Second-Position MCA
A second-position MCA is a cash advance funded to a merchant who already has a first-position MCA outstanding — junior to the first creditor's claim on receivables — requiring higher pricing to compensate for elevated default risk.
Why This Matters
Second-position deals exist in a gray zone of the MCA market. Some funders specialize in second positions, knowingly taking junior priority for higher returns. Other funders prohibit second positions entirely in their underwriting guidelines. The risk profile is materially different: default rates on second positions run 2-4x first positions, factor rates run 10-25% higher to compensate. From a prospecting standpoint, merchants with active first positions are the highest-converting second-position lead pool, but underwriting must scrutinize stacking risk and combined holdback burden.
Frequently Asked Questions
Frequently Asked Questions
How do I price a second-position MCA?
Industry typical: 1.30-1.50 factor rate (vs. 1.20-1.40 for first), 4-8 month terms (vs. 6-12 for first), and stricter qualification (minimum revenue often 1.5x first-position floor). Combined holdback across both positions should not exceed 40% of receivables to maintain merchant viability.
What's the difference between second-position and stacking?
Second-position is disclosed and consented — both first and second-position funders know about each other. Stacking is undisclosed — additional funders are unaware of existing positions. Disclosed second-position is legitimate business; undisclosed stacking is contract violation.