Stacking
Definition
Stacking refers to the practice of taking out multiple merchant cash advances or business loans simultaneously from different lenders. While stacking can provide a business with more total capital, it significantly increases daily payment obligations and can quickly create a debt spiral. Most MCA providers include anti-stacking covenants in their contracts, and taking additional advances without notifying existing funders can constitute a default. Responsible stacking involves careful cash flow analysis to ensure the business can handle combined daily payments without compromising operations.
Example
A business owner has an existing MCA with $200/day payments and takes a second MCA adding $150/day. Combined daily obligations of $350 now consume a larger portion of daily revenue, leaving less for operating expenses and increasing the risk of default on both positions.
Related Terms
Factor Rate
A factor rate is a multiplier used to determine the total cost of a merchant cash advance or short-t...
Merchant Cash Advance (MCA)
A merchant cash advance is a financing arrangement where a business receives a lump sum of capital i...
Holdback
In merchant cash advance agreements, the holdback (also called retrieval rate or withholding percent...
Working Capital
Working capital is the difference between a business's current assets (cash, accounts receivable, in...
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