Why we won't stack you

There is a phone call we get a few times a week. An owner has an active loan or advance somewhere — sometimes ours, sometimes someone else's. The daily debit or weekly payment is tight but manageable. Revenue dropped a little last month, or a big bill came in, or payroll is sitting on the wrong side of the calendar. They want a second position on top of the first. Can we fund it?

We will not. Not because we are pious about it. Because the math does not work for the owner, and we have watched it not work too many times to pretend otherwise. And as a direct lender, the math does not work for us either.

The math of stacking

A short-term advance typically debits between 8% and 15% of daily deposits, depending on the structure. Some are flat daily payments calibrated to that percentage. Either way, the working figure is that around 10% of every dollar that lands in the operating account is committed to one position.

Put a second position on top of that, calibrated to its own 10%, and now 20% of daily revenue is leaving the account before anything else moves. Payroll has not run yet. Rent has not cleared. The food vendor has not been paid. Twenty cents of every dollar is gone the moment it hits.

A third position — and these calls do come in — pushes it to 30%. At that point the business is not running. It is being unwound a day at a time, and the owner usually has not realized it yet because the bank statement still shows deposits coming in.

What we offer instead

If an owner is in the middle of a tight position and cash flow is the problem, there is usually a real solution. None of them are a second position on top of the first:

• Refinance the existing position into a Sprint term loan or SBA 7(a). One fixed monthly payment, longer amortization, lower total dollar drain. This is the move 80% of the time.
• Open a Sprint line of credit for the working-capital piece, separate from the existing position. The line covers the gap, the original loan pays down on schedule, and the two products do not stack on top of each other.
• Restructure with the existing funder. Many will agree to a reduced payment for a defined window if the alternative is default. This is a conversation, not a fee.
• Sometimes, walk away from the deal entirely and tell the owner the truth: another loan will not save the business. The right answer is to fix the operating problem first.

The position

Stacking is one of the easiest fees a financial services shop can collect. If a lender or broker is willing to do it, the same owner can be billed every 60 to 90 days, until the owner runs out of room. We are not built to chase that fee. As a direct lender, we have our own capital at risk in every deal we fund — and when someone else stacks on top of a Sprint loan, our collateral becomes junior to theirs. The math gets worse for everyone in the file at once.

We won't lend on top of another lender, and we won't let another lender stack on top of us if we can see it. The Sprint position is principled, and it is also self-interested. Both can be true.