What is an ACH Business Loan?
An ACH business loan is a term used to describe non-traditional business financing products that take a fixed payment usually weekly or daily Monday-Friday out of the business checking account for repayment. A bank or credit union do not typically offer ACH business loans. ACH business lenders, online business lenders and business loan brokers offer this type of business funding.
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AdvancePoint Capital makes the ACH loan application process a simple, straightforward experience.
What is an Automated Clearing House (ACH)?
Automated Clearing House also known as ACH, is an electronic funds-transfer system run by NACHA, formerly the National Automated Clearing House Association. This payment system provides ACH transactions for direct deposits such as payroll as well as expense payments such as business funding payments, consumer bills, tax payments, and many more payment services.
The ACH Network essentially acts as a financial hub and helps people, industries, and organizations move money from one business bank account to another. In recent years, due to a rule changes related to credit and debit transactions made through the ACH, ACH's can now clear in some cases same business day, which allows lenders to collect payments smoothly and efficiently. This process reduces risk.
How do ACH business loans work?
ACH business loans are typically business fundings that offer money to small business based on the businesses revenue, when access to credit from traditional bank financing options are not available. The business funding is repaid by an ACH payment deducted from a business bank account to repay the funding. The ACH loans work with a payment that is typically weekly, but sometimes Monday-Friday.
ACH business loans are also referred to as revenue based loans, cash flow loans or ACH advances. You may also see them described as merchant cash advances (business cash advances) but the merchant cash advance is either a split of future merchant processing or a fixed "convenience" ACH payment.
How much do ACH business loans cost?
The cost of ACH business loans depends on the business owners qualifications and profile as well as which product is chosen whether it be a short term business loan or merchant cash advance. The cost is typically based on a "factor rate" or "interest rate" dep[ending on the business funding selected.
- Factor rates range from 1.13% of the funded amount up to 1.45% depending on the qualifications of the business.
- Interest rates start at 9% and go up to 45% based on qualifications of the business.
Other fees may be applied such as Origination fee, Processing fee, Funding Fee and other items so it's important to look at your offers carefully for total costs.
You can use the calculator here to see costs of an ACH business loan and how the terms may look Business Loan Calculator
ACH Cash Flow Loan Options for Small Businesses
Short-Term ACH Business Loans
Short-term loans are also considered ACH loans because the repayment terms of the loan withdraw payments directly from a bank account. Commonly used for working capital and cash flow.
- Rates starting at 9%
- Fast and simple application
- Based on the revenue of the business
- Fixed weekly payments
- No Prepayment Penalties
Merchant Cash Advances
A merchant cash advance, which is a future receivables sales agreement, has a method of repayment which can be ACH payments daily out of the business's bank account. Credit card transactions or debit card transactions are not necessary for this repayment method. The most common use for this product is to improve cash flow.
- Factor rates starting at 1.13%
- Payments based on future revenue of the business
- Repaid via a split of merchant process or Fixed ACH payment
- Fast and streamlined application process
- No minimum credit score
Most Common Uses of ACH Business Loan
The good news for businesses is that ACH loans can be used for any legitimate business purpose so businesses use ACH loans for many different reasons. The most common reasons include the following;
- Working Capital- The most common reason businesses get an ACH loan is working capital. Businesses are often looking to balance the cash flow of the business and to support operational needs.
- Purchases- A business made need to purchase new equipment or technology like a POS system.
- Expenses- When expenses are high and revenue is low an ACH loan can level things out. Perhaps an emergency expense comes up with a high dollar amount and you don't want to deplete remaining cash reserves.
- Inventory- Purchasing inventory to keep up with customer demand is very important to a business.
- Supply- Some businesses need to purchase supplies for customers before they get paid from the client.
- Business Opportunity- Capitalizing on a time sensitive business opportunity where you need capital fast.
Is an ACH business loan right for you?: The Pro's & Con's
Pro's
- Many owners use this funding product like a cash flow loan to help cash shortfalls
- Qualifications are easier than traditional loans with less restrictive credit requirements
- Fast and simple payment process via ACH.
- The money funded same day to 24 hours
Con's
- Interest Rates and fees are higher than that of traditional financing
- Adding debt to the business
- Debt payment increases monthly expenses
- The possibility of default or delinquency on the ACH loan.
Qualifications for ACH Loans
- The business bank account must be healthy. What we mean by healthy is that your average daily balance in your account can accommodate a loan payment without causing an overdraft or negative balance in the bank account. If your average daily balance in your bank account dips below the lenders requirements you may be denied an ACH loan.
- All forms of personal credit history and business credit considered
- Must include a voided check so the lender can activate ACH loan payments and wire funds to a checking account.
Who Offers an ACH Loan? Where do I find ACH Business Loans
- Marketplace lenders and Loan Comparison Companies- Online comparison sites like Merchant Maverick, Nerdwallet, Lendingtree & Bank Rate refer customers to business lenders
- Online Business Lenders- You can find on an internet search many business lenders who offer ACH loans.
- Business Loan Brokers- Also known as independent sales organizations (iso's), business loan brokers are a great resource for many different business funding products, include ACH loans.
ACH business loan alternatives
If you don't like the terms of an ACH loan from ACH lenders or you can't qualify for one, you many want to consider some alternatives.
Below is a list of alternative business funding options
- Business Term Loans- Term loans have better rates and terms but qualifications are tougher than ACH loans.
- Business Line of Credit- Business line of credit is a revolving line that offers better rates and costs and more flexibility than an ACH loan.
- Equipment Financing- For the specific purpose of purchasing equipment, equipment financing has longer terms and lower payments than an ACH loan.
- Invoice factoring- For those businesses who invoice clients and have a cash flow problem and want to accelerate there receivables, invoice factoring company offers a cheaper solution than an ACH loan.
Below are a list of alternative options that are not business credit products that can service your business needs.
- Personal Loans- There are a lot of new online personal loan lenders who can get you funds for your business even though the proceeds are for a business purpose.
- Credit Cards- Many small business owners use credit cards to support there business for both purchases and to pay expenses.
- Crowdfunding- If your willing to give up equity in your business to get the capital you need crowd funding may be an option to explore.
- Ownership Contribution- Sometimes the owners will prefer giving a loan to the business from there personal funds to avoid the higher cost of business financing.
We offer a diverse range of loans here at AdvancePoint Capital that you can take advantage of today as there are many ACH lenders. We provide information and credible loan options that you can rely on for your business. When traditional routes don’t work for your small business, we offer alternative solutions that can help you gain access to the cash you need to push your company forward. We additionally offer ACH loans for bad credit but your options may be limited and the rates, costs, and terms may be affected by how bad your credit is. If you’re a business owner looking for a simple way to get fast and simple capital, you’re in the right place. Over the years, we’ve empowered countless small business owners with financing solutions that work with their goals.
How to apply for an ACH Business Loan
Applying for an ACH business loan is pretty simple.
- Application-Fill out a 1 page application disclosing both business and personal information
- Documents-Provide 3 months business bank account statements (some cases merchant processing statements as well)
- Offer(s)- Receive an offer with multiple options that show interest rates, terms and conditions
- Selection- Select an option and sign an agreement as well as provide any closing stipulations like a driver's license or proof of ownership or other documents to receive a full approval to fund.
- Funding- Once your loan agreement and stipulations have been cleared by due diligence in underwriting, funds will be sent to your business bank account by ACH direct deposit.
- Payments-Recurring payments are sent up via ACH based on the terms of your agreement. Payments are typically weekly or daily Monday through Friday, auto ACH payments.
Whether you’re looking for an ACH advance, ACH cash loan or short-term business loan option, we’ll find a funding opportunity that aligns with your future needs. AdvancePoint Capital is committed to the growth and empowerment of small businesses seeking the right type of lender to help. If ACH loans aren’t what you’re looking for, we have other fast business loan options that you can use to benefit your company.
Give us a call or contact us today to learn more about our wide selection of ACH loan products that add the convenient and speedy automatic payment process to your loan.
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Repayment Structure and Costs of ACH Loans
The repayment structure and overall costs of ACH loans are critical considerations for any business owner evaluating this financing option. Here’s what you need to know:
1. Clear Explanation of Repayment Schedules and Frequency
ACH loans are repaid through automatic withdrawals from your business checking account. The repayment schedule is typically set at regular intervals—most commonly daily or weekly, though some lenders may allow biweekly or monthly payments. The payment amount and frequency are agreed upon in advance and remain fixed throughout the loan term, providing predictability for budgeting.
2. Detailed Discussion of Interest Rates, Factor Rates, and APR
ACH loans may use either a traditional interest rate or a factor rate to calculate the cost of borrowing.
• Interest rates for ACH loans can range from 9% up to 45%, depending on your business’s qualifications.
• Factor rates, often between 1.13 and 1.45, determine the total repayment amount by multiplying the borrowed sum by the factor rate (e.g., $20,000 x 1.3 = $26,000 total repayment).
• Unlike standard loans, the annual percentage rate (APR) for ACH loans can be much higher due to short repayment terms and frequent payments.
3. Transparency About Additional Fees and Total Cost
In addition to interest or factor rates, lenders may charge various fees, such as:
• Origination fees
• Processing fees
• Funding fees
• Prepayment penalties (with some lenders)
It’s essential to review all loan documents and offers carefully to understand the full cost of the loan, not just the headline rate.
4. Use of Calculators and Repayment Examples
Many lenders and marketplaces provide online calculators to help estimate your daily or weekly payment, total repayment amount, and overall cost. These tools can clarify how different loan amounts, terms, and rates affect your repayment obligations and cash flow.
5. Risks of Repayment Structure: Impact on Cash Flow and Penalties
The frequent, fixed repayment schedule of ACH loans can strain a business’s cash flow, especially if revenue is uneven or dips unexpectedly. Missing a scheduled payment may result in:
• Late fees from the lender
• Non-sufficient funds (NSF) fees from your bank
• Potential negative impact on your business’s financial standing
Before committing, ensure your average daily balance can support the repayment schedule to avoid these penalties.
Summary of Opportunities for Enhancement
To make the most informed decision, compare offers from multiple lenders, pay close attention to all costs and repayment terms, and use available calculators or repayment examples to model how the loan will affect your business’s cash flow.
Eligibility and Typical Users
ACH loans are designed to help businesses that may not qualify for traditional financing but still need fast access to working capital. Understanding who commonly uses these loans and what lenders look for can help you determine if this option is right for your business.
Who Commonly Uses ACH Loans?
ACH loans are most popular among small businesses in industries with frequent transactions and steady cash flow, such as restaurants and retail operations. These businesses often process a high volume of credit card and debit card transactions, which helps demonstrate their ability to handle regular loan repayments. However, ACH loans are not limited to consumer-facing businesses; any company with consistent revenue and bank activity may be eligible.
Typical users include:
• Businesses seeking a specific loan amount (“amount seeking”) to cover short-term expenses or cash flow gaps.
• Companies with an established business checking account and a history of regular deposits.
• Owners who may have less-than-perfect credit but can show strong business performance through bank statements.
Typical Eligibility Requirements
While exact criteria can vary by lender, most ACH loan providers look for the following:
• Average Daily Checking Account Balance: Lenders review your business bank statements to assess your average account balance over the past three to six months. A healthy average daily balance indicates your ability to make regular payments.
• Cash Flow: Consistent cash flow is essential. Lenders want to see steady revenue from business operations, whether from credit card transactions, debit card transactions, or direct deposits
• Time in Business: Most lenders require that your business has been operating for at least three to six months.
• Loan Terms: The amount you’re seeking and the repayment schedule (daily or weekly) are determined based on your revenue and average account balance.
• Bank Account: You must have an active business checking account to qualify, as repayments are withdrawn automatically via ACH transfers.
Startups without a track record of revenue or businesses with low or erratic bank activity may find it difficult to qualify for ACH loans. Lenders prioritize evidence of ongoing business activity and the ability to maintain a sufficient average daily balance.
By understanding these requirements and evaluating your business’s financial health, you can determine whether an ACH loan is a suitable solution for your funding needs.
