals to resolve MCA distress before underwriting begins. Rather than viewing MCA obligations as a permanent obstacle, many lenders are evaluating whether a pathway exists to restore financeability. When such a pathway exists, transactions that once appeared impossible can become viable lending opportunities.
Understanding how this works is increasingly important for lenders seeking new originations and business owners seeking access to conventional capital.
The Misconception About MCA Refinancing
Business owners frequently assume that if a lender believes in the business, financing should be available.
In reality, factors and asset-based lenders do not lend based on optimism regarding future performance. They lend against collateral and cash flow. That distinction becomes critical in MCA-distressed situations.
A company may continue generating revenue while simultaneously lacking sufficient collateral support to refinance existing obligations. Accounts receivable may exist, but not in amounts large enough to support a facility capable of satisfying the MCA stack. Working capital may be strained. Cash flow may be consumed by debt service. Borrowing capacity may have deteriorated.
As a result, a lender can recognize value in the underlying business while still concluding that a refinancing is not possible. This is one of the most common reasons MCA-distressed businesses find themselves trapped outside conventional capital markets.
Why MCA Debt Creates a Financeability Problem
Merchant cash advances often create a unique challenge because repayment obligations are typically tied to frequent withdrawals from operating cash flow.
As obligations accumulate, debt service begins consuming resources that would otherwise support payroll, inventory purchases, vendor relationships, marketing initiatives, equipment investments and working capital. Over time, this pressure affects the very characteristics lenders evaluate during underwriting. Cash flow weakens, collateral support deteriorates, borrowing capacity declines and working capital becomes increasingly constrained.
The business may continue operating, but the conditions necessary for conventional financing steadily erode. Eventually, the company enters what we refer to as the financeability gap—the distance between its current financial condition and the point at which conventional lenders can prudently provide financing.
At that point, the issue is no longer whether the business has customers or generates revenue. The issue is whether the transaction satisfies conventional underwriting standards.
Why Factors and ABLs Often Walk Away
For many lenders, the challenge is not identifying opportunity; it is creating a financeable transaction.
If sufficient collateral existed to refinance the MCA obligations, conventional financing often would have occurred already. Instead, lenders frequently encounter situations where the amount owed exceeds the borrowing capacity supported by available collateral.
From an underwriting perspective, the numbers simply do not work.
In many situations, the lender may genuinely like the opportunity. Management may be capable, the industry attractive and the customer base stable. The lender may even want the relationship. Yet prudent underwriting standards prevent capital from being advanced without sufficient collateral support.
As a result, many factors and asset-based lenders walk away—not because the business lacks value, but because the transaction lacks financeability.
The Opportunity Hidden Inside MCA Distress
For many lenders, MCA encumbrances have been a non-starter. The obligations appeared too difficult to unwind. The borrowing base could not support a takeout. The path forward seemed uncertain. In many cases, it was simply easier to move on to the next opportunity.
Today, however, a growing number of factors and ABLs are recognizing that MCA distress does not necessarily eliminate lending opportunities. Instead, it may simply indicate that the business requires a restructuring framework before conventional financing becomes possible.
As a result, some lenders have begun evaluating MCA-distressed opportunities through a different lens. Rather than focusing exclusively on whether a company qualifies today, they evaluate whether a credible path exists to restore financeability. When such a path exists, transactions that initially appear outside conventional underwriting parameters may ultimately become viable lending opportunities.
As Curt Powell of nFusion Capital explained:
“I’ve closed multiple deals that were otherwise not financeable because of MCAs. An Article 9 balance sheet restructuring is a great option when the collateral just isn’t there to finance them out.”
In many situations, the challenge resides less in the operating business than in the liabilities surrounding it. Customers, revenue, employees and operating capabilities may remain intact even while the existing capital structure has become incompatible with conventional financing.
The Difference Between Operating Value and Enterprise Value
This distinction is frequently misunderstood.
Many MCA-distressed businesses retain meaningful operating value. Customers continue buying. Employees continue working. Revenue continues flowing. The company may even remain EBITDA positive before debt service.
However, excessive obligations can exhaust the enterprise value associated with the existing capital structure. In practical terms, the business may continue functioning while the balance sheet becomes economically insolvent.
That does not mean the business should be liquidated. It means a different framework may be necessary to preserve the underlying business value and restore financeability. Once financeability returns, enterprise value can begin to be recreated.
How Deals Become Financeable Again
The encouraging reality is that many MCA-distressed businesses are not permanently unfinanceable.
The conditions preventing financing can often be addressed.
Financeability restoration refers to the process through which a company moves from a condition where conventional financing is unavailable to one where sustainable cash flow, adequate collateral support and improved credit characteristics once again satisfy underwriting requirements.
For many businesses, this occurs through either Article 9 restructuring or MCA Credit Rehabilitation Restructuring. While payment modifications, negotiated accommodations and settlement discussions may play important roles within those frameworks, they are not the end goal. Their value lies in whether they improve the conditions necessary for conventional financing to return.
Lower payments can stabilize cash flow and provide management with time to act. Yet payment relief alone does not necessarily alter the underwriting considerations that caused lenders to step away. The broader objective is restoring the characteristics that make a transaction financeable.
Article 9 Restructuring
When accumulated liabilities have rendered an otherwise viable business insolvent and created an unsustainable capital structure, Article 9 restructuring may provide a comprehensive solution.
Conducted under established commercial law, Article 9 restructuring allows operating assets to be transferred through a secured-party sale into a new entity free and clear of prior liens and obligations. Rather than attempting to refinance obligations that cannot realistically be refinanced, the process separates the operating business from an unsustainable capital structure.
The result is a clean platform capable of supporting new financing relationships.
For factors and asset-based lenders, this often creates an opportunity to evaluate the business based on current operating fundamentals rather than legacy obligations.
As Gino Clark of SLR Business Credit observed:
“After the Article 9 process, a new senior secured lender can easily perfect its priority position on assets going forward.”
In many situations, a new lender can establish a clean first-priority position and provide financing that previously would have been impossible.
Credit Rehabilitation
Not every business requires a balance-sheet restructuring.
Many companies continue to look like business as usual, yet remain unfinanceable because debt service obligations have overwhelmed available cash flow. Working capital deteriorates, collateral support becomes insufficient and conventional lenders cannot refinance the existing obligations despite recognizing value in the underlying business.
In these situations, Credit Rehabilitation Restructuring (CRR) may provide a more appropriate solution.
MCA Credit Rehabilitation Restructuring is a framework that goes beyond payment restructuring, protection from legally unwarranted creditor disruption, credit rehabilitation and financeability restoration to create a path back to conventional capital. As cash flow improves and receivables grow, financing opportunities often emerge. Businesses gradually move from unfinanceable to financeable.
As Haze Walker of Lawrence Financial noted:
“It’s an incredibly effective solution. We recently worked with a completely overleveraged and unfinanceable company. It was successfully restructured, and we were able to provide a line of credit to support its future growth.”
What previously appeared impossible from an underwriting perspective can ultimately become a conventional lending opportunity.
What Financeability Restoration Looks Like in Practice
For many businesses, the path back to that opportunity runs through one of two frameworks.
Through its nationally recognized Article 9 restructuring practice, Second Wind Consultants works with businesses whose debt burdens have made conventional financing impossible. The firm’s objective is not simply reducing liabilities but restoring financeability through commercially reasonable restructuring transactions that preserve operating businesses and create clean capital structures capable of supporting future lending relationships.
Through Rise Alliance, its specialized MCA Credit Rehabilitation Restructuring division, businesses that may not require a balance-sheet restructuring can pursue strategies designed to stabilize cash flow, rebuild collateral support, improve lender confidence and create pathways back to conventional financing.
Although the methods differ, the objective remains the same: restoring financeability and creating the conditions necessary for future enterprise value creation.
For lenders, that often means opportunities that previously appeared impossible become financeable transactions once again.
Conclusion
MCA distress often presents a challenge of structure rather than substance. Many affected businesses continue generating revenue, serving customers and creating economic value even while remaining outside the bounds of conventional underwriting.
Increasingly, factors and asset-based lenders are recognizing that distinction. Rather than viewing MCA obligations as a permanent barrier, they are evaluating whether a realistic path exists to restore financeability and create a transaction that can support prudent lending.
When that occurs, the outcome benefits all parties involved. Businesses regain access to conventional capital, lenders gain access to opportunities that previously appeared inaccessible, and enterprise value can once again be evaluated on the basis of future performance rather than legacy obligations.
Frequently Asked Questions
Why won’t a factor refinance my MCA debt?
In many cases, available collateral is insufficient to support a facility large enough to refinance existing MCA obligations. If enough collateral existed, conventional refinancing often would have occurred already.
What is the financeability gap?
The financeability gap is the distance between a company’s current financial condition and the point at which conventional lenders can prudently provide financing.
Can MCA-distressed businesses become financeable again?
Yes. Through Article 9 restructuring or credit rehabilitation, many businesses improve cash flow, rebuild collateral support and restore eligibility for conventional financing.
What is Article 9 restructuring?
Article 9 restructuring is a commercial-law-based process that transfers operating assets through a secured-party sale into a new entity free and clear of prior liens and obligations, creating a clean capital structure capable of supporting future financing.
What is Credit Rehabilitation Restructuring?
Credit Rehabilitation Restructuring (CRR) is a structured process focused on stabilizing cash flow, reducing unsustainable payment burdens, rebuilding collateral support, restoring lender confidence and creating conditions necessary for future refinancing.
Author Bio
Robert DiNozzi is Chief Growth Officer and Partner at Second Wind Consultants, a nationally recognized business renewal and restructuring firm specializing in Article 9 restructuring, financeability restoration, and non-judicial solutions for distressed companies. He also helps oversee Rise Alliance, Second Wind’s Credit Rehabilitation Restructuring division focused on helping businesses stabilize cash flow, rebuild collateral support, and regain access to conventional financing.
DiNozzi is the recipient of the 2026 ABF Journal Legends & Leaders Innovator Award and was recognized by Los Angeles Times Studios as a Banking & Finance Visionary for advancing market-based restructuring frameworks that preserve operating businesses, align stakeholder interests, and create more efficient paths through distress under existing commercial law. He serves on the Global Board of Trustees of the Turnaround Management Association (TMA) and is a frequent contributor to ABF Journal, ABL Advisor, and the Journal of Corporate Renewal.
