May 15, 2026 – By Christian Smith, Berkshire Financial Services
Most business owners stacked in three or four merchant cash advance positions did not set out to get there. They took the first one for a real reason. The second was offered as relief. The third followed because the first two made things worse. Each advance felt like a solution. Each one was actually the next layer of the same problem.
Understanding how stacking works mechanically, not emotionally, is the most important thing a business owner carrying multiple MCA positions can know right now.
How the First Position Gets You to the Second
When the first MCA originates, the funder looks at your bank statements and sets a daily payment they believe you can sustain. The daily draft starts the next business day and reduces your cash flow by a fixed amount every morning before you earn a dollar.
If revenue holds, the draft is manageable. If revenue dips, even slightly, the gap tightens. Operating costs do not pause. Payroll does not pause. The MCA payment does not pause.
That gap is when the phone rings. The same broker who placed the first advance calls to say you qualify for more capital. The pitch sounds like good news because you need it.
The Mechanics of the Second Position
The second MCA is a second position. It sits behind the first lender in the UCC priority stack. The funder of the second position prices that subordinate risk with a higher factor rate. They also know your cash flow is already partially consumed by the first position. The underwriting reflects that.
Here is how the numbers move. The first MCA carries a factor rate of 1.35 on a 50,000 dollar advance, so the daily payment is 350 dollars. The second position is 40,000 dollars at a 1.45 factor rate, with a daily payment of 290 dollars. Your combined daily obligation is now 640 dollars.
Part of that 40,000 dollar advance was used to pay down the first position or cover the cash flow gap it created. The net new capital in your account is less than 40,000. The daily payment of 640 dollars hits before your first customer pays you anything.
Why the Third Position Is Almost Inevitable
The combined daily drain from two stacked positions creates the same problem the first position created, only larger. The broker calls again. The third position is offered.
The third funder knows it sits behind two existing UCC liens. The factor rate is higher than the second. The advance is calibrated to generate enough capital to keep the prior payments current while the third funder collects at the highest rate in the stack.
This is not accidental. Some MCA companies openly advertise taking second, third, and fourth positions. There are informal arrangements among certain funders that pass merchants between them for repeat commissions. The structure is designed to sustain itself.
The Compounding That Never Recovers
A business that takes three stacked MCAs may receive 150,000 dollars in total funding but owe 225,000 dollars in total repayment. The combined daily draft from those three positions may run 1,500 to 2,500 dollars per day. Stacking can push the effective blended annual rate above 200 percent.
Nearly 38 percent of businesses with an MCA currently carry two or more positions at the same time. One industry expert has cited clients with up to 16 concurrent MCAs totaling 8 to 9 million dollars. That is the endpoint of a process that started with one advance taken for a legitimate reason.
The combined payment obligation grows independently of revenue. A business generating 10,000 dollars per day in gross revenue can find itself paying 2,000 dollars per day across stacked positions before a single operating expense is paid. No business model absorbs that indefinitely.
What the Legal Environment Says About a Stack
The legal challenges available to business owners carrying MCA debt apply to each position in a stack independently. The three-factor test courts use to identify disguised loans applies to every contract in the stack.
In February 2026, the New York Appellate Division called MCA contracts unconscionable and affirmed a 77 million dollar judgment against MCA lenders on four grounds at once. Unconscionable means a deal was so one-sided that a court will not enforce it regardless of what was signed. That is the court’s word. Not ours. The ruling applies to the first position, the third position, and every position between them.
The One Thing That Changes the Outcome
The most effective defense against stacking is the recognition that the second advance is not a solution to the problem created by the first. It is an escalation of that problem.
A business carrying stacked MCA positions is not disqualified from a structured resolution. Each position is enrolled separately. Legal representation activates on the full stack. The escrow account builds the settlement reserve across all enrolled balances. The daily drain stops pulling from the operating account the moment authorization is redirected.
The brokers who called to offer the second and third positions were not offering relief. They were offering the next layer. The ruling does not do the work. The structure does. Enrollment is what activates the structure.
To speak with a Berkshire Financial Services Finance Manager about your file, call 1-800-801-1019.
Informational purposes only. Not legal advice. Berkshire Financial Services is not a law firm. Results vary.