Restaurant chain reduced funding cost 47% by switching from MCA stack to consolidated SBA

Background

The operator runs a four-location Texas-style BBQ chain in the Tampa Bay metro, opened the first unit in 2017, and grew to four locations by mid-2023. Combined trailing-twelve-month revenue at the time of the consolidation was $5.4M, with EBITDA margin running 8.2% — healthy for the casual segment, but tight enough that working-capital shocks hurt fast.

Ownership structure was a single member-managed Florida LLC with the founder holding 92% and a silent operating partner holding 8%. Personal credit at the time of the consolidation was 712; the business had clean tax filings through 2024 and was current on rent, sales tax, and payroll tax on every location.

Pre-stack capital structure was conservative: one SBA Express line of credit at $50K (used as float, paid down monthly), one equipment lease on a smokehouse rebuild, and trade credit with two protein suppliers on net-7 terms. No prior MCA history, no UCC filings outside the SBA Express and the equipment lease. This matters because it explains why so many MCA funders were willing to write paper here even after the first stack — the underlying business looked good on a bank statement.

Challenge

In Q2 2024 a beef-cost spike (briskets ran 38% over budget for 11 weeks) drained the operating cash buffer. The founder took a first MCA — $180K at a 1.42 factor, 9-month term — to cover protein purchases and bridge to a renegotiated supplier contract. Daily payment: $1,138.

Three months later, a 4th-of-July weekend hood-system failure took the flagship offline for 11 days. Insurance covered repair but not the lost margin. A broker pitched a 'piggyback' MCA — $120K at 1.38, 7-month term — explicitly stacked on top of the first. Daily payment: $948.

By Q1 2025, with two daily ACHs hitting the operating account, the chain had to take a third MCA ($95K at 1.49, 5-month term) just to make payroll on a slow February. Combined daily debits across the three MCAs reached $2,810 — roughly 38% of average daily revenue. The chain was technically profitable on the P&L and structurally insolvent on a cash basis. Every renewal offer they received made the trap deeper.

Decision process

The founder approached Fundnode in May 2025 after a broker pitched a fourth MCA at a 1.55 factor. The first thing we did was build a true cost-of-capital table for the existing stack: blended factor across the three open MCAs was 1.43, with weighted-average remaining term of 4.2 months. Pulling the math out to annualized APR-equivalent — using the standard ((Factor - 1) × 365 × 2) / (Term days × (1 + Factor)) formula — produced a blended ~71% APR on $295K of outstanding principal balance.

We considered four paths. (1) A fourth-position MCA refinance — rejected immediately because it would compound the same problem at a worse rate. (2) An asset-based line of credit collateralized by FF&E and receivables — possible but slow, and the equipment lease UCC complicated lien priority. (3) A private MCA-consolidation lender at ~32% APR over 18 months — workable but still expensive and pushed the founder's PG into a second-lien position behind the new note. (4) An SBA 7(a) refinance specifically designed to consolidate the MCA stack into one note.

Path 4 won, but only because three structural facts lined up: the underlying business was profitable on a 24-month look-back, the founder's personal credit was over 680, and Florida's MCA disclosure regime made the existing factor-rate math easy to substantiate to the lender. We matched the merchant to a preferred SBA 7(a) lender with prior MCA-consolidation experience. Underwriting took 47 days; the final note was a $680,000 SBA 7(a) at Prime + 2.75 (effective 11.25% APR at closing) on a 10-year fully amortizing term, with no prepayment penalty after year 3.

Outcome

Closing took 73 days end-to-end from first conversation. Net proceeds of $680K paid off the three open MCAs ($478K outstanding at consolidation), funded a $90K reserve, and covered $112K of working capital for a fifth-location buildout pushed to Q3 2026. The fixed monthly P&I on the consolidated note is $9,420 — versus the prior $58,420/month of combined daily MCA debits ($2,810 × 21 banking days).

On a 12-month forward basis: total interest expense under the consolidated note is projected at $74,800, versus $211,400 the merchant would have paid in equivalent factor cost continuing to roll the MCA stack (assuming flat renewal pricing). That's a 64.6% reduction in dollar-cost of capital and a swing from ~71% blended APR to 11.25% APR on the consolidated note.

Operationally, the swing freed roughly $590K of annual cash flow — enough to fund the planned fifth-location buildout from internally generated capital rather than another debt round, and to restore the operating-account buffer to 6 weeks of payroll within the first 8 months post-consolidation. The founder reports the change in nightly stress is the larger story; the P&L improvement is just the receipt.

Lessons learned

• MCA stacking compounds — the third position usually carries a higher factor than the first, even from the same funder, because the underwriter prices in stack risk.
• SBA 7(a) lenders will consolidate MCA debt if the underlying business is profitable on a 24-month look-back and personal credit is above ~680.
• The disclosure data required under TX SB 1280, CA SB 1235, and NY NYDFS 803 makes the refinance underwriter's job materially easier — borrowers in disclosure states have a real advantage.
• Refi math is dollar-cost-of-capital, not headline rate — a 10-year SBA note at 11.25% beats a 6-month MCA at 1.35 factor by a 6x margin on real-dollar interest expense.
• Don't let a broker frame the fourth MCA as 'the bridge to next month.' The bridge is the refinance.

Related reading

• MCA stacking recovery program
• How MCAs hurt SBA loan qualification later
• SBA loan product overview
• Restaurant funding hub
• Find your funder match