Stacking
Stacking is the practice of a merchant taking multiple cash advances from different funders simultaneously without disclosing existing positions — violating most MCA agreement terms and dramatically increasing default risk for all stacked positions.
Why This Matters
Stacking is the highest-risk behavior in MCA portfolios. Merchants stack typically because cash flow problems make a single advance insufficient, or because brokers steered them to multiple funders without disclosing existing obligations. Once stacked, default rates spike — the merchant's daily holdback withdrawals compound across positions until cash flow collapses. Detection signals: multiple recent UCC filings from different funders, holdback exceeding 30% of receivables, and sudden withdrawal spikes from new funder ACH activity. Most MCA agreements include explicit anti-stacking covenants and acceleration clauses if stacking is detected.
Frequently Asked Questions
Frequently Asked Questions
How do I detect stacking risk before funding?
Pull the merchant's UCC search before funding — multiple recent filings from different funders is the clearest pre-funding signal. Bank statement analysis showing multiple recurring ACH withdrawals from funder accounts confirms post-funding. Cross-check declared positions against UCC and ACH evidence.
Is stacking illegal?
Stacking is a contract violation under most MCA agreements but not inherently criminal. Misrepresenting existing debt during application can constitute fraud. Most funders pursue contract remedies (default acceleration, COJ enforcement) rather than criminal charges, though aggressive bad actors face fraud allegations.