[Finance1]

Stacking is here to stay until something big happens in court. We've had a few defaults because of stacking. Pearl has been our thorn.

IOU Central is in the stacking game. I just saw them approve a 12 month loan (@ 1.17) on top of a pretty large MCA. Their rule is the MCA must be seasoned 90 days and meet all other credit requirements.

The tough part is some merchants can afford a stack and some can't. There are some stackers out there that really care about ability to repay and then there are others that could care less. The funders that don't give a crap about the merchants are quite dangerous to the industry. But greed is a powerful motivator and there is plenty of opportunity.

Most stackers that put loans in place aren't really violating existing MCA contracts either. If they are fixed payment loans that aren't attached to receivables then there's no real enforceable violation of contract.

When a merchant asks for a renewal and the bank statements show a stack the safest thing to do is just string the merchant along as much as you can and recover as much (hopefully all) of the cash advance and part ways. Never even let on that you know about the stack. I tried it the other way and it didn't work well at all.

[Chambo]

"Most stackers that put loans in place aren't really violating existing MCA contracts either. If they are fixed payment loans that aren't attached to receivables then there's no real enforceable violation of contract."

Therein lies the problem. Aside from a couple companies that produce actual loans, ALL ACH deals are receivable deals, just disbursed in a fixed payment format.

[Sean Cash]

Most stackers that put loans in place aren't really violating existing MCA contracts either. If they are fixed payment loans that aren't attached to receivables then there's no real enforceable violation of contract.
all.

Why does everyone assume that a loan does not interfere with a purchase of future receivables? Most funders that buy receivables have contracts that state borrowing money, engaging in abnormal business transactions, or doing anything with any type of financial services company must be cleared with the funder first or it is an outright breach of contract.

A clear cut loan stacked on a clear cut purchase of future sales is a breach.

[Finance1]

Why does everyone assume that a loan does not interfere with a purchase of future receivables? Most funders that buy receivables have contracts that state borrowing money, engaging in abnormal business transactions, or doing anything with any type of financial services company must be cleared with the funder first or it is an outright breach of contract.

A clear cut loan stacked on a clear cut purchase of future sales is a breach.

But what can you really do about it? That's the crappy part. Our legal guys did the research and calling breach and taking it to court is a total lose-lose proposition on a performing advance. When a stack causes a default (it's happened to us twice) there is nothing left on the bone to really go after. You just write it off and move on. Filing a default judgment on a defunct business and broke owner isn't worth the legal expense unless it's a big balance. Even then, chances of recovery are pretty low.

We've been hoping that a big company like AdvanceMe or MCC goes after the stackers. It takes a good bit of resources to take another funder to court. Money wasted for smaller companies like mine.

There really aren't that many stackers that I know of. Pearl, Wide, IOU Central, TBB (they're very careful about affordability so I don't worry about them too much) and I'm sure there are some others as well. I just haven't run into any others.

Even though MCA contracts have provisions and restrictions about taking out additional financing it's pretty weak language in the real world. A court would take forever just figuring out what the heck we are doing let alone know who is right and wrong. It will come down to being legally able to prohibit a merchant from taking out financing and it would be case by case. It's unconventional. It would be like telling a merchant that they can't take out a bank line of credit even if they can qualify with a bank.

If I had to take a guess, there has been few if any court proceedings related to stacking. If there has been I"m sure they were expensive messes and not even worth the fight in the end.