MCA Position | MCA Glossary

Definition

The priority ranking of an MCA funder's claim on a business's receivables relative to other MCA funders — first position collects before second position, and so on.

Explanation

MCA position refers to the lien priority order among multiple MCA funders who have claims against the same business's future receivables. When a business takes multiple MCA advances simultaneously — a practice known as stacking — each funder holds a different position in the collection priority. First-position MCA funders have the strongest claim: they were first to file a UCC-1 lien against the business's receivables and have contractual priority to collect before any other MCA obligee. Second and third position funders collect only after the first-position funder's daily remittance obligation is satisfied. Position matters because in a distressed situation — where the business's revenue declines significantly — first-position funders continue collecting while second and third position funders may collect little or nothing. This elevated risk for non-first-position funders is reflected in their pricing: second-position MCA factor rates are typically 0.05 to 0.20 higher than first-position rates for the same advance profile.

Example

A business has three MCA positions: Funder A (first position, 12% holdback), Funder B (second position, 10% holdback), and Funder C (third position, 8% holdback). On a day with $3,000 in card sales, Funder A receives $360, Funder B receives $300, and Funder C receives $240 — assuming all collections occur through the payment processor split.

Why It Matters

Understanding MCA position is critical for businesses with multiple advances and for those considering stacking. First-position funders offer better pricing but have the most restrictive covenants. Accepting a second or third position advance typically costs significantly more and signals to future lenders that the business is in or approaching financial distress. Most financing advisors recommend maintaining a single MCA position at any time.

Frequently asked questions

Can I take a second position MCA without my first-position funder's knowledge?

Many first-position MCA agreements prohibit additional liens or advances without funder consent — taking a second position advance may constitute default under your existing agreement. Even if your contract does not explicitly prohibit it, second-position funders will file a UCC-1 lien that appears on public records and will be visible to your first-position funder when they conduct periodic searches. Proceeding without disclosure can have serious legal and financial consequences.