7 Things Every Business Owner with 3 or More Stacked MCAs Needs to Know

You have sold your future revenue three times. The buyers are all expecting delivery.

The situation you are in has a name in the industry. Stacking. The word suggests organization, one thing placed on top of another. The reality is less orderly. Three or more MCA funders are withdrawing from the same bank account on overlapping schedules, each pulling a fixed daily amount that was calculated based on your revenue at the time of each signing, not your revenue now. The total withdrawal is almost certainly more than your business can sustain. If it were not, you would not be reading this.

What follows are seven things you need to understand, not as general principles, but as specific realities that apply to businesses carrying three or more simultaneous MCA obligations.

Your Funders Are Competing, Not Cooperating

Each funder operates independently. They do not coordinate withdrawal schedules, they do not share information about your other obligations (though some have learned to check UCC filings before funding), and they do not defer to one another in the event of default. When the account balance drops below the combined daily withdrawal total, the funder whose ACH processes first that morning receives payment. The others do not.

This is not an orderly creditor hierarchy. It is a race, and the funders know it. The first to obtain a judgment in the event of default secures priority over the others. This incentive accelerates legal action. A funder who might otherwise negotiate has strong motivation to file first, freeze the account, and claim what remains before the other funders arrive.

You are not dealing with a single creditor problem. You are dealing with a coordination problem among creditors who have no incentive to coordinate.

At Least One of Your Agreements Is Probably Challengeable

In our review of stacked MCA portfolios (cases involving three or more simultaneous advances), we have found that at least one agreement in the stack contains a provision that is vulnerable to legal challenge. The vulnerability varies: an illusory reconciliation clause that the funder never honored, a confession of judgment filed in a jurisdiction that lacks authority over the merchant, a personal guarantee that was misrepresented at signing, or an agreement whose structure (fixed daily payments with no genuine revenue adjustment) supports reclassification as a loan.

The Yellowstone Capital settlement in January 2025 confirmed what practitioners had argued for years: that many MCA agreements labeled as purchases of future receivables were, in operation, high-interest loans. The billion-dollar judgment and the cancellation of over five hundred million in merchant debt did not emerge from a novel legal theory. It emerged from the recognition that the contracts said one thing and the funders did another.

Not every agreement in the stack is enforceable. But you will not know which one until someone reads them.

The SBA Cannot Rescue You Anymore

Prior to June 2025, business owners carrying MCA debt could apply for an SBA 7(a) loan and use the proceeds to refinance their advances. This was, for many businesses, the only viable exit from a stacking spiral. SBA rates between ten and thirteen percent replaced effective MCA APRs that routinely exceeded one hundred percent.

That path is closed. The SBA amended its Standard Operating Procedures to explicitly prohibit the use of 7(a) loan proceeds for refinancing MCA debt or factoring agreements. The stated rationale was rising default rates among borrowers who refinanced MCA debt with SBA loans and then took on new MCA obligations. The policy is understandable from the SBA's perspective. From the perspective of a business owner carrying three stacked MCAs, it closes the most accessible institutional exit.

The inability to refinance through the SBA does not eliminate other options. It eliminates the easiest one. What remains are legal strategies, negotiated settlements, and, in some cases, bankruptcy protections. None of these are as simple as an SBA application. All of them require professional guidance.

Your Personal Assets Are Exposed

If you signed personal guarantees on each of your MCA agreements (and if you have three advances, you almost certainly signed three personal guarantees), your exposure extends beyond the business. The funders can pursue your personal bank accounts, your savings, your home equity, and any other personal assets the guarantee reaches.

Closing the business does not discharge these obligations. Filing for business bankruptcy may discharge the business entity's liability, but the personal guarantees survive unless the individual owner also files for personal bankruptcy protection.

This is the fact that changes the calculation for most business owners. When the debt was confined to the business, the worst outcome was the loss of the business. When the debt reaches personal assets through guarantees, the worst outcome is the loss of everything the owner built before the business existed.

Reconciliation Is Your Contractual Right (And Your Strategic Weapon)

Every one of your MCA agreements contains a reconciliation clause. This clause exists because the agreement is structured as a purchase of future receivables, and the daily payment is supposed to reflect a percentage of your actual revenue. When revenue declines, the payment should decline with it.

In practice, funders resist reconciliation. They impose documentation requirements that are difficult to satisfy on short timelines. They claim the request was insufficient or untimely. They continue withdrawing fixed amounts while the request is pending. In some cases, they simply do not respond.

But the request itself has a legal function that exceeds its commercial one. A denied or ignored reconciliation request supports the argument that the reconciliation provision is illusory, which is one of three factors New York courts use to determine whether an MCA should be reclassified as a loan. If the funder refuses to reconcile, the entire agreement may be vulnerable to a usury challenge.

Send the request in writing. Attach bank statements showing the revenue decline. Send it via certified mail. Document the funder's response (or lack thereof). This is not merely a negotiation tactic. It is the foundation of a legal position that may reduce your total obligation by tens of thousands of dollars.

Bankruptcy Is an Option, Not a Catastrophe

The word carries weight it does not deserve. Chapter 11 reorganization permits a business to continue operating while restructuring its debts under court supervision. The automatic stay, which takes effect upon filing, halts all collection activity, including ACH withdrawals, bank freezes, and judgment enforcement. Every MCA funder, simultaneously, is forced to stop.

DEFENSE TEAM SPOTLIGHT

Todd Spodek

Lead Attorney & Founder

Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.

NY Bar Admitted Multi-State Licensed Federal Courts

Meet the Full Team

For businesses with three or more stacked MCAs, the automatic stay is sometimes the only mechanism capable of stopping the bleeding long enough to construct a viable path forward.

And Chapter 11 provides an additional advantage that is specific to MCA debt: it forces the question of classification. When an MCA funder files a proof of claim in bankruptcy, the debtor can object and seek to reclassify the transaction as a loan. If the court agrees, the claim may be reduced to the principal amount plus legally permissible interest, which is a fraction of the original factor-rate obligation. Recent bankruptcy court decisions, including rulings from the Southern District of Indiana and the District of Maryland, have examined MCA agreements under this framework and, in several cases, determined that the transactions were loans.

Bankruptcy is not the first option. It is the option that exists when other options have been exhausted, and it is a better option than surrender.

You Need One Conversation, Not Seven

The most common mistake business owners with stacked MCAs make is treating each agreement as a separate problem. They negotiate with one funder while ignoring the others. They challenge one confession of judgment while the other funders file theirs. They address the loudest creditor while the quietest one obtains a judgment.

The correct approach treats the entire stack as a single legal matter. One attorney reviews all agreements, identifies the strongest and weakest positions across the portfolio, and constructs a unified strategy that addresses all funders simultaneously. The funders are not coordinating their actions. Your response must coordinate yours.

That strategy begins with a consultation. The consultation is not a commitment to litigation, to bankruptcy, or to any particular course of action. It is the point at which someone who has reviewed hundreds of these agreements examines yours and tells you what is enforceable, what is not, and what the viable paths forward look like from where you are standing today.

The call is free. Delaying it is not.