Stacking

Stacking happens when a business takes a second, third or fourth merchant cash advance (MCA) or short-term loan while earlier ones are still being paid. Each funder in the stack pulls its own payment, often daily, from the same bank account.

Example: a business with $60,000 in monthly deposits has a first advance that pulls $500 per business day, about $11,000 a month. A second funder adds $400 a day, and a third adds $350. Now about $27,500 a month, nearly half of deposits, goes to advance payments before rent, payroll or suppliers. One slow month can quickly turn into bounced payments.

Funders that knowingly take a later spot are often called second or third position funders, and they price for the added risk. Other stacking happens without the earlier funder's knowledge, which may breach the first contract.

Why it matters for lenders

Stacking is a major driver of MCA defaults. As the stack grows, ACH returns rise, and collections turn into a race between funders. For the first funder, a new advance taken without consent can mean the same receipts are being sold twice.

Most MCA contracts include an anti-stacking clause, and many funders file a UCC-1 financing statement to put others on notice of their claim on the receivables. Regulators have also stepped in. Under a 2025 Texas law (HB 700), a provider of sales-based financing generally may set up automatic debits only if it holds a perfected, first-priority security interest in the business's receivables. Texas regulators said in 2026 that this partly addresses stacking. Some state disclosure laws also require funders to show how much of a new advance goes to pay off an existing one.

How it works in practice

An underwriter at an MCA funder receives a new submission from a broker. During bank statement analysis, she flags recurring debits to three other funders, plus a large deposit last week that looks like a new advance. A UCC search shows two filings against the business's receivables.

She records each existing position on the deal: funder, daily payment, estimated balance and start date. With those numbers, she calculates total daily payments as a share of average deposits. If the share is above the funder's limit, she declines, or offers a smaller amount that pays off one existing advance. When existing positions are kept in free-text notes instead of structured fields, renewals and later reviews miss them. The funder then approves deals its own policy should have stopped.