Grocery Stores and Bodegas: 6 Decisions About Stacked MCA Payments

For the owner of a grocery store or a bodega, when daily merchant cash advance payments are piling up, the process is simple, but it’s rarely easy. Stop taking new advances, list every position and every daily debit to the business account, look at those daily debits - do the math. If there is a missed debit coming, act before it happens, not after. Find out what leverage the funders have and what you have, then, rather than one at a time, renegotiate all positions together.

Stop Stacking

The first decision is the simplest: stop stacking. “Stacking,” taking a new advance while an earlier one is still being repaid, is where most owners find themselves in trouble. Two positions, now two contracts and two daily debits, coming out of the same sales, and one can distract you from the other. The earlier advance is called the first position, the next, the second. Each has a separate daily debit and a separate claim on your future sales.

So why do so many owners stack in the first place? It happens because the first advance covers a real need, and for a time it works, but the daily debit it creates eats into the cash flow. One morning you wake up short, and the lender offers a second advance, with a second, separate contract and a second, separate daily debit, also out of the same sales. Brokers see that you’re still making payments, and they call. The new position often carries a higher factor rate, and soon you’re in a circle. The first funder’s contract often forbids taking another advance while you’re still repaying, but that’s only to protect that funder’s priority; it rarely stops a second or a third. Some advertise second, third, fourth positions.

The next step is to write down every position, every daily debit, and add them all up. Let’s say you’re a store that sells $15,000 a day. You’re repaying three separate advances, the daily debits $1,800, $1,400 and $1,100, making $4,300 every day, or about 29 cents out of every dollar you bring in. That $4,300 leaves every weekday before any employee, any supplier, or any utility is paid. Over a typical five-day week, that’s a total of over $21,000. And the three balances owed come to a total of over $281,000 against the $200,000 that was actually advanced to you.

Act before a missed debit happens, not after. A slow week and suddenly you’re looking at $11,000 a day, not $15,000. Your debits stay the same, unless there is a reconciliation clause you can invoke. If you miss one debit, every position can go into default at once. In a default, each funder acts on its own contract, and each may move to protect itself before the others. Waiting rarely makes it cheaper.

Each Lender’s Leverage

Once you’ve got a clear picture of your own position, take a look at each lender’s leverage. Most funders file a UCC-1, a lien against the business’s current and future receivables, ranking in order of filing. The latest position usually gets the worst lien. So take stock: a long list of liens and no assets means there’s little left for later funders if the business were to fail. Under the Uniform Commercial Code, the funder may try to tell your customers they owe it the debt, not you. When a funder redirects your receivables, the money is intercepted before it reaches your account. For a business already short on cash, that can end operations before you’re able to recover.

Confessions of judgment let funders bypass suing you and skip straight to judgment and collection. Since August 30, 2019 New York bars judgment confessions against a business outside New York. The funder generally has to sue you and serve you in court, so there is a chance to fight, and time to get ahead of the debt. A store located in New York does not get that protection.

In Texas, as of September 1, 2025, sales-based financing law was amended to make any sales-based financing contract with a judgment confession void. Automatic debits are only authorized for funders with a first-priority security interest in the account, which is often difficult for second or third positions. So have your paperwork reviewed by someone who understands it. Know where you stand in the UCC order, if there are any confession of judgment clauses, if there are balances past due.

MCAs are written as purchases of future sales, not loans. On that basis, they’re not covered by most state usury laws, but a court might treat one as a loan. The court can weigh whether the contract has a reconciliation clause, a fixed term and recourse if you go bankrupt. In New York, charging over 25% a year on a loan without authorization is criminal usury, a felony. MCAs, on the other hand, are legal, but many carry effective yearly costs well above 100%.

Renegotiate All of Them Together

Once you know where you stand, it’s time to bargain. Rather than one position at a time, renegotiate all of them together. That usually involves two steps: cut the daily debit to what you can pay consistently, then restructure the balances. Later funders in particular know they won’t get much if you liquidate, so most would rather keep the business alive. It’s leverage. The key is to use it before there are missed debits.

Keep in mind, though, that if you try to lower just one of your daily amounts, the others stay fixed and the daily drain stays as high. Bring every position, every daily amount, every contract to the table.

If you are considering an SBA loan to refinance an MCA, pay close attention to the rules. Under the agency’s rules for loans issued from October 1, 2026, an active merchant cash advance is ineligible as an existing debt. The advance needs to be converted to a term loan and amortized for at least 24 months, and no new agreements can be in place.

If you do settle, the settled debt can be taxed as income, unless you can show an exception like insolvency. The amount excluded, however, is limited to the amount by which your total liabilities exceeded your total assets at the time the debt was cancelled. To claim the insolvency exemption, use IRS Form 982.

Stacking never looks like a decision. You took one position, then one morning you had an issue, and each new advance looked like a reasonable solution to a problem. But the trap is daily arithmetic, and daily arithmetic can be renegotiated. For a store that recovers, the process almost always involves stopping new positions and dealing with the whole stack while leverage remains.