[Sean Cash]

Yes or NO? Whether the conversation is better suited for behind closed doors or not, the situation is real. Many merchants are getting an advance against their future credit card sales and shortly after getting financing of some sort that is repaid via daily bank debits. Is this okay?

[miked]

Well I think a lot depends on whether or not the original funder's agreement allows merchants to obtain secondary financing.

[Nickshades]

I think it would absolutely have to start with whether the original funder allows secondary financing, but collecting on two advances from the same merchant only jeopardizes the merchant's sustainability to have enough cash flow to operate their own business. Most merchants looking for another advance after receiving financing are seeking an advance equal to or greater than what they have already received. This so called piggyback program only forces the merchant to drive more sales so they can pay back what they owe. It is a bad move on the merchant and usually a breach of their agreement.

[Capital Stack]

I agree with nick. Its bad business for the merchant and lender community. But we just funded a merchant last week for $25k. The ISO funded the merchant several times and his balance was $150k. Our office spoke with the funder and they agreed to wanting to keep the merchant on the books. They gave us the go forward on the 2nd.

Although it is a strict policy of ours not to stack. additionally every month we have performing merchants that stack on us and we decline them for renewal.

In short stacking is bad business you'll hurt your merchants and the funders you stack on.

[MCNetwork]

Short stacking is okay as long as you're not the funder being stacked on

[Chambo]

Exactly....there are funds who stack all day, but Lord help you if you stack on them!

[Finance1]

If anyone here saw my post on the MCA forum about Pearl stacking one of our clients I can update it. The merchant has gone out of business and stuck us with a decent balance. Pearl was filing legal action for default and the merchant closed up and filed bk. So, I voted f*ck no.

The ONLY way I can see it being ok is if the stack funder really takes the health of the business and ability to repay. Basically, stack funder has enough ethics and analysis to feel comfortable that the 2nd won't jeopardize the 1st AND merchant in any way. Unfortunately I have zero faith in the stack funders out there caring in any way. They want in and out quick and for a very high price. They simply do not care about anyone except themselves and their dollars.

If there are any other funders out there who have taken a hit because of a Pearl 2nd that violated their contract and want to sue let me know. It will take more than just my company to shut those guys out of the deliberate violation of existing contract stacking business.

[Sean Cash]

Pearl's name always seems to come up in conversations about stacking.

[J.Celifarco]

I cant believe things have changed so much in this industry that we are actually looking at stacking at being OK. If the lender taking the second position had underwriting in place that took the original advance into account and did not put the merchant in a position that their cash flow would be jeopardized then there would be no problem with stacking. The issue is that very very few companies that are willing to take second positions have underwriting in place that takes the original advance into account.. Because of that stacking is 100% a bad thing

[miked]

Everything is okay until you run into a situation like Finance1 described. And this has happened to everyone at some point I'm sure. Funders spend a lot of money on underwriters and cash flow analysis to determine the safest amount of money the merchant can afford to repay each month. Then another funder hops in a week later and doubles that amount. I have heard a lot of complaining in this industry about this and not enough suing. Strange, for an industry that is very litigious when it comes to merchants. So now that it may be funder vs. funder, funders are either not confident that their contracts and UCC-1s are perfected, they'd rather not spend the time and energy on it, they don't want their business to go through the scrutiny of the courts, or they don't want to create negative goodwill in the industry.

I know everyone hides their UCC-1s under aliases or doesn't file them at all to deter UCC hunters, but you may be shooting yourself in the foot when a stack funder comes along. They can claim that they did DD and argue that there was no public lien that prevented the merchant from secondary financing.

[Chambo]

True...if these were taken to litigation, then all these clandestine UCC filings would be revealed. The whole point of suing different names would be tossed out the window.

[MCAVeteran]

the reason these smaller funding companies are stacking is because they cant compete head to head with the larger funders on the rates, offers, turns, to land a deal. they have to come in behind these funders and give small lumps of cash as a stack. see if any of these stackers will give $50k, $75K, $100K to a merchant over 12 months with a 30-35% rate...Dont think so. they are relying on two things to stay operating : 1- merchant needs cash sooner than when a renewal can occur, 2-the broker needs commissions and is willing to bring the deal to them to give more cash to merchant and train merchant on how to make it happen.

[Chambo]

curious to know if there is (what seems to be) such a distaste for stacking, why has it become so prevalent?

[funding pro]

curious to know if there is (what seems to be) such a distaste for stacking, why has it become so prevalent?

In general "drug use" has a negative connotation, yet it is still a booming business for those that are willing to engage it.

[Chambo]

In general "drug use" has a negative connotation, yet it is still a booming business for those that are willing to engage it.

Good point...

[Chambo]

I thought about this post yesterday as I received docs on a merchant who had 5 advances. I just don't get how the merchant thinks it is good and how FIVE STACKS cannot be looked at as predatory (like a pride of lions feeding on a gazelle). When does it stop?

This scenario is DEFINITELY a game of musical chairs. SOMEBODY is going to be left standing when the music stops.

[Lendinero]

I thought about this post yesterday as I received docs on a merchant who had 5 advances. I just don't get how the merchant thinks it is good and how FIVE STACKS cannot be looked at as predatory (like a pride of lions feeding on a gazelle). When does it stop?

This scenario is DEFINITELY a game of musical chairs. SOMEBODY is going to be left standing when the music stops.

Could not have said it any better. We turn away merchants like that all the time. It's just bad business.

[mfs01]

There are two things to keep in mind when considering stacking.
#1: Is it prohibited in the agreement with the funding company who is in first position?
#2: Will it help or hurt the merchant and funding company in first position? A good underwriter will make sure that the total $ amount being paid out per month by the merchant after getting the stacked advance will be a number that the merchant can withstand (taking into consideration the SIC and profit margins for that industry).

By not carefully reviewing these 2 things you not only hurt the merchant and the funding company in first position. You also risk a default.

[Eric S]

There are two things to keep in mind when considering stacking.
#1: Is it prohibited in the agreement with the funding company who is in first position?
#2: Will it help or hurt the merchant and funding company in first position? A good underwriter will make sure that the total $ amount being paid out per month by the merchant after getting the stacked advance will be a number that the merchant can withstand (taking into consideration the SIC and profit margins for that industry).

By not carefully reviewing these 2 things you not only hurt the merchant and the funding company in first position. You also risk a default.

You are dead WRONG. There is one thing to think about when stacking. Do not do it.

[Chambo]

There are two things to keep in mind when considering stacking.
#1: Is it prohibited in the agreement with the funding company who is in first position?
#2: Will it help or hurt the merchant and funding company in first position? A good underwriter will make sure that the total $ amount being paid out per month by the merchant after getting the stacked advance will be a number that the merchant can withstand (taking into consideration the SIC and profit margins for that industry).

By not carefully reviewing these 2 things you not only hurt the merchant and the funding company in first position. You also risk a default.

This is assuming:

1) the "underwriter" (and I use the term loosely) needs to be willing to do the math involved to figure out the margins
2) the ISO or rep involved gives a rat's ass about the merchant

[Eric S]

This is assuming:

1) the "underwriter" (and I use the term loosely) needs to be willing to do the math involved to figure out the margins
2) the ISO or rep involved gives a rat's ass about the merchant

Stacking is WRONG. It's simple. You should NEVER participate it in. NEVER. If you do, you are a scum bag and know nothing of business ethics.

[SBF]

I find that I am competing with stackers more and more... I had a deal come in where the merchant had an MCA balance. The merchant stated he didn't want it paid off, he just wanted more funds added on. He said he had an offer for a loan stack and he wanted one from me. I was able to educate him on the hazards of accepting loan stacks. Not only is it prohibited by his current MCA provider, but it will most certainly damage his future borrowing power and his reputation. Thankfully he understood the bigger picture and took my advice to simply payoff his mca and allow me to provide a larger one..

[achcash]

SBF - Simply payoff? Did you explain to the merchant that paying it off is a refi, and therefore he is paying double the cost on the balance on the factor and is actually more expensive than a grasshopper?

[MCNetwork]

Stacking is WRONG. It's simple. You should NEVER participate it in. NEVER. If you do, you are a scum bag and know nothing of business ethics.

So you're saying half of the funders in our industry are scum bags?

[Eric S]

So you're saying half of the funders in our industry are scum bags?

Absolutely.