Stacked MCAs: 5 Ways the Records Can Reveal Another Funding Position

Short answer: Yes, usually. Funders can spot the repeat borrower by analyzing their statements for regular automated debits, searching UCC liens, cross checking the wires with any loan they paid off, reading submissions made by brokers, and by reviewing the applications they filled out and calls they recorded. Those records all give clues or outright declarations that indicate how much funding is outstanding.

Funders call it stacking--multiple advances taken simultaneously, each from a different lender, and each designed to encumber the same receipts to some extent. They are often taken out in order to keep up with existing payments and avoid shutting down. Often the first contract forbids taking on other debt.

Start with the bank statements. Those will show withdrawals, either daily or weekly, in an amount exactly as the payment is set, with a unique funder name. Anybody doing underwriting can recognize that. Recent statements are also a part of the underwriting process, so these amounts will come up in conversation for each funding round. It does not stop after the contract is signed, either. One MCA agreement, for example, lets the funder call a default if the borrower does not produce bank statements or login credentials within two business days of a written request. That’s 2 days, not 2 weeks or months, so you can’t ignore it.

Part of underwriting means running UCC reports to find liens, and that will also reveal the funding firms themselves. Anyone who does a lien search on the business can see all the liens that each funder filed. Funder agreements from up to five years ago may come up, too, if the lien was never released. It will raise eyebrows, so plan ahead. Whether the agreement is complete or cancelled, you need to be ready to answer questions about it. One contract lets the funder file UCCs under another name. That funder can also pull a credit report anytime you owe money.

Wires also do not lie. On many advances, part of the money goes straight to the last funder. Funders will look at the wire confirmations and payoff letters to find a list of your other debt.

The broker also has records of your other loan sources. Many brokers pass the same application around to more than one firm at a time and will explain the open advances when they make a submission.

Finally, the easiest of them all, your own words. Your applications often ask how many loans you have now. The phone call to close the contract often does the same. Funders record that.

Let’s say someone finds a hidden debt. So what, right? Well, that is a tricky situation because many contracts bar stacking other loans. A funder can treat that as a default of the loan, which means they could demand the whole unpaid balance right now, and could tack on default fees for good measure. They may also claim you defrauded the company by hiding another loan on your application. Secrets come with a cost. One contract filed with the SEC lets the funder add a 25% penalty of the remaining receivables if the lender believes the borrower took more funding without consent.

These contracts often reach you as an individual, too. MCAs often seek a guaranty of performance. That’s not a blanket on any nonpayment. Slow sales may not always trigger it, but stacking may, and the house, personal accounts, and even wages may be on the line.

The Funder File Matters

The trail of documents does not always hurt you, though. The funder’s records show whether they funded despite having that info on the table. That does not always let you off the hook, but it weakens any claim that they relied on the application in making the loan. It can also make it harder for them to call a default if they continued to receive payments over months. This is why the funder file matters. They keep your application, the bank statements you sent, the recording of the funding call, and the payoff letters and broker emails. An attorney can demand those records in discovery. Your lawyer will check to see if the funder overlooked anything.

The timing is key here. You need to know which advance came first and which ones were still outstanding when you applied. If one advance pays off the other, that does not have the same effect as having two contracts open at the same time. Lien searches help here. They list each filing with the date it was filed. Some reports also delay up to three business days. Have a list of all your UCCs and contracts ready. You will need them.

Now what? Pull these same records yourself. Get a copy of your agreements, get your bank statements from three months before the first advance to the present, and mark the funding debits. Find every payoff letter and wire confirmation. Run a UCC search to spot all your old and new lien filings. Know the words and numbers you gave other funders in writing and in recorded calls. That way, you can see what anyone else will see, and you can know what kinds of conversations to expect.

Do not make things worse. The dominoes can keep falling, so do not make the first one tip over. Do not give any statement to a collections company or a sworn statement of any kind until you speak with a lawyer. That recording of your own words is a hard piece of evidence to get around.