Understanding Stacking: What It Is, Why It Matters, and How We Approach It at Levo Funding
In the world of merchant cash advances (MCAs), the term stacking comes up often and for good reason. It’s a practice that can significantly impact a small business’s financial health and its relationship with funders. At Levo Funding, we believe in transparency and responsible funding, so today we’re breaking down what stacking is, why it can be risky, and how we handle it differently.
What Is Stacking?
Stacking occurs when a business takes out multiple MCAs simultaneously, or one after another, before fully paying off the original advance. While this might seem like a quick fix for cash flow issues, it often leads to an unsustainable obligations and increased daily or weekly payments.
To be clear, stacking is different from consolidation or refinancing, which are structured financial strategies aimed at reducing overall payment pressure. Stacking typically involves layering new positions on top of existing ones without a full payoff, creating a snowball effect that can be difficult for a business to manage.
Why Is Stacking Risky?
1. Cash Flow Strain
With multiple funders collecting payments, often daily or weekly, businesses can quickly find themselves strapped for cash, even if revenue is consistent.
2.Credit Profile Damage
While MCA funding doesn’t usually show up on traditional credit reports, stacking can flag a business as high-risk within the alternative finance space, making future funding more expensive or harder to secure.
3. Shortened Lifespan of Advances
Stacked positions tend to have shorter durations, higher rates, and more aggressive repayment schedules.
4. Legal & Ethical Gray Areas
Some funders include clauses that prohibit stacking in their contracts. Violating these terms can lead to breaches, lawsuits, or default.
Our Approach to Stacking
At Levo Funding, we don’t believe in funding for the sake of funding. We take a consultative approach to ensure that any capital we provide sets our clients up for long-term success, not short-term survival.
Here’s how we do it:
-We analyze full payment obligations before issuing a new position.
-We communicate directly with clients about any existing advances.
-We offer buyouts and consolidations when possible to reduce payment burdens.
-We say no when it’s not the right fit. If adding a second or third position will do more harm than good, we’ll recommend alternatives even if it means turning down a deal.
Stacking might offer a temporary solution, but it often leads to long-term problems. If your business is juggling multiple advances or considering taking on another position, let’s talk. We’re here to offer honest guidance and funding options that actually work for your bottom line.
Want to learn more about responsible funding? Contact us today.