Make sure your cash flow can accommodate the periodic payment frequency. Here’s what you need to keep in mind to ensure that they can work for your business. Millions of ACH transactions happen every day. Tips for Using ACH Payments for Business Loan Repayment This is because an ACH payment helps mitigate the risk of missing payments. This type of electronic direct debit makes capital available to some borrowers who might not qualify with a more traditional payment model.This makes it easier for many borrowers to smooth their cash flow and avoid having large expenses all due at once. Daily or weekly debits (as opposed to a monthly debit) reduce the size of each payment.The timely and recurring payments help build and maintain a strong business credit profile.It’s more convenient than writing a check, particularly if the ACH debits are automatic and scheduled.Using ACH payments can reduce your costs and save you time. Writing checks, paying for processing fees and postage all take time or money. ACH payments can be more cost-effective.

Benefits of ACH Payments for Business Loansīenefits of ACH payments for the borrower include: An example would be a business-to-business transaction, like a borrower repaying a small business loan. This means that the lender is requesting the money transfer. An example would be giving your employees their paychecks via direct deposit.Īn ACH debit on the other hand, pulls money from the payer’s account. This means the payer is asking the network to transfer the money. The main difference between these two is who is asking the ACH Network to initiate the money transfer.Īn ACH credit pushes money into someone’s account. There are two types of ACH payments - an ACH credit and an ACH debit. While some lenders still accept payment by check, electronic payments have become increasingly common - particularly with online lenders. Repayment for a line of credit is automatically deducted on a weekly basis. OnDeck term loans come with either a fixed daily (every business day) or weekly ACH payment. Most lenders, including online lenders like OnDeck, prefer to accept business loan payments through an ACH electronic funds transfer (EFT) directly.

Roughly 90% of all electronic payments are handled through the ACH network, including direct deposits and most likely your credit card payment, mortgage payment or automobile payment. This is different from using a debit card, which does not allow the third party direct access to your account. This network is governed by the non-profit National Automated Clearing House Association (NACHA) and is overseen by the Federal Reserve.Īn ACH debit wire transfer occurs when you explicitly allow a third party (vendor, merchant or lender) to have direct access to your business checking account to withdraw the funds you owe. The Automated Clearing House Network (ACH) is used for processing electronic credit and debit transactions in the United States. One of the many benefits of ACH payments is simplifying small business loan payments for borrowers. The money is taken straight from your bank account, which allows for same-day, direct payments between two parties. However, ACH payment processing has also become popular.ĪCH payments are designed to make things quick and easy. Instead, you may use a debit card or a business credit card for quick payments. With the invention of new payment methods and technologies, using checks seems slow and many businesses need to move faster than ever.

It’s rare to make a payment with a paper check today.

What is an ach debit or credit