Merchant Cash Advance in Third Position
A third position merchant cash advance is a new advance taken while two others are still being paid. It adds a third debit to the same deposits, so expect it to be smaller, shorter and priced higher than the first two. Add all three payments against a slow month, and price a consolidation next to it, before you sign.
The stacking math on three debits
Stacking math is one division. Add every debit that leaves the account in a period, then divide by the deposits that came in over the same period. That share is the debit load. A third position deserves a look only if the load with three payments still leaves room in a slow month, not just an average one.
Count what already goes out
List the first and second advances with the payment, how often it comes out and the balance left. Divide weekly payments by five to get a daily figure, so every line uses the same unit.
Add the third payment
The third payment is the payback on the new offer divided by the number of payments. A shorter term means a bigger payment, even when the factor rate looks the same.
Test the slow month
Take the lowest month on your recent statements. If the combined load in that month would leave too little for payroll, rent and stock, a third position makes the squeeze worse.
A worked example with three positions
Example: a business deposits $120,000 a month, about $5,714 each business day across 21 business days. Its first advance takes $500 a day and its second $350. A third offer is $25,000 at a 1.45 factor over 100 business days, or $362.50 a day.
| Line | Daily debit | Share of an average month | Share of a month 20% slower |
|---|---|---|---|
| First advance | $500 | 8.8% | 10.9% |
| Second advance | $350 | 6.1% | 7.7% |
| First two together | $850 | 14.9% | 18.6% |
| Third offer | $362.50 | 6.3% | 7.9% |
| All three | $1,212.50 | 21.2% | 26.5% |
The third offer pays back $36,250 for $25,000, so it costs $11,250, about $0.45 per dollar received. Over 100 business days that works out to an estimated APR near 199%, figured the way the MCA cost checker does it. In the slow month, more than a quarter of deposits would leave in debits.
How funders size a third position
Funders that review third position files work backward from what's left. Each sets its own limits, and none of the figures below belongs to any one funder.
The room left in your deposits
Many funders cap the share of deposits that all debits together may take. Say a cap were 25% of $5,714 a day, or about $1,429. Subtract the $850 already going out and about $579 a day is left. Over 100 business days that's roughly $57,857 in payback, so at a 1.45 factor the room supports about $39,900 at most.
How far along the first two are
An advance that's mostly paid will drop off soon and free room. Two advances funded in the last few weeks leave little, and many files stop there.
How the open advances have been paid
Returned payments, missed debits or a recent change to a payment schedule weigh heavily. A clean record on the first two is the strongest part of a third position file.
A term that ends near the others
Third position terms tend to be short, so the new payment ends close to the first two. That keeps the stack from running for months after deposits slow.
When to consolidate instead
- The slow-month load with three payments would leave too little for payroll and rent.
- Part of the third advance would go toward making the first two payments.
- An earlier contract limits new advances without the funder's consent.
- Both open balances are large, so a third payment would ride on top of them for months.
Consolidation replaces several payments with one. In the example, say the two open balances were $30,000 and $18,000. A $60,000 consolidation at a 1.40 factor over 189 business days pays both off, leaves about $12,000 in new cash and costs about $444 a day, against $1,212.50 a day with three positions.
The trade is real. Stacking leaves $84,250 still to pay for $25,000 of new cash. The consolidation leaves $84,000 to pay for $12,000 of new cash, with a far lighter daily debit and a longer term. Read more on MCA consolidation and reverse consolidation.
Risks of a third position
- Contract default. If an earlier contract bars more financing, signing a third advance can count as a default. Read the anti-stacking clause in each contract first.
- A thin cushion. Three fixed debits keep coming out on a slow day, so one bad week can push the account below zero and set off returned payments.
- Cost that compounds. Each later position is priced for standing further back, so the blended cost of everything open rises with every advance.
- More liens and more paperwork. Each funder may file a UCC lien and handle its own reconciliation. See UCC liens and MCAs.
- More personal exposure. Most contracts carry a personal guarantee, and three of them multiply what's at stake. See the personal guarantee guide.
Questions to ask before you sign
- What's the total payback, and how many payments make it up?
- Does any earlier contract limit new advances?
- What would all three payments take from my slowest month?
- Is there a discount for early payoff, and is it written into the contract?
- What would one consolidation of everything cost next to this offer?
FAQ
Can I get a third position merchant cash advance?
Some funders review third position files when the first two advances have been paid on schedule and deposits leave room for one more debit. Expect a smaller amount and a shorter term than the first two.
Why is a third position priced higher?
The third funder collects behind two others. If sales drop, the earlier debits still come out, so the third funder prices for standing last in line.
How much can a third position be?
It's sized from the room left after the first two payments. A funder estimates what share of deposits all debits together can take, subtracts what already goes out, and sizes the payback to fit.
Is consolidation always better than a third position?
No. Consolidation lowers the daily debit but can leave less new cash and run longer. Compare total payback, new cash and the slow-month debit load side by side.
What should I have ready for a third position conversation?
Recent bank statements, both open contracts, the balance and payment on each, and any payoff letters. Naming every open advance up front helps the file move.
Fourth position and industry notes
A fourth advance is rarer and tighter still. The fourth position guide works through four debits and the options next to it. For industry detail, see third position for restaurants and third position for construction. Add up your own stack with the stacked payment calculator.
Weighing a third advance?
Call 877-FUND-654 with every open contract in hand. We call you back, usually the same business day, and we always talk with you before we shop your file.