One of the more innovative products available in the alternative lending marketplace is an ACH loan (sometimes called an ACH advance or cash flow loan). ACH loans are a broad category of business loans that are specific in the way in which they are paid back.

When you apply for an ACH loan, a prospective lender (like First American Merchant) will review your business’s checking account statements, typically going back several months. Why would they do this? Simply to get a sense of your average daily closing balance, which helps them determine how much of a loan to offer you, and for how long.

If you decide to move forward, your ACH loan agreement will include (among other details) the amount of the loan, the duration, the interest rate, the cost of borrowing, and the amount that you’ll pay back on a regular basis. That is where the “ACH part” of an ACH loan comes back into the picture.

ACH stands for Automated Clearing House. Just as how an ACH payment for a TV cable bill or utility bill is automatically withdrawn from a bank account, the repayment amount of your ACH loan is automatically withdrawn on a prescribed date – which can be daily, weekly or monthly (depending on the terms and conditions of the loan agreement). What’s more, the amount is always fixed and predictable, which is important because it means that you will not experience any unexpected — and unwelcome — surprises when you manage your cash flow.

The biggest benefit of an ACH loan is that the application and approval process is rapid, and typically takes a matter of days. What’s more, unlike the case with bank loans, impaired credit is not a deal-breaker, 2+ years of credit history isn’t mandatory, and there’s no collateral requirement! If the lender is confident that your business is viable and headed in the right direction, your application is likely to be approved.

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