Stacked: 7 Rules for Restructuring When You Have 4+ Positions

Four positions do not behave like one position four times over. They behave like four creditors discovering the same cash at the same moment, each holding paper that claims to be first. Restructuring a stack begins from that recognition. Everything else is procedure.

The owner of a stacked business tends to arrive with a spreadsheet and a single question about which funder to pay. The spreadsheet helps. The question misleads. Payment order matters less than agreement terms, lien positions, tax exposure, and the forums where each dispute will be heard. The seven rules below follow that order of importance, and counsel should confirm each against the signed documents.

Inventory Every Agreement Before Paying Anyone

Statements show balances. Agreements show obligations, and the two documents rarely tell the same story. The full file for each position includes the funding contract, the guarantee, the security agreement, the UCC filing, every amendment, and every message in which terms changed. One position may be a purchase of receivables. Another may be a loan wearing similar clothes. New York courts decide that question by substance, asking whether repayment is absolute and weighing reconciliation, finite term, and bankruptcy recourse, under the LG Funding decision of the Second Department.

A later appellate discussion with a dissent shows how contested that classification remains, in the Bridge Funding decision. The dissent proposed a different test than the majority applied. An owner with four positions may hold four different answers to the same legal question, which is why the inventory precedes every other move.

The contract ran to fourteen pages, most of them unnecessary, and the necessary ones were the collateral description and the guarantee. That distribution is common enough to plan around.

Reconciliation Rights Live or Die by Contract Language

Where receipts have fallen, some agreements adjust the debit and some do not, and the difference sits in specific sentences rather than general principles. The LG factors treat reconciliation as evidence rather than conclusion: its presence supports purchase characterization without compelling it, and its absence wounds without killing. A funder, the confession of judgment (which defenders of the industry will insist was negotiated between equals) having already transferred procedural control before the first payment was missed, has little reason to volunteer flexibility the contract does not require.

Invoking a reconciliation clause the agreement does not contain is worse than useless. Counsel locates the clause, follows its notice procedure to the letter, and preserves proof of every transmission. Steps taken, or not taken, in the first seventy two hours after a shortfall often decide whether the clause helps.

Confessions Compound Across the Stack

One confession of judgment is a danger. Four are a calendar of ambushes. New York practice still permits entry without an action on a sworn affidavit stating the sum, the authorization, and the facts of the debt, under the confession procedure of CPLR 3218. Each funder holding such an affidavit can move without warning and without regard to what the other three intend. The owner learns of the first filing from the bank, and the remaining funders learn of it from the docket.

Texas draws a sharper line for covered financing. A commercial sales based financing contract containing a confession or similar provision is void and unenforceable, under the enrolled text of House Bill 700. Coverage, timing, and exemptions require counsel review, and the chapter creates no private right of action.

Liens Layer Without Erasing One Another

A later filing does not retire an earlier lien. A security interest continues in collateral despite disposition unless free and clear disposition was authorized, attaching to identifiable proceeds, under the proceeds statute. Four blanket filings on the same receivables create a priority dispute among funders, not a release for the borrower. Paying the fourth funder in full while the first retains its filing purchases nothing but a receipt.

Every settlement in a stack must therefore include filed termination proof. The secured party owes termination within twenty days after a signed debtor demand when statutory conditions hold, and debtor self filing remains narrow. Ensure each release names the funder, the servicer, the affiliates, and the covered accounts, or expect the omitted party to surface later.

Payroll Taxes Come Before Every Funder

But the most dangerous creditor in a stacked business is rarely a funder at all. Employment tax enforcement can reach responsible individuals in their own capacity through the trust fund recovery penalty, which turns on actual authority over financial affairs rather than title or ownership share. The IRS describes installment agreements and qualifying compromises as conditional relief, never automatic discounts, with filed returns, current deposits, and years of continuing compliance as the price, per the IRS account of collection alternatives.

An owner who feeds four funders while payroll deposits fall behind has chosen the wrong priority. The funders sue the business. The government follows the individual.

Forums Multiply With Positions

Each agreement selects its own battlefield. Written arbitration provisions are generally enforceable under federal law, subject to contract defenses of general application, under the federal arbitration section. One position may compel arbitration while another proceeds in court, and a third enforces a confession without any proceeding at all. Formation, scope, delegation, and waiver questions belong to counsel, agreement by agreement.

Rarely does a procedural detail consume so much money as forum confusion. Counsel maps every forum clause before responding anywhere, in order to prevent an appearance in one proceeding from waiving rights in another. Consolidation across funders happens by negotiation, not by right.

Settlements Must Be Signed and Complete

A stack settles one position at a time, and each settlement must stand alone. Oral promises from a negotiation call bind no one until reduced to signed writing. Releases cover only the parties and accounts they name. Tax allocation of any forgiven amount needs attention the same week, since canceled debt can be taxable income with conditional exclusions, per the IRS on canceled debt.

Settle the position you can document first. The loudest funder is rarely the senior lienholder.

Federal enforcers barred named providers from the industry after charges including unauthorized withdrawals and weaponized confessions, with vacated judgments and released liens as remedy, in the FTC action against abusive providers. That order bound its parties and voids nothing across the market. The sample of settled stacks behind any general advice is not scientific, and no honest adviser predicts results from a desk.

Delancey Street is a settlement company, not a law firm, and it offers a free confidential initial review of stacked MCA and business debt while independently licensed counsel handles legal questions. Consultation is where this conversation begins. We ensure the file is complete before any funder is contacted. Four creditors dividing one cash flow produce arithmetic, not malice, and arithmetic yields to the owner who inventories first and negotiates second.