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Also known as a business cash advance, an ACH loan—or automated clearing house loan—is a type of short-term business financing. Compared to other types of loans, ACH loans are easier to qualify for, because the lender can access your bank account directly for electronic repayments. A business cash advance gives you an advance on your future sales based on your last three to six months of total sales revenue and outgoing expenses. You’ll then pay back a fixed percentage of predicted revenue over 6, 12, or 18 months.
An ACH loan and a Merchant Cash Advance (MCA) could probably be considered siblings. While an MCA loan is really an advance based upon your regular and predictable volume of credit card transactions, an ACH loan should really be considered a “cash flow” loan. Instead of looking at your credit card transactions, the lender looks at the average daily balance of your business checking account.
The ACH designation really applies to how the lender is paid. ACH refers to the lender’s ability to withdraw an agreed-upon amount directly from your checking account at agreed-upon intervals. This is different from factoring your accounts receivable because instead of billing your customers and collecting from them, they directly access your checking account in much the same way automated payments might go to your mortgage lender or a utility company from your personal checking account.
In many ways, ACH Loan repayments emulate automatic payments you would set up for a credit card or utility bill payment. These types of payments often use the Automated Clearing House method, too. This type of loan was originally formulated for businesses that do many credit or debit card transactions daily–primarily in restaurants or retail operations. Now, though, this loan is commonly offered to pretty much any company, even businesses that aren’t consumer-facing. If this is the case, lenders will typically look at your bank deposit activity instead of your credit card transaction activity.
ACH Loans are popular because they are a relatively fast way to raise a decent amount of capital, funding that can be used to renovate a storefront or hire seasonal help.
The automated and fixed nature of ACH Loans is preferred by many, too, because you don’t have to worry about logging into an account every month and paying varying amounts.
ACH Loans are a solid option if your FICO credit score is less than ideal but you can show a consistent, repeated number of transactions into your business bank account. Additionally, most financiers do not require a hard credit check.
Estimate Your PaymentsEstimate How Much You May Qualify ForTerms and ExplanationHow to Calculate Payments
To make the best use of this ACH loan calculator, you’ll need a few additional pieces of information. The calculator requires the following:
You will get the estimated daily payment, weekly payment, and total payment.
You can also estimate how much you may qualify for if you take out an ACH loan. Once you fill out your information, the calculator will give you a range of dollar figures within which you may be able to borrow. This will give you an idea of the types of expenses you may cover and whether or not you might need to seek additional financing elsewhere. The inputs for this calculator include:
This is the month and year your business officially started operations.
This refers to the total amount of money your business makes during a 12-month period.
Last month’s deposits show how much money you deposited into your business bank account in the previous month.
This is where you select your business’ estimated credit score.
Here are the essential pieces of information you’ll need to enter and notice as outputs on our ACH loan calculator.
This refers to the amount you’d like to borrow. In most cases, your business revenue will dictate how much you’ll receive.
Loan term is how long you’ll take to repay your loan. Since ACH loans are short-term loans, this may be anywhere from a month to a year or so.
Some lenders will automatically withdraw funds from your bank account on a daily basis until your loan has been paid off.
Lenders may also automatically withdraw funds from your bank account every week until you repay your loan.
Total repayment refers to the total amount you’ll pay for your ACH loan, including principal and interest.
ACH loans provide quick access to capital, and, even if you don’t have stellar credit, they may still be able to provide you with the funding you need. Like other forms of financing, ACH loan payments are determined based on the loan amount, interest rate, term, and any other fees.
As indicated in their name, ACH loans withdraw payments via ACH—or directly from your business bank account—on a daily or weekly basis. You’ll agree on the payment amount and intervals with the lender in advance, so there won’t be any surprises. Since lenders can easily access your account and collect repayments, ACH loans are a breeze to qualify for, even if you have fair credit or bad credit.
ACH loans offer lightning-fast access to cash and are therefore designed for faster repayment, too. That being said, it’s misleading to look at ACH loans with a traditional APR because they’re not designed to be repaid over a years-long process. Instead, it makes more sense to calculate based on a daily or weekly payment. Typical loan terms for ACH loans range from one to 14 months.
At Lendio, we don’t charge an application fee for access to our network of 75+ lenders, but many other lenders do. If you’re shopping around, inquire about potential application fees before you apply.
You will also want to consider any potential origination fees, charges many lenders include upfront to cover the cost of funding a loan. Keep origination fees in mind to account for the total cost of the loan.
ACH stands for Automated Clearing House Network. Run by an organization called the National Automated Clearing House Association (NACHA), this network electronically moves money between bank accounts across the U.S. ACH is used for a variety of transactions, like paycheck deposits (which push money into accounts) and repayment debits for ACH loans (which push money out of accounts).
ACH payments are a way to transfer money into and out of bank accounts, without using cash, paper checks, credit cards, and wire transfers. These payments can easily move money in and out of accounts.
Since ACH loans are short-term loans that are easy to qualify for, interest rates are usually quite high. It’s not uncommon to find an ACH loan with a rate in the triple digits.
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