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ACH Business Loans: The Basics

Businessman writing on a formAn automated clearing house is a large electronic network that processes credit and debit transactions in extensive batches. An ACH (automated clearing house) business loan is similar to a merchant cash advance. The difference is that an ACH loan is generally a “cash flow” loan while a merchant cash advance is an advance on regular and predictable credit card transactions.

The ACH loan lender will look at the business’s average daily, monthly, or quarterly balance of the business’s checking account instead of the amount of credit card transactions that are likely to occur within a certain period. An ACH loan can provide funds in the same way that a merchant cash advance can, however. Unlike a bank loan, there is usually no set time period for repayment of an ACH loan. Payments will just continue until the full amount of the ACH business loan is repaid.

Why would I need an


Businesses may need an ACH business loan for a variety of reasons, but the most common reason is just that the business needs funds quickly. Perhaps the business is trying out a new product line or a major component of the business just suddenly stopped working, like a specialized computer or other piece of equipment. If something fails, then business owners may need funds quickly for repairs or to invest in a new piece of equipment. ACH business loans are also a great option for business owners who have less-than-ideal credit ratings.

How does an ACH business Loan work?

The ACH generally measures the business’s ability to withdraw an agreed upon amount directly from the business’s checking account at an agreed upon point in time or across several points in time. For example, the bank or merchant can look at your overall balance in the past year to determine whether you will have, say, $100 each month on the first of the month. It works just like making an automatic mortgage payment or car payment at a specific time each month.

What are the factors that affect an ACH business loan?

This type of loan is not affected at all by accounts receivable (what you will be paid); it simply a measure of what you have on hand at a specific time. The lender also does not consider the business’s credit in this type of transaction either, which can be helpful for those with poor credit. Instead, they look at overall business performance. You may have to pay a higher interest rate, but you will be able to access the funds much more quickly than traditional financing methods, like a small business loan.

ACH business loans can be very helpful in certain situations, but it should not be the only type of loan that you use for your business. It can be very helpful for emergency solutions and is generally used as a short term solution.

Contact FAM for an ACH business loan today!