There are many reasons why a business might need an alternative solution to a conventional bank loan. If a business is considered “high risk” by traditional lending sources, for example, it might not be possible for the business to secure a loan. Banks are hesitant to provide any services to a business categorized as high risk; this categorization could be because the business is a startup, experiences a high level of charge backs, bad credit history, etc.
Two popular alternatives are an ACH loan and a Merchant Cash Advance. A merchant cash advance is not really a loan; it is a purchase of a business’ future credit cards sales. An ACH, on the other hand, is more like a “cash flow” loan; the lender will be looking at your average daily balance on your business checking account instead of your credit card transactions.
These projected cash/check earnings act as loan security instead of having to provide collateral, as is the case with a traditional business loan. First American Merchant Funding refers to the very popular ACH funding program as a “Bank Only” funding. Even if a business does not have a merchant account, they can still obtain this form of funding.
There are many benefits that an ACH business loan can offer a business:
- Everyone is short on time, and time is money. An ACH loan can be of great assistance in situations where you need cash quickly to make a payment or to reinvest in your business in whatever way you need to.
- It can also be helpful when you are in a situation where you do not have collateral that you are willing to post or assets you are willing to liquidate.
- An ACH loan is convenient and fast when you do not have the time to sit, flip through and fill out a stack of paperwork.
- If your business experiences low credit card processing but high gross sales volumes (check or cash), an ACH business loan can accommodate you.
- It can be a great choice for your business if you are seeking methods of improving your FICO scores and credit reporting.
- This option is also great for businesses that do not have a merchant account.
- If your business is cyclical and you’re afraid of finding yourself in the situation of being short on cash during a slow month, an ACH business loan allows you to make your payment as a percentage of your daily cash register receipts.
In addition, if you have a FICO score of at least 500, if you’ve been in business for six months or more, if you’ve experienced 10k in gross monthly deposits and have less than 3 NSF’s per month, it should not be a problem to qualify. The simple qualification and application process, has and continues to make the ACH business loan a favorite with many business owners.