Positions in Business Funding: What You Need to Know

What Exactly Are 'Positions' Anyway?

Okay, so you're looking for funding, right? And maybe you've heard the term 'positions' thrown around. It can be a little confusing if you're not in the industry every day. Basically, a 'position' refers to the order of who gets paid back first if something goes wrong, or more commonly, the order in which a funder collects payments from your daily or weekly revenue. Think of it like a pecking order for your business's cash flow.

If you have one funding company that's collecting a percentage of your daily sales, they're in 'first position.' If you then get a second funding product from a different company, and they also collect daily, they'd be in 'second position.' And so on. It's essentially how many active funding agreements you have that are drawing from your same revenue stream. It's not about how many loans you have in total, but how many are actively being repaid simultaneously from your primary income.

So, How Many Positions Do Funders Usually Allow?

This is where it gets a little nuanced. There's no one-size-fits-all answer, honestly. It really depends on the funder, your business's health, and the type of funding product we're talking about.

Most traditional banks, for instance, are pretty conservative. If you have a conventional bank loan, they typically want to be in first position, and they usually won't approve you if you have other daily or weekly funding products already in place. And forget about getting a second bank loan on top of another one without some serious collateral or a really strong balance sheet.

With merchant cash advances (MCAs) or revenue-based funding, it's a bit more flexible. Here's a general guideline we see day in and day out:

• First Position: This is the most common. Most funders, especially for your initial MCA or revenue-based product, want to be in first position. It means they're the only one taking a cut of your daily or weekly receivables, making their repayment more secure.
• Second Position: This is also quite common. Many businesses will take a second position MCA if they need more capital but aren't ready to pay off their first one. The second funder knows they'll get paid after the first one, so they might charge a slightly higher factor rate or a shorter term to offset that risk. We see this a lot with businesses that have a good payment history on their first advance.
• Third Position: This starts to get trickier. Some funders will go into third position, but they're typically looking for businesses with very strong, consistent revenue, or they'll offer smaller amounts at higher rates. It's just a higher risk profile for them.
• Fourth+ Positions: Honestly? This is pretty rare for daily/weekly payment products. It's not impossible, but you're usually looking at very high rates and very short terms because the risk of default goes up significantly with each additional position. Most responsible funders will tell you that taking on a fourth or fifth position could be stretching your business too thin. We've seen businesses get into trouble trying to stack too many advances.

Now, if we're talking about a business line of credit, that's usually considered a different beast than a daily draw. And a real estate-backed business loan? That's typically secured by property, so its position is usually tied to the real estate, not your daily cash flow in the same way an MCA is.

Why Do Funders Care So Much About Positions?

It boils down to risk, plain and simple. Imagine a pie. Each funder is taking a slice. The more slices that are being taken daily, the smaller the remaining pie is for everyone else, and the higher the chance that one slice might not get its full portion if the pie shrinks.

If you have too many active repayment streams, it can really strain your business's cash flow. One of our merchants in Miami had three advances running last year, and they eventually found themselves in a really tight spot when a few slow weeks hit. We had to work with them to consolidate and restructure because their daily outgoing payments were just too high. It's a common story, unfortunately.

Funders want to make sure your business can comfortably afford the repayments without jeopardizing your operations. Too many positions signal increased financial stress and a higher likelihood of default.

Does LoanQuail Fund Companies with Multiple Positions?

Absolutely, we do! Look, we understand that businesses often need capital on an ongoing basis. It's not always about just one lump sum and then you're done. Sometimes you need a bit more cash to seize an opportunity, or maybe you need to consolidate existing debt to free up cash flow.

We work with businesses in first, second, and sometimes even third position. What's most important to us is understanding your overall financial picture. We look at your revenue, your existing obligations, and your future plans. We don't just blindly approve or deny based on a number; we dig into the details.

For example, if you have a first position MCA and it's almost paid off, we might be able to offer you a larger second position advance that also helps you pay off the remaining balance of the first one, effectively consolidating it into a new, single funding product. Or, if you have strong revenue but just need a little extra bridge capital, we can often come in with a second position. We also offer business lines of credit and real estate-backed loans, which often don't directly conflict with existing MCA positions in the same way a stacked MCA would.

The goal is always to find funding that helps your business, not hurts it with unsustainable repayment terms. We're here to be a partner, not just another funder.

If you're wondering what your options are, or even just want to understand how your current funding looks in terms of positions, it doesn't hurt to have a chat. You can check your eligibility right here with LoanQuail – it's quick, and there's no obligation. We'll give you an honest assessment of what's possible for your business.