How to Restructure a Business Loan

Restructuring a business loan means changing its terms so the payment fits your cash flow again: extending the term, pausing or reducing payments for a few months, paying interest only for a while or, with a merchant cash advance, lowering the daily or weekly payment. You request it from the same lender, in writing, with numbers that show what happened and what payment you can actually sustain. The sooner you ask, the more options there usually are.

This guide covers the most common options, how to prepare your request step by step, what changes depending on the type of debt (bank loan, SBA loan, cash advance) and the mistakes that make things worse. It is not legal advice: if the amount is large or you have already been sued, talk to an attorney. Leer en español.

Restructure, refinance or renegotiate: the difference

People use these terms interchangeably, but they are not the same:

If your credit and sales are still strong, refinancing may make sense; we explain it in how to refinance a business loan. If sales dropped, the realistic move is usually to restructure with your current lender.

The most common restructuring options

• Extend the term. You repay the same balance over more months, so the payment goes down. You will generally pay more interest overall, but you buy breathing room.
• Interest-only period. For a few months you pay just the interest, not the principal. Useful if you expect sales to bounce back soon, for example after a slow season or a remodel.
• Temporary pause or reduction. The lender accepts smaller payments, or none, for a short time. What you did not pay gets added to the end or spread over the following months; ask exactly how.
• Change the payment frequency. Move from weekly to monthly payments, or shift the due date so it lines up with when you get paid.
• Release or swap collateral. Less common, but sometimes negotiable if you sell an asset to reduce the balance.
• With a merchant cash advance: lower the payment. If your contract has a fixed daily or weekly amount estimated from your sales, many contracts include a reconciliation clause to adjust it when sales drop. More on that below.

Not every option is available with every lender. Ask what programs they have for borrowers in hardship: many have them even if they do not advertise them.

An example of how it looks in practice. Picture an auto repair shop with a monthly-payment term loan. The city closes its street for four months of construction and sales fall by half. The owner writes to the bank before the next payment, sends six months of bank statements, a photo of the construction notice and a proposal: interest only for four months, then back to the normal payment, with the term extended to make up what was paused. It is a concrete proposal with a clear cause and an end date, and that is something a lender can approve.

How to request a restructuring, step by step

1. Read your contract. Look for clauses on late payments, late fees, personal guarantees, collateral and, for an advance, the reconciliation clause.
2. Run your numbers. Sales for the last three to six months, fixed costs, and how much you can truly pay each week or month while still covering payroll and rent.
3. Explain the cause on one page. What happened (street construction, a big customer left, a flood, an illness), when it started and what you are doing to recover.
4. Propose something specific. "I can pay this amount for six months and return to the normal payment on this date" works far better than "I can't pay."
5. Contact the lender before you miss a payment. Reach out to collections or customer service and ask for the person who handles adjustments or hardship.
6. Put everything in writing and keep copies: your proposal, statements and explanation.
7. Do not change how you pay until the new agreement is signed.
8. Keep the agreement. If things change again, tell the lender right away.

To prepare for the conversation, see how to negotiate funding terms.

If you have an SBA loan

With an SBA 7(a) loan, you deal with the bank or lender that made it, not with the SBA directly, just like when you applied. The SBA explains on sba.gov that you always work with your lender. So the restructuring request goes to the lender, which has to follow the program's rules.

• Ask to speak with the department that handles SBA loans in hardship.
• Bring the same numbers: sales, costs, cause and proposal.
• Ask which options the program allows in your case, such as a longer term or a period of reduced payments.
• If your loan has already been purchased by the SBA, sba.gov says payments on those loans are made through the SBA Loan Portal, where you can also see your balance and history.

Do not stop paying an SBA loan without talking to the lender first: the personal guarantee and collateral you signed are still in force. If things have already gone that far, read what happens when you default on an SBA loan.

If you have a merchant cash advance (MCA)

A merchant cash advance is not a loan: the funder bought a share of your future sales. So instead of "restructuring the loan," the goal is to lower the payment so it reflects what you actually sell.

1. Check whether your contract has a reconciliation clause, which allows the fixed payment to be adjusted when your sales drop.
2. Gather the bank and card processor statements that show the decline.
3. Request reconciliation in writing, following the procedure in the contract.
4. Ask for the new payment to be confirmed in writing.

If you have several advances with daily payments that together are eating your sales, read how to lower your daily advance payment. Merchant Fund Express, our recommended funder, reviews your sales and deposits, not just your credit, and can evaluate options to lower your business's daily or weekly payment. No serious option promises results before reviewing your case.

Mistakes that make things worse

• Waiting until you are several payments behind. By then there are late fees, the lender may have sent your account to collections and your options shrink.
• Going silent. Silence reads as unwillingness to pay. Respond, even if only to say you are preparing a proposal.
• Closing or switching bank accounts so the payment cannot be collected. In most contracts that is a default and makes everything worse.
• Taking on more expensive debt to make current payments without a plan. If new financing just postpones the problem, it makes it bigger.
• Paying someone who promises to fix everything for an upfront fee. Be wary of any "relief program" that wants money before doing anything or tells you to stop paying.
• Accepting a verbal agreement. If it is not in writing and signed, it does not exist.

After the agreement: getting healthy again

A restructuring buys you time; what you do with that time decides whether it works:

• Review your costs one by one: suppliers, subscriptions, hours with few sales.
• Set aside a reserve every week, even a small one.
• Deposit all of your sales in the business account so your history shows the recovery.
• Talk to your accountant about the tax effect of any change to your debt.
• When your numbers improve, check whether you can refinance on better terms.

If you later need working capital to grow again, applying with Merchant Fund Express is free and does not affect your credit. Spanish-speaking support is available, and applicants with an ITIN are accepted (no SSN needed). Borrow only what your cash flow can sustain.