A Merchant Cash Advance can provide quick access to capital when a business needs money immediately.
But the same speed and accessibility that make an MCA attractive can become a serious problem when a business takes on multiple advances, high payment obligations, or new advances to cover old ones.
What started as a solution to a cash-flow problem can become the problem.
If a large portion of your daily or weekly revenue is going toward MCA payments, your business may be generating sales while becoming less and less able to pay its operating expenses.
That's when you need to stop and look at the entire picture.
MCA stacking occurs when a business takes on multiple merchant cash advances from different providers before the previous advances have been paid off.
You may have started with one MCA.
Then another lender offered additional capital.
Then another.
Now you may be making several withdrawals every day or week.
"How much more money can I get?"
"How much of my business's cash flow is being consumed by debt?"
If you're using new financing to make payments on existing financing, that's a warning sign that your current debt structure may no longer be sustainable.
Before you take another dollar of financing, know your numbers.
Gather every current MCA agreement and determine:
Original advance amount.
Total contractual payback.
Current balance.
Daily or weekly payment.
Number of payments remaining.
Total payments being withdrawn each month.
Any personal guarantees.
UCC filings.
Default provisions.
Any other obligations connected to the agreement.
Then compare those payments with your actual business cash flow.
Revenue is not the same thing as available cash.
A business can have strong sales and still run out of money.
There is no single solution for every business.
Depending on your circumstances, potential options may include:
In some situations, an existing MCA creditor may be willing to modify payment arrangements.
This depends entirely on the agreement, the creditor, and the circumstances of the business.
Nothing is guaranteed.
If you have several MCA obligations, you may be able to replace multiple payments with a single financing arrangement.
The objective is to simplify your debt and potentially reduce the pressure that multiple withdrawals are placing on your cash flow.
Qualification is required, and consolidation isn't appropriate for every business.
Refinancing means obtaining new financing to pay off existing MCA obligations.
The new financing replaces the old debt.
Depending on the business's financial condition, possible alternatives could include:
Business term financing
SBA financing
Business lines of credit
Asset-based financing
Equipment financing
Other qualified business financing
The goal is not simply to move debt from one lender to another.
The new financing needs to make financial sense for the business.
Settlement is not refinancing.
Refinancing replaces existing debt with new financing.
Settlement involves attempting to reach an agreement with the existing creditor to resolve the debt under different terms or for an agreed-upon payoff amount.
A creditor must agree to the settlement.
There is no guarantee that a creditor will reduce the balance, change the payment terms, or accept a particular payoff amount.
Business owners should also understand the potential legal, tax, credit, and contractual consequences before entering into a settlement.
What If You're Already Falling Behind?
This is where ignoring the problem can become extremely expensive.
If MCA payments are being missed or an account is approaching default, you may face increased collection activity or legal action depending on the agreement and applicable law.
Your contracts may also contain provisions involving:
ACH withdrawals
Personal guarantees
UCC filings
Default provisions
Collection costs
Arbitration
Litigation
Do not assume that ignoring the lender will make the problem disappear.
If you have received a default notice, demand letter, lawsuit, or other legal document, consider speaking with a qualified attorney who handles business debt.
For some businesses facing severe financial distress, bankruptcy may become part of the discussion.
For others, it may not be appropriate.
Bankruptcy is a serious legal decision and should be evaluated with a qualified bankruptcy attorney—not based on an internet article or a sales pitch.
The important point is this:
Don't wait until the business has run out of options before finding out what options exist.
If your business is already struggling with MCA payments, taking another expensive advance simply to keep the current payments going may make the underlying problem worse.
More money does not automatically mean more cash flow.
If the new payment obligation exceeds the benefit the money creates, you may be digging the hole deeper.
Then ask yourself:
How much of my business's cash flow is going toward MCA debt every month?
How much money is actually left to operate the business?
Can the business realistically continue under the current payment structure?
Those answers matter.
At Olsen Business & Financial Solutions Consultants (DBA. BizMoolah), we believe the first step should be understanding your financial situation.
We'll help you organize the information surrounding your existing MCA obligations so you can better understand the problem and explore potential solutions that may fit your situation.
That could mean consolidation.
It could mean refinancing.
It could mean restructuring.
It could mean negotiating with creditors.
And in some situations, the right answer may be to seek professional legal or bankruptcy advice.
The goal isn't to put you into another loan.
Tell us about your current MCA debt.
We'll review the information you provide and help you understand what potential paths may be available.
No obligation. No guaranteed results. Financing, restructuring, and other options are subject to qualification, creditor approval, and applicable program requirements.
Educational information only. BizMoolah does not provide legal, tax, or bankruptcy advice. Financing, refinancing, consolidation, restructuring, and other solutions are subject to qualification, availability, creditor approval, contractual terms, and applicable law. No particular outcome is guaranteed.