How existing positions are counted, and what they do to the next offer

What a position is

When a funder advances against your future revenue, it takes a claim on that revenue and usually files a UCC-1 to perfect it. A second funder doing the same thing takes a claim on the same cash, behind the first. That ordering is the position.

Order is established by two different things that people conflate. Legal priority among secured parties generally follows the order of perfection — who filed first. Practical priority follows who gets the money first, which is decided by debit timing and by whether anyone controls the deposit account. A funder in second position by filing date can be first in line every morning if its ACH lands earlier.

The count, and the arithmetic behind it

Underwriters do not stop at how many positions you have. They compute the burden.

The standard calculation converts everything into a daily figure and compares it to daily deposits. Illustrative only — a business with $90,000 of monthly deposits over roughly 21 banking days is taking in about $4,286 a day. Two existing daily debits of $425 and $310 total $735, which is 17.2% of daily deposits. Add a third at $500 and the total is $1,235, or 28.8%.

That percentage is the number that decides the next offer. Some funders publish a ceiling for it; most do not. What every one of them is testing is the same thing: whether enough cash survives the debits to run the business, because a business that cannot buy inventory does not generate the revenue the debits depend on. See daily debit as a share of daily deposits for the full mechanics.

Alongside the percentage they look at:

• How many positions. Each additional one compounds the problem and shortens the queue in front of you.
• Balance remaining on each. A position eighty percent repaid is nearly gone; one funded last week is not.
• Age and payment history. A position that has been debited cleanly for four months is evidence you can carry it.
• Term structure. Daily debits, weekly debits and monthly amortising payments behave very differently against the same monthly cash flow.
• Whether the existing contracts prohibit what you are about to do. See MCA anti-stacking clauses.

How they find what you already owe

The application asks. It is not the primary source.

What an existing UCC-1 filing means, and what it does not

A filed UCC-1 is a public notice that someone claims an interest in described collateral. It is not a judgment, it is not proof of a current balance, and it does not by itself stop a new funding.

Three things routinely go wrong with the index:

When a new lender needs priority that an existing filing blocks, the tools are a payoff, a subordination agreement, or an intercreditor agreement between the two secured parties. All three are negotiations, and none of them happen quickly. See collateral, blanket liens and UCC-1 filings and what is a UCC filing on my receivables.

Coverage, in plain terms

Bank and term lenders express the same concern with a ratio rather than a percentage of daily deposits. Debt service coverage is cash available to service debt, divided by the debt service due in the same period.

Illustrative only — a business with $180,000 of annual cash flow available for debt service and $150,000 of annual principal and interest has coverage of 1.20. It generates $1.20 for every dollar of scheduled payment. Below 1.0 the business is not covering its payments out of operations. Lenders want a cushion above 1.0, and the size of the cushion they want is theirs and varies by lender, by product and by industry; nobody should quote you a market standard as if it were a rule.

Two things trip people up. First, an existing advance with a daily debit is debt service even where the contract calls it a purchase of receivables — the cash leaves either way, and a careful analyst includes it. Second, the new facility's payments go in the denominator too; coverage is computed after the loan you are asking for, not before it. The full method is in debt service coverage ratio and how lenders calculate it and worked through in debt service coverage step by step.

What to do before you apply

1. Run your own UCC search and read every filing on the index against you.
2. Pursue terminations for anything paid off, in writing.
3. Build a one-page debt schedule: funder, original amount, current balance, payment, frequency, remaining term.
4. Compute your own daily obligation as a share of daily deposits.
5. Disclose all of it up front.

The last point is the one that pays. An underwriter who is handed the debt schedule prices the debt. An underwriter who finds a position you did not mention prices the omission as well.