What is the difference between an ACH loan and a merchant cash advance, you may be thinking. How do I know which is better suited to my needs and situation? Honestly, an ACH loan and a merchant cash advance are like book ends on the same shelf. They are very similar; it is really in the “how” that they differ.
Both of these loans are considered a short-term financing option. A merchant cash advance is based upon regular and predictable volume of credit card transactions. An ACH loan, on the other hand, looks at the average daily balance of your business checking account; thus, an ACH is more of a “cash flow” loan.
Instead of factoring your accounts receivable, an ACH depends on the ability of your lender to withdraw an agreed upon amount from your checking account. The amount to be withdrawn is agreed upon from the start as well as in what intervals. So instead of billing your customers, your account is directly accessed just like any other automated payments you may have.
Keep in mind that the cost of capital can be a little more expensive – you may have a higher interest rate – but the timeframe in accessing the capital will be much faster than a traditional loan. In the end, an ACH lender will be more willing to offer assistance to a small business owner that has poor credit since directly accessing their checking account greatly reduces the risk involved for them.
Interested, but not sure where to look for an ACH lender? The best place to look for lenders is online. A quick search will yield thousands of options. When searching, be sure to ask questions about the fees involved; don’t go with the first lender that shows interest in your situation.
You need to be sure you understand all of the fees and terms upfront. If you are speaking with a representative that is hesitant or unclear, move on to the next option. You definitely don’t want to put yourself in bad deal. Also, make sure you have an estimate of the annual percentage rate.
1st American Merchant Funding is one of the lenders willing to work with you regardless of your situation. An ACH advance with them simply requires an evaluation of your gross monthly deposits of your business checking account over the previous 3-6 months. To qualify, you need a 500 FICO score, have been in business for 6 months, 10K in gross monthly deposits and less than 3 NSF’s per month. It is as simple as submitting a form, receiving a quote and obtaining your funding.
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