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Everything You Need to Know About ACH Business Loans and Payments

Small business loans, ACH, payment processing, business bank accounts… There’s so much to understand as a small business owner. From making loan payments and choosing an ACH provider, these decisions can feel overwhelming. This is especially true if you’re a new business trying to get things set up correctly for sustainable growth. 

Trying to sort out the details of ACH payments and small business loans can be confusing. If you’re currently considering these options, the following details will help you distinguish between the two and understand the ins and outs of each. 

What is the Automated Clearing House (ACH)?

The Automated Clearing House Network (ACH) is a network that processes electronic financial transactions like Direct deposits and Direct Payments. ACH transaction types include local, state, and federal government, consumer, and business-to-business transactions (as well as international payments).

What are ACH Payments?

An ACH payment is a type of electronic bank-to-bank payment that allows users to bypass card networks, wire transfers, checks, and cash and complete a seamless transfer of money between bank accounts. Small business loan payments via ACH from a business’ bank account are a popular option for many lenders. It allows them to take periodic payments and reduce the costs associated with processing a loan payment.

Why Lenders and Borrowers Prefer ACH Payments

In addition to simplifying the process, ACH payments make it easier for lenders to identify potential repayment issues early on. If they notice an issue, this option gives lenders time to help borrowers catch up on their loan payments and avoid credit issues. Borrowers also like the benefits of ACH payments. 

For example, ACH payments can help a small business owner eliminate cash flow problems through the ability to make more frequent and smaller debits on a daily or weekly basis, rather than a large, monthly loan payment. ACH payments can also help businesses save money (as much as $1.22 per check according to electronicpayment.org). It simplifies the payment process considerably since all payments take place in the background, are scheduled, and are automated.

All in all, if you feel that making payments electronically can help your business operate more efficiently and improve cash flow management, it might be time to look into ACH payments for business loan payments. When looking into this opportunity, just be sure the provider you choose understands your business type and your business’s unique needs.