By the time a dealer starts thinking about refinancing, the stack usually looks like archaeology: a floorplan line from one era, an equipment note from another, a term loan taken for a renovation, two credit cards that quietly became working capital, and (in more files than anyone admits) an advance or two with daily debits. Each layer made sense the week it was added. The stack as a whole was never designed by anyone.
Refinancing is the act of designing it. Done well it is not about chasing a lower rate on one loan: it is about replacing an accumulation with a structure, so the store's cash flow services debt in the order and shape a lender would have chosen on purpose.
First, read your own stack
Write down every obligation with four columns: who, balance, payment, and what the money originally bought. Then sort by effective cost, not by stated rate: a factor-rate advance quoted at 1.35 is not thirty-five percent, and the real number depends on the term, which is the arithmetic covered in the factor-rate article. The sorted list is the refinancing agenda, top down.
| Layer | Typical shape | Refinance verdict |
|---|---|---|
| Merchant cash advances | Daily debits, factor-rate pricing | Retire first, always: see the MCA relief playbook |
| Credit cards carrying balances | Revolving, high rate, minimum payments | Consolidate into amortizing debt |
| Short-term online loans | Weekly payments, one-to-two-year terms | Consolidate or pay down |
| Equipment notes | Fixed payments against specific assets | Usually leave alone unless costly |
| Term loan from a prior project | Monthly amortization | Refinance only if pricing or term is off |
| Floorplan | Revolving, unit-tied | Not refinancing's job: manage it as inventory finance |
What refinancing actually changes
Three things, and only the first one is a rate. Cost: expensive layers replaced by cheaper ones. Cadence: daily and weekly debits replaced by one monthly payment, which transforms how the operating account behaves day to day. And coverage: the debt-service line in a lender's math shrinks, which is often the difference between a store that qualifies for its next facility and one that does not.
The cadence effect is the underrated one. A store remitting daily is making hundreds of payments a year, each one dragging the account balance down before deposits land. The same total obligation paid monthly leaves the account holding visibly higher balances between payments, and the average daily balance a future lender reads off the statements improves for the identical underlying business.
The instruments, in order of strength
- Real-estate-backed refinancing, where the store or its owner holds property: the strongest consolidation instrument available, the collateral supports larger amounts and longer terms than any cash-flow loan. Covered in depth in its own article.
- SBA refinancing, where the debts qualify: converts the stack into one long amortization; the dealership specifics are in the 7(a) article.
- Conventional term consolidation, underwritten on coverage: faster than SBA, sized by cash flow.
- MCA-specific consolidation for advance-heavy stacks: options compared honestly in the MCA relief series.
Sequencing: stop the bleeding before the surgery
The refinance underwrite reads your last several months of bank statements, which means the account's behavior between now and closing is part of the file. Three rules follow. Stop adding layers, one more advance taken during the process can undo the approval it was bridging. Keep the obligations you intend to refinance current, because recent missed payments reprice everything. And keep deposits flowing through the operating account the file presents, so the statements a lender reads describe the store you are asking them to fund.
When not to refinance
- To extend a problem instead of fixing it: consolidating cards you will immediately refill restructures nothing.
- When the existing debt is cheap and the only motive is cash out with no specific use: leverage without a plan is how the stack got here.
- When prepayment economics on an existing loan eat the savings: run the payoff math first.
- Mid-crisis on the floorplan: sold-out-of-trust issues need direct resolution with the provider before any refinance underwrites cleanly.
The refinance file
- The four-column stack: creditor, balance, payment, original purpose: complete, including the embarrassing lines.
- Payoff letters or current statements for everything being retired.
- Six months of business bank statements, read in advance the way a stranger would read them.
- Three years of returns plus interims: coverage is the underwrite.
- The after picture: one page showing the stack before and after, with the monthly total each way.
Common questions
Will refinancing hurt my credit?
The underwriting inquiries are minor and temporary. What moves credit materially is what the refinance does afterward: revolving balances retired, payment history rebuilt on one obligation, utilization down. The rebuilding mechanics after an advance payoff are covered in the MCA relief series.
Can I refinance while I have open merchant cash advances?
Yes: retiring them is usually the point, and payoff letters from the advance holders are part of the file. What complicates the underwrite is taking a NEW advance during the process, which changes the statements mid-review.
Should I refinance the floorplan too?
Floorplan is inventory finance and stays floorplan. If the line itself is the problem (aging units, curtailment pressure) that is a different decision with its own analysis. What a stack refinance does is stop the floorplan from being leaned on for working capital it was never meant to fund.
How much does consolidation actually save?
It depends entirely on what is in the stack: replacing factor-rate daily debt is transformative; replacing a reasonable term loan is marginal. Sort your stack by effective cost and the top two lines will tell you whether this is worth doing. No responsible answer promises a number before reading the file.
One loan or several after the refinance?
Structure follows use: long assets on long debt, equipment on equipment terms, a working-capital base on a term or revolving facility, floorplan for cars. One giant loan is not the goal: a stack someone designed is.
How long does this take?
Cash-flow consolidations move in weeks when the file is complete; real-estate-backed and SBA routes take longer and are usually worth it. The stall points are the same as every dealer file: missing payoff letters, unfiled returns, and statements that need explaining.
Where to start
Build the four-column stack tonight. Most dealers have never seen their whole debt picture on one page, and the sorted version makes the first move obvious: it is nearly always the same line, and it is nearly always the one with a daily debit.
Qualified Commercial Underwriting Desk
Credit and capital markets
The Qualified Commercial underwriting desk reviews commercial real estate, dealer and Main Street files daily. The Academy is written from that work (how files are actually read, priced and declined) rather than from a rate sheet.
Educational content only. Nothing here is a commitment to lend, an offer of credit, or tax, legal or accounting advice. Program terms, timelines and thresholds vary by lender, file and market conditions, and any figures shown are illustrative.