[bdshaw]

I would like to hear the industry's thoughts

[adroc]

Because there is profit to be made and it does not always represent an undue risk, relative to the reward. Plus, some lenders do not have a good grasp on underwriting (which, let's be honest is rather flimsy in this space with just a few months of bank/cc statements and a credit report) and figure if Company X did it, why not piggyback on their experience/risk tolerance.

[Eric S]

I would like to hear the industry's thoughts

As long as lenders re-fi balances and continue to ignore the requested approval amount and monthly budget it will keep happening.

[@jeannette]

Math - Most of your deals that are done as a stack are 3-4 month 1.5. The funder looks at it in terms of odds and margins. Your deals that go bad will probably pay for at least 30-60 days getting your principal back, and the deals that pay 100% are making up for the losses with the high margin. The second and third funder are not worried about the initial funder that put the money out for 6-12 months.

In some rare cases stacking does make sense. If you have a high volume merchant that the initial funder does not want to take the risk on and put out the total amount that the merchant would qualify for, it forces the merchant to continue shopping. When the second funder looks at the merchant and they still have another 10% of margin to work with on a payment, the deal makes sense.

[Sean Cash]

There are already a few funders that are absolute poison to stack on because they will in fact sue you, not just make idle complaints and threats about it.

There are also quite a bit of behind the scenes settlements occurring in which stackers are writing checks for damages to the funders they stacked on.

Since it seems like everybody off the street is a funder now and half those companies are entering the space without the budget for a decent lawyer or any lawyer at all, I would highly suggest that they don't stack. Too many new entrants have been ill-advised of the risks, lack understanding of the product they're offering, and operate at their own legal and financial peril.

And similarly, I think we are seeing too many new entrants operating under the false assumption that a standard MCA is a 3 month program, that terms are fixed, that stacking is the basis for the industry, and that you can call a purchase of future receivables a loan. People that are syndicating with fly-by-night funders have no idea what they are doing and will wake up one day and realize their money is gone.

I get email and phone solicitations from funders pitching 5th to 8th position stacks. Their days are numbered.

[J.Celifarco]

There are already a few funders that are absolute poison to stack on because they will in fact sue you, not just make idle complaints and threats about it.

There are also quite a bit of behind the scenes settlements occurring in which stackers are writing checks for damages to the funders they stacked on.

Since it seems like everybody off the street is a funder now and half those companies are entering the space without the budget for a decent lawyer or any lawyer at all, I would highly suggest that they don't stack. Too many new entrants have been ill-advised of the risks, lack understanding of the product they're offering, and operate at their own legal and financial peril.

And similarly, I think we are seeing too many new entrants operating under the false assumption that a standard MCA is a 3 month program, that terms are fixed, that stacking is the basis for the industry, that you can call a purchase of future receivables a loan. People that are syndicating with fly-by-night funders have no idea what they are doing and will wake up one day and realize their money is gone.

100% agree with this. The bigger problem for the banks only doing stacking, is now that a couple of law suits have been won and there is precedent set, you are going to see a lot more law suits being filed.. The next year or so should be really interesting with this.

[Chambo]

Hmmmmm...guess I am not the old grouch afterall, eh Sean?

[Sean Cash]

Hmmmmm...guess I am not the old grouch afterall, eh Sean?

I'm filling in for you today lol!

[bdshaw]

I appreciate everyone's input and did not pose the question with any judgement in mind.
However it is interesting that no one discussed the erosion of the initial lender's collateral position other than in reference to a suit.
I have not looked a many documents at all but think there is probably an acceleration clause that might be useful defaulting the merchant and taking 100% of the funds flow available. Nothing will hurt the multiposition (I think I just made this up) players like getting zero cash from an investment.
PS_ Chambo your still number one in my book.

[Al1]

There are already a few funders that are absolute poison to stack on because they will in fact sue you, not just make idle complaints and threats about it.

There are also quite a bit of behind the scenes settlements occurring in which stackers are writing checks for damages to the funders they stacked on.

Since it seems like everybody off the street is a funder now and half those companies are entering the space without the budget for a decent lawyer or any lawyer at all, I would highly suggest that they don't stack. Too many new entrants have been ill-advised of the risks, lack understanding of the product they're offering, and operate at their own legal and financial peril.

And similarly, I think we are seeing too many new entrants operating under the false assumption that a standard MCA is a 3 month program, that terms are fixed, that stacking is the basis for the industry, that you can call a purchase of future receivables a loan. People that are syndicating with fly-by-night funders have no idea what they are doing and will wake up one day and realize their money is gone.

100% agree with this. The bigger problem for the banks only doing stacking, is now that a couple of law suits have been won and there is precedent set, you are going to see a lot more law suits being filed.. The next year or so should be really interesting with this.

Does anyone actually know a lawsuit has been filed? I'd really like to know where it was filed and the parties involved if someone has that info.

[Chambo]

Does anyone actually know a lawsuit has been filed? I'd really like to know where it was filed and the parties involved if someone has that info.

I doubt the culprits writing the check will fess up. But it is a pretty safe bet who is suing. Think of BIG MONEY NASMES behind certain funds, who probably already have three or four lawyers on speed dial (cough, cough -Gilbert.....cough, cough - Google)

[JayBallentine]

Does anyone actually know a lawsuit has been filed? I'd really like to know where it was filed and the parties involved if someone has that info.

Try Enigma.io. You'll discover all sorts of fun facts about some funders... Property info, political donations, tax liens, and more.

[FUNd]

I'll tell you why, 1.45 factors with a 10% bank fee and $800 in junk fees. Nuff said.

[JSL23]

I would like to hear the industry's thoughts

So they will have something to discuss on www.dailyfunder.com

[JSL23]

I'll tell you why, 1.45 factors with a 10% bank fee and $800 in junk fees. Nuff said.

And that ^

[Sean Cash]

Does anyone actually know a lawsuit has been filed? I'd really like to know where it was filed and the parties involved if someone has that info.

A little late to respond, but wondering if anyone has seen this stacking lawsuit? https://iapps.courts.state.ny.us/fbe...==&system=prod

[CherelleSOS]

I agree 150% and could not have said it more eloquently.

[Chambo]

yeah, Mandis has the money to go after folks, and the desire to make a point

[channin19]

This reads more as a disagreement about integrating platforms and right of first refusal than a straight stacking lawsuit.

[Andy]

A little late to respond, but wondering if anyone has seen this stacking lawsuit? https://iapps.courts.state.ny.us/fbe...==&system=prod

Very interesting, thank you

[Jared_Weitz]

I agree 150% and could not have said it more eloquently.

Yeah he does. I think this read as stacking and also a disagreement about the platform.

[bizloanbroker]

Stacking has become the norm in our industry and anyone who does not believe that is just not living in reality. It will continue regardless of lawsuits and I believe within a year there will be almost no company's left that actually pay balances off

[CASHCASH]

Because this
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[J.Celifarco]

Stacking has become the norm in our industry and anyone who does not believe that is just not living in reality. It will continue regardless of lawsuits and I believe within a year there will be almost no company's left that actually pay balances off

I don't agree with this statement at all. Stacking has become the norm for a some banks and some iso's not all. Also the bigger banks will never stack or stop paying off balances to each other because they want to continue to be paid off. As long as MCC, ODC, CAN, and the other big banks continue to payoff balances most banks will follow suit. The ones that don't will continue to get sued and I don't think these smaller banks have the budget to go up against these bigger companies. The cost of stacking will eventually outweigh the profit

[Andy]

I don't agree with this statement at all. Stacking has become the norm for a some banks and some iso's not all. Also the bigger banks will never stack or stop paying off balances to each other because they want to continue to be paid off. As long as MCC, ODC, CAN, and the other big banks continue to payoff balances most banks will follow suit. The ones that don't will continue to get sued and I don't think these smaller banks have the budget to go up against these bigger companies. The cost of stacking will eventually outweigh the profit

I agree no way will stacking become the norm for all companies. There will always be the big players that will not stack. Because lets be real, is paying 25+% of your gross sales towards cash advance debt really a good or sustainable idea for most businesses? The established players keep payments low for a reason. Stacking only appears to be the norm because as new players enter the game they have to stack in order to get market share. Cant beat an ODC MCC or CAN rate? Lets stack on it instead. That is why some of the newer stackers are now doing longer terms, because they have no other way to gain market share. They will soon learn why no one else is doing 6 month 3rds at 1.40, because add in default rates and lawsuits and its not such a profitable business anymore....