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ACH business funding is a form of business financing where you receive a lump sum of capital upfront and repay it through fixed daily or weekly debits withdrawn automatically from your business bank account via the Automated Clearing House (ACH) network. The ACH network is the same electronic system used for direct deposits, bill payments, and bank-to-bank transfers across the United States.
Unlike credit card split funding, which requires a payment processor to withhold a percentage of card sales, ACH funding works directly through your bank account. This makes it available to any business with a bank account and consistent revenue deposits, regardless of whether you process credit card transactions.
ACH-based funding has become the dominant form of alternative business financing in the United States. According to industry estimates, the majority of merchant cash advances and revenue-based funding products issued today use ACH debits rather than the traditional credit card split mechanism. The shift happened because ACH debits expanded the eligible market beyond card-processing businesses to include service companies, contractors, wholesalers, and any business with regular bank deposits.
The structure is simple: a funding company purchases a portion of your future receivables at a discount. You receive the purchase price today, and the funder collects the purchased amount over time through daily or weekly ACH withdrawals from your bank account. The total amount you repay (the purchased amount) is calculated by multiplying the advance amount by a factor rate, typically between 1.15 and 1.50.
ACH funding involves a direct relationship between the funding company and your business bank account. Here is the step-by-step process from application to final repayment.
You submit an application along with your last 3 to 4 months of business bank statements. The funder analyzes your bank statements to determine your average monthly deposits, daily ending balances, and overall financial health. They look at the consistency of your deposits, whether you have regular negative balance days, and how your revenue trends over the review period.
ACH funders use a bank-statement-driven underwriting model. The key metrics they evaluate include your average monthly deposits (minimum $10,000 for most funders), your average daily balance, the number of negative balance days per month, existing ACH obligations from other funders, non-sufficient-fund (NSF) occurrences, and the overall trend of your revenue (growing, stable, or declining). Most funders can underwrite and approve an application within the same business day.
If approved, you receive an offer that specifies the advance amount, the factor rate, the total payback amount, the daily or weekly debit amount, and the estimated repayment term. For example: $40,000 advance at a 1.30 factor rate equals $52,000 total payback, collected through $520 daily debits over approximately 100 business days (about 5 months).
When you accept the offer and sign the funding agreement, you also sign an ACH authorization form that gives the funding company permission to initiate debits from your business bank account. This authorization remains in effect until the full purchased amount has been collected.
The advance amount is deposited into your business bank account, typically within 1 to 3 business days. Starting the next business day after funding (or a few days later, depending on the agreement), the funder begins withdrawing the agreed-upon daily amount from your account. Debits occur Monday through Friday on business days, excluding weekends and federal holidays.
The daily debits continue until the full purchased amount has been collected. Unlike credit card split funding, where the repayment timeline is variable, ACH funding with fixed daily debits follows a predictable schedule. You know approximately how many business days it will take to repay the full amount.
The terms "ACH funding" and "merchant cash advance" are often used interchangeably, but there are meaningful differences that matter to business owners evaluating their options.
A merchant cash advance in its original form involves the purchase of future credit card receivables, with repayment collected through a percentage split at the payment processor. ACH funding involves the purchase of future receivables (from any revenue source, not just credit cards), with repayment collected through fixed daily or weekly bank account debits.
The critical difference for your cash flow is this: traditional MCA repayment (via credit card split) fluctuates with your sales volume. ACH repayment is a fixed amount regardless of how much revenue you generate on any given day. If your daily ACH debit is $500, that amount is withdrawn whether you had a $5,000 revenue day or a $500 revenue day.
This distinction matters most for businesses with variable revenue. A restaurant that does $8,000 on Friday and $2,000 on Tuesday faces the same $500 ACH debit on both days. With credit card split funding at a 15% holdback, the restaurant would pay $1,200 on Friday and $300 on Tuesday. The split funding model naturally accommodates the revenue variation, while the ACH model requires you to maintain sufficient bank balances every business day.
Many in the industry now use the term "MCA" to describe both structures. When evaluating an offer, always ask specifically whether repayment is via credit card split or ACH debit, as this significantly impacts your daily cash flow management.
ACH funding has broader eligibility than credit card split funding because it does not require credit card processing. The typical qualification requirements include:
Businesses that are particularly well-suited for ACH funding include service companies, contractors, medical practices, wholesalers and distributors, e-commerce businesses, trucking companies, and any business with consistent monthly revenue that flows through a bank account.
Understanding the cost structure of ACH funding requires familiarity with factor rates, which work differently from traditional interest rates.
ACH funding uses factor rates rather than annual percentage rates (APR). A factor rate is a decimal number, typically between 1.15 and 1.50, that is multiplied by your advance amount to determine the total repayment amount. For example, a $50,000 advance at a 1.25 factor rate means you repay $62,500 in total. The cost of the funding is the difference: $12,500.
Factor rates are not directly comparable to APR because the total cost is fixed regardless of how quickly you repay. If you repay a 1.25 factor rate advance over 6 months, the effective APR is much higher than if you repay the same factor rate over 12 months, even though the dollar cost is identical. This is an important consideration when comparing ACH funding to interest-bearing products.
ACH funding terms typically range from 3 to 18 months, with the most common terms falling between 4 and 12 months. Shorter terms mean higher daily debits but lower total cost because you are done repaying sooner. Longer terms mean smaller daily debits but the funding costs more in total because the factor rate is typically higher for longer terms.
| Feature | ACH Funding | CC Split MCA | Bank Loan |
|---|---|---|---|
| Repayment Method | Fixed daily/weekly ACH debit | % of daily CC sales | Fixed monthly payment |
| Requires CC Processing | No | Yes | No |
| Payment Flexibility | Fixed (same amount daily) | Variable (adjusts with sales) | Fixed (same amount monthly) |
| Approval Speed | Same day to 2 days | 1-3 business days | 2-8 weeks |
| Minimum Credit Score | 500+ | 500+ | 680+ |
| Collateral | Not required | Not required | Often required |
| Typical Factor Rate / APR | 1.15 - 1.50 factor | 1.15 - 1.45 factor | 6% - 15% APR |
| Funding Amounts | $5,000 - $500,000 | $5,000 - $500,000 | $25,000 - $5,000,000+ |
| Repayment Term | 3-18 months | Variable (based on sales) | 1-25 years |
| Documentation Required | Bank statements | CC processing statements | Tax returns, financials, business plan |
One of the biggest advantages of ACH funding over credit card split funding is its applicability across a much wider range of industries. Because ACH funding is based on bank deposits rather than credit card volume, it serves businesses that may not process many card transactions.
Plumbing companies, HVAC contractors, electricians, landscaping services, cleaning companies, and other service businesses often receive payments via check, ACH transfer, or cash. These businesses do not have the credit card volume needed for split funding but do have consistent monthly revenue flowing through their bank accounts, making them strong candidates for ACH funding.
General contractors, subcontractors, and construction companies frequently need capital to purchase materials, hire workers, or bridge the gap between project milestones and payment. ACH funding provides fast access to working capital based on documented revenue rather than credit card sales.
Trucking companies, freight brokers, and transportation businesses operate on tight cash flow cycles. Fuel costs, driver wages, and maintenance expenses are ongoing, while receivables from shippers and brokers can take 30 to 90 days to arrive. ACH funding bridges this gap effectively.
Medical practices, dental offices, veterinary clinics, and other healthcare providers often have a mix of insurance reimbursements and patient payments. The insurance portion flows through bank deposits rather than credit card terminals, making ACH funding a natural fit for these practices.
E-commerce businesses receive revenue through platforms like Shopify, Amazon, or PayPal, which deposit funds into bank accounts on a regular schedule. These deposits count as revenue for ACH underwriting purposes, making ACH funding accessible to online-only businesses.
Wholesale businesses and distributors typically deal in large invoices paid by check or wire transfer. Their bank statements show strong, consistent deposits that ACH funders evaluate favorably, even though credit card volume may be minimal.
Applying for ACH business funding through Merchant Fund Express is designed to be fast and straightforward.
Fill out the online application on our website. It takes about 5 minutes and asks for your business name, industry, monthly revenue estimate, time in business, and desired funding amount. There is no hard credit pull at the application stage.
Upload or email your last 3 to 4 months of complete business bank statements. These are the primary documents used to evaluate your application. Complete statements showing all pages with all deposits and withdrawals are required.
Merchant Fund Express submits your application to our network of ACH funding companies. We present you with the best available offers and explain each one in clear terms: the advance amount, total payback, factor rate, daily debit amount, and estimated term length. We help you compare options so you can make an informed decision.
Once you select an offer, you sign the funding agreement and ACH authorization electronically. All terms are clearly disclosed, including the total cost, payment schedule, and any fees.
The advance amount is deposited directly into your business bank account, typically within 1 to 3 business days. Daily ACH debits begin on the next business day or within a few days of funding, depending on the funder's process.
Daily debits are withdrawn automatically on each business day until the full purchased amount is repaid. You can monitor your progress by tracking the total debits against the purchased amount in your funding agreement.