[MCAVeteran]

the word on the street is that cease and desist letters will be or have already gone out to a few companies stacking. the impact of stacking has reached code red...

[Chambo]

I heard that was going to start about a month ago. Those papers will probably just get thrown in the trash though. Until someone gets sued and loses, it'll continue

[MCNetwork]

The companies being stacked on should sue the merchants because they accepted the deals in the first place. That's like suing the gun manufacturers because of crimes being committed with guns.

[Scott Williams]

The companies being stacked on should sue the merchants because they accepted the deals in the first place. That's like suing the gun manufacturers because of crimes being committed with guns.

I don't think a judge would rule the merchant breached their contract and now owes the funder more money as a penalty. I think a judge would have a hard time working through the language of these contracts since most judges are not familiar with this type of financing. Like other people have said before......the more funders want to shine a light on this industry through the court systems might come back to bit them in other ways.

[Scott Williams]

On the same note. What if a funder sued the merchant for stacking. The merchant's attorney then argued the language in the contract wasn’t legal. Maybe the judge sides with the funder on the stacking but finds the funder liable for charging a processing fee of $295 to all of their past clients. He/she then orders the funder to refund that $295 to all past clients.

I saw this type of stuff happen years ago in the mortgage industry. Lenders and title companies got greedy to make more money. A title company made up a processing fee of $495 on each file. Just a junk fee. A class action lawyer picked up on it and sued the title company. The title company had to refund all their past clients.

Crazy things can happen when lawyers and the courts start getting involved breaking down contracts.

[Ryan Shiroky]

Lenders that require the merchant to payoff their existing balance on a renewal are always going to run the risk of the merchant taking a second funding. Double dipping these merchants causes them to pay interest twice on the money and upsets many merchants. I bet lenders that "add on" renewals see a lot more of their merchant not take second fundings.

Agreed... you renew a merchant that is 50-60% paid down and they are paying for the money twice... where as on 2nd positions its kind of averaging up (or down in some circumstances) their total cost of money (between both advances). I am seeing more and more merchants who actually counter a renewal pitch with saying EXACTLY that... "why would i pay for it twice when i can get a few grand somewhere else without paying off anything...???"

Once i tried the "but then you would be breaking your contractual obligation to XYZ to NOT take a second position"

Merchant - "sue me..." *click*

what to do then?

[Chambo]

Merchant are getting wise to the deal

[Ryan Shiroky]

thats what I'm sayin'...

[merchant cash cloud]

"If a merchant can sustain it" It is pretty much common sense. If a merchant is doing lets say 50k a month and has an existing advance of lets say 45k, paying 16% of credit card sales.... and has an average bank balance of 10k, always positive. Can they sustain a Daily ACH? Sure the hell can.

Whats the issue? You say the broker doesnt care, im sure they dont, they just want commission. However to say the lender doesnt care? Thats just wrong, they want to get paid back. Period.

2nd , 3rd, We have even done 4th Position. Businesses are healthy and doing well.

[Chambo]

"If a merchant can sustain it" It is pretty much common sense. If a merchant is doing lets say 50k a month and has an existing advance of lets say 45k, paying 16% of credit card sales.... and has an average bank balance of 10k, always positive. Can they sustain a Daily ACH? Sure the hell can.

Whats the issue? You say the broker doesnt care, im sure they dont, they just want commission. However to say the lender doesnt care? Thats just wrong, they want to get paid back. Period.

2nd , 3rd, We have even done 4th Position. Businesses are healthy and doing well.

if each MCA is taking 12% of gross sales as collection, by the 4th deal, you are taking 48% of gross sales. What business can take a 48% hit to GROSS sales (not profit, but GROSS) and still thrive?

It's a lecherous ticking time bomb

[mfs01]

I have also been seeing submissions lately with 3 or 4 advances out on the merchant. In addition, we have been catching quite a bit of merchants trying to double fund on the same day. In one case, Luckly the broker called me and told me that if we need to move fast because he is dealing with a competitor and once we looked into it we found that the merchant was supposed to get funded by both of us in the same day...

You know its really weird what's going on of recent. I'm seeing 4 or 5 open advances now, very often on submissions. Its becoming prevalent in the market unfortunately. Now with that said some of these merchants are utilizing the cash properly and probably performing for the collective funders. In other cases for merchants that cant handle all the extra leverage of receivables will get in trouble and hurt everyone in the deal.

Never know if this will be good or bad for business. Just a thought! I remember a time when starters first came out by 1st merchant and certain players were saying this will destroy the industry lending to these types of merchants. Then two years later the trend turned when proved its value, and most big funders started offering starer advances on CCP deals.

So as I've expressed often to many my discontent with stacking, although on that note trying to keep and open mind. And hopefully the guys that are doing the stacking as a business model and the merchants taking them wont F--k everybody in the process including themselves.

DR

[Chambo]

merchant are learning the system...and ways to squeeze through the cracks

[Quickfunder]

What happened to premature UCC filings to ward off other lenders? We used to have to get confirmation from a filing bank that they in fact didn't fund a merchant despite filing a UCC while applying them.

[Ryan Shiroky]

I have seen a lot of funders stop filing UCC altogether (more of the little guys) simply because other funders stalk out their UCC filings to call the other guys book... It is a part of the competitive nature of this business, so I see the advantage to NOT filing, but on the flip side of that coin, your increasing your risk by not tucking them in the blanket...

[mfs01]

I have seen a lot of funders stop filing UCC altogether (more of the little guys) simply because other funders stalk out their UCC filings to call the other guys book... It is a part of the competitive nature of this business, so I see the advantage to NOT filing, but on the flip side of that coin, your increasing your risk by not tucking them in the blanket...

Filing a UCC is kinda like a double edged sword. I agree with you Ryan. But the question at that point is, Do you want to risk losing the merchant by filing a UCC or would you prefer the merchant stacks on top of your loan and risk a default? Personally, I would prefer to lose the merchant and have my advance paid off early from the payoff on the new advance they're getting

[AndyYSCISOdept]

If you are a broker and one of your merchants, who currently has an advance out with an MCA company, says that they need more money, and your fear is that if you say "Not now, Buddy. Need to wait until your balance is lower" that you could lose the merchant to a different broker, makes sense to try and keep the merchant. But I feel the best way to handle those situations are to contact the MCA provider and let them know the merchant needs more funds and if they won't give it to him then he is going to look for a stack. If they still say no to an add on, what choice do you have?!

I 100% agree. Stacking is bad for business, but unfortunately until there is something banning it industry wide it's going to happen. And lets be honest, some reps are trying to squeeze as much money out of each lead as possible

[isaacdstern]

So everyone has a different name for this type of Advance... here are the most common ones I have heard..

Grasshopper
Stack Loans
Stacking
Layering
Double dipping
2nd position

I was at a meeting this week and I heard this type of advance referred to by a name I have never heard before and I was literally on the floor laughing after I heard it

They referred to it as a "Doggystyle" deal

I am not sure if this name will catch on but it was very funny hearing it....

[OrangeFi]

Its not quite true. Just because he is looking for more money, it doesn't mean that they are in bad shape. I have two accounts at this time that is looking for loan. First one, they were approved for $75K but decided to only take $50K. 1 month down the road they decided to take the balance only to find out that they can't because once the contract is signed, they have to wait till renewal time to get the balance which is 7 months away.

I'm just looking for a lender that is willing to go 2nd on UCC.

877.319.7207

[OrangeFi]

Not knowing the exact financial situation (ie: profit margins, pending jobs/invoices, expansion plans etc) it is IMPOSSIBLE to say that any company taking on an undetermined amount of debt is bad business. Generally speaking if stacking was not an amicable / profitable "loan" it would not exist (for very long).

Any structured financing can go south, henceforth the housing bubble, should the outcome be determined by "the market". If a merchant has a viable plan and follows thru it is not at all inconceivable to borrow money at 40 points +/- for 2-3 months.

Retail Merchants cost on a T-Shirt ($2), Sale Price ($6-30+++???)

The numbers don't lie...

[Chambo]

Not knowing the exact financial situation (ie: profit margins, pending jobs/invoices, expansion plans etc) it is IMPOSSIBLE to say that any company taking on an undetermined amount of debt is bad business. Generally speaking if stacking was not an amicable / profitable "loan" it would not exist (for very long).

Any structured financing can go south, henceforth the housing bubble, should the outcome be determined by "the market". If a merchant has a viable plan and follows thru it is not at all inconceivable to borrow money at 40 points +/- for 2-3 months.

Retail Merchants cost on a T-Shirt ($2), Sale Price ($6-30+++???)

The numbers don't lie...

The error in this analysis is you are looking at merchant's gross sales vis a vis their profit. A merchant may buy or make a shirt for $2 then sell it for $6, but the $6 cannot realistically be factored off. The merchant still has other expenses that need to come out of the $4 markup. Rent, wages., utilities,. etc.

Once you get into 3 or 4 stacks, how much of the merchant's profit is eaten up? My guess is ALL OF IT. How are they supposed to pay their staff? Rent? Suppliers?

It is a disaster just waiting to happen and the game of musical chairs will in fact end at some point. It is this practice unfortunately that is incredibly short sighted for a quick buck and could end up creating irrevocable damage to the industry as a whole.

So, as I say to merchants looking to stack...." I hope that extra $5-10K goes a REALLY LONG WAY, because it will most likely be the LAST money you will be seeing for a while."

[mfs01]

MFS Global would be willing to go in second position as long as this won't hurt the merchant or the funding company that is holding the first position. In summary, the numbers need to make sense for all parties.

Contact us for more info at:
702-473-1145
isosupport@mfsglobal.com

[cashguy]

Directlender good thoughts here, but stack on responsibly.

[J.Celifarco]

thats the point stacking when you know you are going to put a merchant out of business and stacking when the merchant can afford it are 2 very different things.. How many people actually distinguish between the two, or care which category the merchant falls into

[MCA Pioneer]

Stacking can be done responsibly. Much like a second mortgage on a property - one must qualify mathematically. There is no out-cry in the mortgage industry when seconds are "stacked" on first mortgages, but that market-place is heavily regulated. Point is, if the cash flow, pay history, and use of funds all make sense then fund the customer. The big boy funders out there who want to hog tie and horse whip agents and customers who stack frankly will not exercise on their threats - call me and I'll explain why.

This from a 14 year industry vet and former Director at AdvanceMe.

[MCAVeteran]

Looking at statements for a merchant and they are repaying: east capital, 1st merchant funding,strategic,IOU central, capital stack, all pulling daily fix achs from merchant- and the merchant obviously wants more as he's shopping more funders - is this really the practice now moving forward?