If you're a small business owner, you may have come across the term "loan stacking." It's the practice of taking out multiple loans or merchant cash advances (MCAs) from different companies simultaneously or in close succession, stacking one cash advance on top of another.
On the surface, this might not seem to be a problem. After all, as a business owner, you think you know how much cash you need and how much debt you can handle. Unfortunately, many merchants don't realize the complex situation stacking puts them in. This dangerous practice has resulted in many small businesses defaulting on their contracts and closing their doors.
How stacking begins
Here's an example of how a merchant can fall into the stacking trap.
Willie B. owns a BBQ restaurant in Chicago. He came to Quikstone to apply for a $20,000 cash advance to make improvements to his restaurant. He needed two new freezers and a new smoker. Looking over the last six months of his credit card sales, his Quikstone representative felt he would not be able to handle repayment of his requested amount, but Quikstone could provide him with a $10,000 cash advance. They also suggested that he could apply for more funds when this advance was 50% paid or more. Willie agreed, signed his contract, and received his funding.
Soon after, a sales agent representing another funding company approached Willie, offering to give him $10,000, no questions asked. Without considering the risk, Willie accepted that offer, and now he had his $20,000.
No problem, right? Now Willie was in debt to two MCA providers, and he violated his contracts. He also never considered the fees associated with the new advance and the total amount he would have to repay. That second advance put his business in a cash flow bind, and so the cycle was set to repeat itself as he went looking for another cash advance to help pay back the first two.
The Vicious Cycle
Did you know those unscrupulous funding companies are willing to fund merchants with as many as 12 stacked advances? Quikstone has seen the results of its work on unsuspecting merchants who are desperate to keep their businesses afloat.
How can this happen? Some MCA companies search for leads using devious tactics that target newly funded businesses and often will follow up with an offer of additional funding. If this happens, it's best to go back to your original funding company and inquire when you would be eligible for additional funding.
If you apply to Quikstone and owe another MCA company, Quikstone may try to pay that off as part of your deal so you will only have one repayment, easing the strain on your cash flow.
Carefully Choose Your Funding Company Before You Apply For A Cash Advance.
Reputable companies like Quikstone will carefully underwrite your account and let you know when you qualify for more funds. Sometimes this may be in as little as 60-90 days. In this situation, unlike other companies, Quikstone does not charge fees on the financing you have already paid for – a practice called "double-dipping." A reputable provider like Quikstone will be upfront about all costs involved and be more than willing to spend the time to make sure you understand all the terms of the agreement. Not all MCA companies are the same.
When you choose Quikstone for a cash advance, you will get a funding partner who will never knowingly put your business at risk. Our representatives will always tell you the truth, even if that means we will lose business.
Since 2005, Quikstone has helped thousands of merchants with easy, fast, and flexible working capital for all their business needs. 80% of our merchants are repeat customers, and we are proud of the trust they place in us.
Let Quikstone Capital work with you to find the right solution to help your business thrive.
