S is for Stacking

Growing up, there was a rule – under no circumstances did you go in mom’s kitchen when she was cooking.  If you made the mistake of entering her kitchen, you got “the look”.

I am just like my mom (on this topic and many others – that is another story).  I have a system.  I plan what pot needs to go on the stove and which pan is going in the oven; how long it takes for one course to cook while I am prepping another.  I have even mastered “the look”.

Over the years, I learned to explain my system – what needs to go where and when.  There are now a few people I will invite to help me in the kitchen. I am the chef and I have learned to surround myself with like minded sous-chefs.

In business and particularly with entrepreneurs we often forget to bring on like minded sous-chefs.  We believe we can be the only chef in the kitchen and we can do everything ourselves.

All of us in banking, factoring or any type of business finance have a system to determine if a deal is a good fit.

Once we decide to enter into a financing agreement, we file a UCC-1 (Uniform Commercial Code) financing statement.  That is our announcement to the commercial finance world that some or all of the collateral is spoken for; that we are going to be in the kitchen.  The first step of the decision process is a UCC search to see who else might have a stake in any of the collateral.  If we find that there is another company with a stake in the receivables, we cannot purchase them and therefore cannot do the deal. We cannot walk into a kitchen and expect to cook a meal when there is no space for us to work – unless we know who else is there and we come to some agreements about how we are going to operate together.

In the world of Fintech and MCA’s, many of these companies are not filing UCC’s which means that we don’t have any way of knowing how the collateral has been spread out.  We don’t know who is in the kitchen.

Imagine that you have a crowded kitchen and everyone believes they were the only one invited to help the chef.  It is only after they committed to help, learned the system and made the plan that they find out other folks are there.

This is stacking.  Stacking occurs when a business owner takes out multiple MCA loans with different companies.  With the likely scenario that there are no UCC’s filed, it is inevitable that the finance companies begin to trip over each other.

The damage that happens next is why I believe stacking is the single most dangerous thing to hit the finance scene in the last decade.  I have yet to see a stacking situation result in a healthy outcome for a business owner.  Entrepreneurs are losing their businesses under the weight of these stacks –  the near impossible-to-sustain daily payment schedule, lack of transparency in pricing, and the chaos that comes from believing you are the only sous-chef in the kitchen – only to find out you are not.

The biggest danger?  These loans are SO easy to get.  You can sit at your computer and the ads will pop up.  While a bank, a factor, or just about any other financing source has an underwriting process that requires time and information, these loans are, literally, one click away.    It is the difference between a well planned, well executed dinner party where everyone leaves full and happy and a kitchen disaster in the making.

The lesson

If it seems too easy, too good to be true – it probably is,


In a well run kitchen, sous-chefs work with each other,


If your kitchen is too crowded, something is bound to get burned.

Don’t let that be your business.