Buyout vs refinance
Both end the debits. Only 1 of them is available to most stacked merchants.
A refinance replaces existing debt with cheaper debt. A position buyout retires merchant cash advance positions in full at closing using a collateral backed facility. They sound adjacent and they are underwritten on different things, which is why a business that cannot refinance can sometimes still do a buyout, and why the product marketed to everyone as a consolidation is neither.
The short answer
Refinance reads cash flow. Buyout reads collateral.
Then the detail, if you want it.
A conventional refinance asks whether the business can service the new facility out of documented cash flow. If daily debits have already compressed the deposits a lender computes coverage from, the answer is frequently no, and the very condition creating the need is what disqualifies the file.
A position buyout asks a different question: is there enough collateral in the business, equipment, receivables, real estate, or a blanket position, to secure a facility large enough to pay every advance off in full at closing. Coverage still matters, but the asset carries weight the cash flow cannot. That is why a merchant with 4 positions and a fleet can often do a buyout when no refinance is available to them.
An SBA loan is usually not the refinance. Under the SBA's SOP 50 10 8, effective June 1, 2025, as the firm reads it, 7(a) loan proceeds may not be used to refinance merchant cash advance or factoring obligations. Owners are still routinely told to "get an SBA loan to pay off the advances." Ask the lender to show you the rule before you spend 60 days on an application that cannot close for that purpose.
The difference is not marketing. At closing, a buyout sends payoff funds to each funder against payoff letters, the daily debits stop, and 1 monthly payment replaces them. What it is not, and the distinction is the entire point, is a reverse consolidation, which leaves the original positions in place and adds a new debit on top to fund them.
Side by side
Where they actually differ.
| Position buyout | Refinance | |
|---|---|---|
| What it retires | Merchant cash advance positions, in full at closing | Existing term debt or a line |
| What it is underwritten on | Collateral first, coverage second | Documented cash flow and coverage |
| Typical requirement | 3 or more positions and collateral in the business | 2 years in business, coverage above 1.25, clean statements |
| What happens to the old obligations | Paid off against payoff letters at closing | Paid off at closing |
| Payment after closing | 1 monthly payment | 1 monthly payment |
| Speed | 7 to 21 business days | 3 to 15 business days |
| What is filed | A lien against the pledged collateral | A lien against the refinanced collateral |
| Available while heavily stacked | Often, if collateral supports it | Rarely, because debits suppress coverage |
| What you must produce | Every advance contract, balances, payoff letters, collateral schedules | Statements, financials, a debt schedule |
General descriptions of common structures, not offers and not a ranking. Every facility is arranged through third party lenders and funders and is subject to their underwriting, documentation and approval; the actual agreement governs.
What to do first
Measure the load before you shop anything.
The order of operations
Before you talk to anyone, run the stack calculator and get 2 numbers: the total monthly debit load, and that load as a share of monthly deposits. Above roughly a third of deposits, the stack is deciding what the business can do and the conversation is about structure, not about another position.
Then assemble the paper: every advance contract with a current balance, 6 months of bank statements, a schedule of what the business owns free and clear, and any existing UCC filings against the entity. That list is the difference between a 10 day closing and a 6 week one, and it is also what tells you honestly whether a buyout is available. The agreement organizer exists for this step.
If there is no collateral and coverage will not support a refinance, the honest answer is that neither is available today, and the work is a repayment plan with the existing funders plus the operating changes that rebuild coverage. Anyone offering to solve it with a new daily debit is selling you the problem again.
What goes wrong
The mistakes that cost the most.
Accepting a reverse consolidation as a buyout
A reverse consolidation does not retire the positions. The original debits keep running, and a new facility debits you as well, to fund them. Gross obligations rise, and if the new facility stops, every original position is still live. Ask 1 question: at closing, does each funder receive a payoff in full, yes or no.
Shopping before pulling payoff letters
A buyout is sized to the actual payoff figures on a specific date, not to balances the funders quote informally. Without current payoff letters the facility is sized wrong and the closing fails.
Taking another position while the buyout is in process
A new position taken mid process changes the payoff total, the collateral coverage and the underwriting, and usually kills the transaction. Nothing new until it closes.
Assuming a refinance is available because the bank is friendly
Coverage is computed after daily debits. A business with strong revenue and heavy debits frequently fails the same coverage test a much smaller, cleaner business passes.
Ignoring what is already filed
Existing UCC filings against the entity determine what can be pledged and in what order. Pull the filings before you promise collateral to anyone.
Questions
What owners ask.
How many positions do I need for a buyout?
Typically 3 or more, because below that the arithmetic rarely justifies the closing costs and a straight refinance or a single payoff is usually cleaner.
What counts as collateral?
Titled equipment, unencumbered receivables, real estate, and in some structures a blanket position on business assets. What matters is value, marketability, and what is already filed ahead of it.
Will the funders agree to a payoff?
Payoff is a contractual right in nearly every advance agreement. What varies is whether a discount is available on early payoff, which is a negotiation and is never assumed in the sizing.
Does a buyout hurt my credit?
The positions are paid in full, which is the outcome any file reads better for than a default or a settlement. A new secured facility appears with a lien on the pledged collateral.
What if I do not have collateral?
Then a buyout is not available, and any product described to you as a collateral free consolidation should be examined on the payoff question above before anything else. The alternative is a workout with the existing funders and the operating changes that rebuild coverage.
Start with the file
A straight read within 2 business days.
Send the basics through the intake form: what the file supports, what is missing, and the next step if there is one. If we are not the right desk for it, we say so.