Glossary · Underwriting
Stacking
Stacking means a merchant takes more than one cash advance at the same time, so several funders debit the same bank account and the combined holdback climbs.
Also called MCA stacking, stacked advances, loan stacking
Each open advance is a position. A merchant with a first-position advance who takes a second one is stacking. Many funders will fund a second or third position, usually at a higher factor and shorter term, and some specialize in deep stacks.
The risk is affordability. Every position adds a fixed daily or weekly debit. Underwriters add up the existing payments from the bank statements, add the proposed payment, and compare the total with true revenue to get a combined holdback.
Many MCA contracts prohibit taking additional financing without the first funder's consent. Brokers should know what the existing contracts say before placing another position, because a stacking default can come back on the deal and on the broker's relationship with the funder.
Formula
existing monthly payments = sum of each open position's payment × payments per month combined holdback % = (existing monthly payments + new monthly payment) ÷ monthly true revenue
Example
A merchant with $80,000 of monthly true revenue already pays $6,000 a month to one funder. A new offer at $535.71 a day adds $11,250 a month. Combined holdback: $17,250 ÷ $80,000 = 21.56%, which many funders would treat as a stretch.
Track it on every deal
Statements, offers, positions and commissions with the math worked out, in one CRM for lending companies.
Related
- FeatureLender matchingStore every lender's criteria once and see which lenders each deal qualifies for, with the rule behind every pass, warning and fail. Built for MCA and business lending.Read
- FeatureBank statement analysisEnter each month's deposits, ADB, NSFs and negative days per bank account and get averages, revenue trend, holdback and an affordability check on the deal.Read
- Free toolStacking and positions calculatorAdd up a merchant's existing MCA positions and a proposed advance to see combined holdback, the risk band, and the largest new payment and advance that still fit.Read
- Free toolHoldback calculatorWork out an MCA holdback percentage from the daily or weekly payment and monthly revenue, or the payment a target holdback allows. Free, no signup.Read
- GlossaryPositionsA position is one open cash advance on a merchant's account, numbered in the order taken: first position, second position and so on.Read
- GlossaryHoldbackHoldback is the share of a merchant's revenue that goes to repaying a cash advance, either a fixed split of card sales or the effective share taken by fixed ACH payments.Read
- GlossaryConsolidationAn MCA consolidation is a new advance that pays off one or more existing advances at funding, so the merchant ends up with fewer debits and, ideally, a lower total payment.Read
- GlossaryReverse consolidationA reverse consolidation gives an over-stacked merchant weekly funding that covers existing MCA payments, replacing several daily debits with one smaller payment over a longer term.Read
- GlossaryUCC-1 filingA UCC-1 is a public financing statement a funder files with a state to record its interest in a merchant's receivables; brokers search them to find existing positions.Read