ACH Business Loans: Are They The Right Fit For Your Business?

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Business financing options are seldom simple. Even the simplest loans offered by traditional banks can force you into a slow, tedious process. They can take months to assess you before giving you a loan. In the end, they might not even grant you a loan, even after you’ve been waiting for months.

There are many alternative lending options available, one of which is an ACH business loan. ACH loans offer many businesses a unique borrowing option, but they are quite different from other loans. So, let’s go over what ACH loans are and how they might help your business.

What Is An ACH Loan?

Automated clearing house (ACH) loans are business loans that are best suited for small-medium sized businesses. They are an option that moves money electronically, without the need for wire transfers, checks, or cash. These loans are often compared to MCA loans, as they share many similarities. The difference between the two is centered around how the lender ends up getting paid.

Simply put, ACH loans are B2B (business-to-business) transactions. The lender comes to an agreement with the borrower where the lender buys a business’s future accounts receivable for an upfront sum of cash. The borrower’s business is funded through the ACH, then an automatic repayment process is set in motion. Repayments are conducted regularly, typically daily, though often weekly, through ACH transfers.

An ACH loan allows the lender to withdraw money from your checking account according to the terms of the loan. The borrower and the lender must agree to the payment intervals and amounts before the loan is given. This process is similar to invoice factoring, but differs in the way funds are transferred. Instead of billing and receiving funds from your customers, the lender accesses the funds directly through your checking account. This dynamic is similar to the way you’d make automated payments under other financing options.

Another thing to keep in mind is that ACH loans are more expensive than other options. You’ll face a higher interest rate, but you’ll gain access to funds faster than you would with those other options. This makes ACH loans a better short-term borrowing option.

You can find ACH lenders online, but there are a lot of them to choose from. Not all lenders are created equal, so take your time and shop around for terms that are more agreeable to your business’s situation.

Strengths & Weaknesses

One of the best things about ACH loans is their simplicity. The documentation requirements are far laxer than they are with other business financing options. This is because the repayment process is safer than other options. Credit score requirements are minimal if they’re a requirement at all. They are handed out like candy; few requirements, fast access.

ACH loans are not universally useful, however. They are notorious for their high factor rates and constant repayments. They can put a serious strain on a business’s cash flow, especially when there are delays between your client’s payments to you and your ACH repayments. Failure to repay on any given day can lead to additional fees, further bogging down your business’s financials. In this situation, you can often request that the lender pause automatic repayments until deposits into your business are sufficient.

What Are ACH Loans Used For?

Because of the way they are set up, ACH loans are best used for short-term expenses. They can help you deal with hiccups in your cash flow by creating smaller, more regular debts, as opposed to lump sums that you’d borrow for larger expenses.

Some examples of good uses for ACH loans include:

  • Maintaining inventory
  • Marketing expenses
  • Employee training
  • Manufacturing



At this point, you may be wondering: how exactly are ACH loans different from merchant cash advances (MCAs)? Well, the borrowing process is very similar, but the repayment process varies significantly.

MCA loans are similar to ACH loans because they are both simply the sale of future accounts receivable. However, MCAs are repaid by withholding a portion of a business’s credit card deposits, as opposed to checking account deposits. MCA loans also take repayments in the form of a portion of credit card deposits, as opposed to an automated daily repayment scheme.

How Do I Get An ACH Loan?

To get an ACH loan, start by finding the right lender for your business. After you’ve done that, you’ll have to submit an application. The application will typically require:

  • 6 month’s business financial information
  • Bank statements
  • Driver’s license
  • Business license
  • A voided check


If you’re asking for a lot of money (6+ figures), they will likely require more documentation. After the lender assesses your business, they’ll send you an offer or decline your application. If they send an offer, you’ll typically have several financing options to choose from.

Once you’re all set up, the lender will send you the money and the repayment process will be set in motion. Many lenders work online now, so the whole process is quite streamlined.

Are ACH Loans Right For Me?

This depends on the specific needs of your business. ACH loans are very popular, particularly among businesses that don’t accept credit card payments. Of course, they’re not the best option for every business. In many cases, an MCA loan will be much more useful for your business.

If your business is constantly in the midst of cash flow issues, an ACH loan might be too much to bear. In this case, an MCA loan is usually more advisable. Still, ACH loans are quite generic in how they can be applied and can offer your business the financing option that will keep it going strong.

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