Position stacking is how most small businesses end up in a merchant cash advance crisis they did not plan for. The first advance feels manageable. The second introduces strain. By the third, the daily withdrawals have consumed the operating margin, and the business owner is borrowing from one funder to survive the payments owed to another.
What follows are eight realities about MCA position stacking that every business owner carrying more than one advance should understand before the next funder calls.
What Position Stacking Means in Practice
Each merchant cash advance a business takes occupies a numbered position. The first funder holds first position, meaning its UCC lien was filed earliest and its claim against business receivables takes priority. The second funder sits behind the first. The third sits behind both. The position number reflects the order of filing, and that order determines who recovers first if the business cannot meet its obligations.
The term sounds administrative. It is not. Position determines pricing, determines risk appetite, determines how aggressive the funder will be in collection. A funder in fourth position knows it may recover nothing if the business fails, and it prices that knowledge into every term of the agreement.
Why Funders Offer Second and Third Position Advances
A reasonable question: if later positions carry greater risk, why do funders extend them at all? The answer sits in the factor rate. A first position advance might carry a factor of 1.25. A third position advance from a different funder might carry a factor of 1.49 or higher. The funder compensates for the subordinate position by extracting a larger share of the total receivables purchased.
The economics work for the funder even at elevated default rates because the margin on each funded deal is substantial. For the business owner, however, the compounding cost of stacked positions creates an obligation structure that resembles something closer to a debt spiral than a financing arrangement.
The Daily Withdrawal Problem Compounds
One advance might withdraw a few hundred dollars per day from the business bank account. Manageable, perhaps, for a business generating consistent revenue. But stacking introduces a second daily withdrawal, then a third, sometimes a fourth. Each operates on its own schedule, its own fixed or percentage based deduction, its own relationship to the business checking account.
The business owner who agreed to one daily debit of $350 now faces four daily debits totaling $1,400, each arriving on its own timing, each indifferent to whether yesterday was profitable.
The cumulative effect is a cash flow problem that no amount of revenue growth can solve on its own timeline. The withdrawals are contractual. They do not pause for slow weeks, for seasonal dips, for the ordinary fluctuations that every business experiences.
UCC Liens Stack Too
Every MCA funder files a UCC-1 financing statement against the business. The first funder’s lien attaches to all receivables, sometimes to all assets. The second funder files its own lien, subordinate to the first. By the time a business has three or four advances, the UCC filings create a public record that signals distress to any potential lender, landlord, or partner who runs a search.
These liens do not disappear when the advance is repaid unless the funder files a termination statement. Some funders delay this process. Others fail to do it entirely. The result is a business encumbered by liens that no longer reflect active obligations but still appear on every public records search.
In February 2024, the New York Attorney General secured a judgment against Richmond Capital Group and affiliated entities for practices that included aggressive collection on stacked positions. The Yellowstone Capital settlement that followed in early 2025, which cancelled hundreds of millions in outstanding merchant obligations, demonstrated the scale at which position stacking had been weaponized by stacking lenders against small businesses across the country.
Brokers Profit From Every Position
The broker who placed the first advance earns a commission. That same broker, or a competing one, earns a new commission on the second advance. And the third. The broker’s income is directly proportional to the number of positions filled, regardless of whether the business can sustain the combined withdrawal schedule.
This is the misalignment that makes stacking so persistent. The person recommending the second advance has a financial incentive to recommend it. The person recommending the third advance has the same incentive. Nobody in the transaction chain is compensated for saying no.
Reconciliation Becomes Nearly Impossible
Some MCA agreements include a reconciliation provision, which in theory allows the business to request that daily payments be adjusted downward if revenue declines. In a single advance arrangement, reconciliation is already difficult to invoke. With stacked positions, it becomes something close to impossible.
Each funder has its own reconciliation process, its own documentation requirements, its own timeline for responding. Requesting reconciliation from one funder does not reduce the obligations owed to the others. And the funder in second or third position has even less incentive to accommodate a reduction, because any decrease in its daily collection extends the period during which it occupies a subordinate position.
I have seen business owners attempt to reconcile with three funders simultaneously. The process consumed weeks. The daily debits continued throughout.
SBA Loans Are Off the Table
Recent SBA Standard Operating Procedure guidelines now prohibit backing loans for businesses with existing MCA debt. This matters because an SBA loan is often the most viable exit from a stacked MCA situation. The interest rates are lower, the terms are longer, the payment structure is monthly rather than daily.
But the SBA will not refinance a business out of MCA debt if the MCA debt still exists at closing. The business must first resolve the advances, which requires capital it does not have, which is why it sought the SBA loan in the first place. The circularity is not accidental. It is the trap.
Unwinding Stacked Positions
Resolving a stacked MCA situation requires more than willpower. It requires a strategy that accounts for the priority of each lien, the terms of each agreement, the willingness of each funder to negotiate, and the business’s actual capacity to sustain any revised payment structure.
Settlement is one path. Some funders will accept a discounted payoff, particularly if they hold a subordinate position and recognize that full recovery is unlikely. But the first position funder has less incentive to discount, because its lien priority means it recovers before anyone else.
Debt consolidation through a term loan is another path, though one that requires the business to qualify for traditional financing while carrying the weight of multiple advances. The UCC liens complicate this. The daily withdrawal history complicates it further.
The honest assessment is this: position stacking is easier to enter than to exit. Each new advance feels like relief in the short term and becomes a constraint within weeks. The funders know this. The brokers know this. The business owner discovers it only after the third or fourth daily debit hits an account that no longer has the margin to absorb it.
A consultation with an attorney who handles MCA disputes is where the conversation about unwinding begins. That call costs nothing and assumes nothing about what comes after.
