Running a small business isn’t easy. Cash flow challenges can hit at any time, and many business owners look for quick solutions. One of the most tempting options is a Merchant Cash Advance (MCA). MCAs promise fast cash with minimal paperwork, which sounds perfect. But when businesses take out multiple MCAs—also known as MCA stacking—it can be a financial nightmare.
Let’s break down why MCA stacking is so dangerous and how you can protect your business.
What is MCA Stacking?
MCA stacking happens when a business takes out more than one Merchant Cash Advance at the same time, or in quick succession. At first, it might seem harmless. You take one advance to cover expenses, then another to cover something else. But each MCA comes with its own repayment requirement, usually a fixed percentage of your daily credit card or debit card sales.
When you have multiple MCAs, these daily deductions add up fast. A big chunk of your daily revenue can vanish before you even get a chance to reinvest it into your business. This can lead to serious cash flow problems and make day-to-day operations nearly impossible.
Why MCA Stacking is Risky
The problem with MCA stacking isn’t just the cost—it’s how the payments work. Unlike traditional loans with predictable monthly payments, MCAs take a cut of your daily sales. With multiple MCAs stacked together, it’s not unusual for 40%–50% of your daily revenue to go straight to lenders.
Think about it: even if your business is technically profitable, the cash you actually get to use is shrinking. Payroll, inventory, and essential bills can’t be covered, and suddenly, you need yet another MCA just to survive. This creates a vicious cycle that’s almost impossible to escape.
Another danger is that MCA lenders are eager to approve more funding. They often focus only on your sales volume, not on whether you’re already stretched too thin. So the cycle keeps repeating: more advances, higher daily deductions, and more pressure on your business.
Hidden Costs of MCA Stacking
MCA interest rates are already high. On paper, they might not look outrageous, but when you calculate the equivalent annual percentage rate (APR), it can reach 70%–200%. With multiple advances stacked, this rate skyrockets.
The financial strain doesn’t stop there. Daily deductions can make it impossible to pay employees on time, delay supplier payments, and harm your business reputation. Vendors may refuse to work with you, and staff may leave for more stable jobs. Over time, these operational problems pile on top of financial stress, pushing some businesses toward bankruptcy.
Safer Alternatives to MCA Stacking
If you’re facing a cash crunch, there are better ways to get funding without risking your business.
1. Traditional Business Loans: These usually have lower interest rates and more predictable repayment schedules. They may take longer to secure, but they’re much safer in the long run.
2. Lines of Credit: A business line of credit gives you access to cash when you need it without taking a large lump sum that eats up daily revenue.
3. SBA-Backed Programs: These loans are designed to support small businesses and often come with favorable terms.
4. Cash Flow Management: Before taking on more debt, review your expenses. Reduce non-essential spending, negotiate better terms with suppliers, and focus on improving operational efficiency.
5. Strategic Partnerships or Investors: Sometimes, bringing in an investor or partner can provide cash without the burden of high-interest debt.
Please see our other articles about the dangers of merchant, cash advance, MCA loans here
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Key Takeaways
MCA stacking might seem like a quick fix, but it’s a recipe for financial disaster. Multiple advances can drain your daily revenue, create a cycle of debt, and ultimately threaten your business’s survival.
The best approach is to think long-term. Explore safer financing options, manage your cash flow carefully, and avoid the temptation of taking on multiple high-cost advances. By doing so, you’ll protect your business, your employees, and your future growth.
Small businesses are tough, but they’re also resilient. Avoid MCA stacking, make smarter financial choices, and you’ll be in a much stronger position to succeed.
