Anti-stacking clauses and what breaching one triggers

What the clause says

The wording varies but the shape is consistent: for as long as any part of the purchased amount is outstanding, you will not sell, assign, pledge or encumber the receivables, and you will not enter into any agreement with another party for the purchase of receivables or for financing repaid from them, without the funder's prior written consent.

Stronger versions extend to any additional indebtedness of any kind. Weaker versions carve out ordinary trade credit, equipment finance, or a bank facility that predates the advance.

Why it exists

The funder says it bought a stream of receipts. A second funder buying the same stream is buying something already sold. Beyond the legal characterisation, there is straightforward commercial logic: two daily debits against one deposit account is how good files turn bad, and the first position wants to protect the cash flow it underwrote.

What breach triggers

Almost always an event of default, and events of default in these agreements run together:

• Acceleration of the full unpaid purchased amount, immediately.
• Default fees, and responsibility for the funder's collection and attorney costs.
• Exposure under the personal guarantee, because taking additional financing is one of the covenants a performance guarantee typically covers.
• Enforcement of the security interest in the receivables.
• Filing of a confession of judgment, where the agreement includes one and it is usable in the relevant court.

Note that the trigger is the act of taking the second position, not missing a payment. You can be current on both deals and in default on the first.

How they find out

What the second position does to the arithmetic

Combined, that is $1,050 a day, about $22,050 across a 21-day month, or 18.7% of deposits before a single cost of sale is paid. The second deal repays $42,600, costing $12,600, and at $430 a day it runs about 99 banking days.

The damage is not in the cost. It is in the overlap. For several months the business services two schedules out of one deposit stream, and the daily total was set by two underwriters who each sized their own deal against the same deposits without pricing the other.

If the first debit was already at the limit of what free cash supports, the second is funded out of payables, payroll taxes or a third advance. That mechanism runs the same way whether or not the anti-stacking clause is ever enforced.

The carve-outs worth asking for before you sign

This language is negotiable more often than it is negotiated, and the moment to ask is before the first deal funds.

• Equipment finance secured only by the equipment. Commonly agreed, because it does not touch the receivables.
• A pre-existing bank line or term loan. Disclose it and have it excluded by name, rather than leaving an argument about whether "additional financing" means new financing.
• Ordinary trade credit. Supplier terms should not be a covenant breach. Check that they are carved out.
• A real estate loan, secured by property rather than receipts.
• Renewal by the same funder. Obvious, and it should still be in the document.

Consent, and the paperwork of it

Consent is sometimes obtainable, particularly for a facility that does not touch the receivables — equipment finance against the equipment, for example, or a real-estate-secured loan. Ask before you sign anything with the second party, and get the consent as a signed document from someone with authority at the funder, not as a broker's reassurance in a text message.

Where a second funder asks you to certify what positions you have outstanding, answer accurately. That certification is usually backed by a validity guarantee, and a false statement there is the kind of thing that turns a commercial dispute into a personal claim against you.

The practical advice

If you are contemplating a second position because the first is unaffordable, the anti-stacking clause is not your main problem — the arithmetic is. Two debits against one deposit stream compresses the timeline on both. Deal with the first position through reconciliation or a workout conversation before you go looking for the second.

If you have already taken a second position

The clause is triggered by the act, so the exposure exists whether or not anyone has raised it yet. Three things help.

If the first position has already declared a default, take advice. Acceleration, a guarantee demand and a confession of judgment are not things to handle alone, and outcomes in this market are shaped in the first fortnight.