What is a High Risk ACH Small Business Loan and How Can it BOOST My Business?
For starters, an ACH small business loan can also be referred to as a small business cash flow loan, or high risk business cash advance. The ACH designation really applies to how the lender is paid. ACH or Automated Clearing House, refers to the lenders ability to withdraw an agreed upon amount directly from your checking account at agreed upon intervals, typically daily or weekly. This is different from factoring your accounts receivable (A/R), 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 you mortgage lender or a utility company from your personal checking account.
An ACH small business loan, much like factoring or an MCA loan, should be considered a small business short-term financing option. The cost of the capital is more expensive, in other words you’ll pay a higher interest rate, but you’ll be able to access that capital much quicker than a traditional term loan from the bank or other financial institution.
Because a small business ACH loan lender will be able to pull your payment directly from your checking account, it reduces risk to the lender making it possible for small business owners with a healthy checking account but less-than-perfect credit to get a loan.
The Automated Clearing House (ACH) is a network for processing electronic credit and debit transactions in the United States. An ACH debit transfer occurs when you explicitly allow a third party (a vendor, merchant, or a lender) to have direct access to your business checking account to withdraw funds agreed upon by you. Roughly 90 percent of all electronic payments are handled through the ACH network, and include direct payroll deposits as well as electronic payments.
Many small business lenders prefer to accept your business loan payments through an ACH transfer directly. If your mortgage, or an automobile payment, is pulled directly from your checking account every month, an ACH or electronic small business loan payment works much the same way.
For example, most small business revenue based financing options come with either a fixed daily (every business day) or weekly ACH payment. Repayment for a small business line of credit may be automatically deducted on a weekly basis, while high risk small business loan payments are typically deducted daily. While some lenders still accept payment by check, electronic payments have become increasingly common, particularly with online lenders.
High Risk ACH Small Business Loans are offered to high risk merchants by LVRG Funding, one of the fastest growing small business funding companies in the country. There are only a few small business funding companies willing to fund high risk merchants, and LVRG leads the way. High Risk ACH Small Business Loans are available to businesses that have been classified as high risk small business owners, and are therefore unable to obtain bank loans or any other form of financing from traditional lending institutions.
Other terms often associated with a High Risk High Risk ACH Small Business Loan are: Same Day High Risk Small Business Financing, High Risk Business Cash Advance, Unsecured High Risk Business Loans, High Risk Merchant Money Advancement, High Risk Merchant Cash Financing, No Interest High Risk Merchant Loans, Unsecured High Risk Business Loans, and High Risk Business Cash Advances.
LVRG is able to provide High Risk Business Funding to industries most lenders won’t even consider. Some of the high risk industries that we are able to provide fast working capital financing to, are as follows:
Home Businesses • Sole Proprietorship's • California Businesses • Construction • Bail Bonds • Antiques (No Special Orders)• Rental Or Sales Agencies • Collectibles/Memorabilia • Computer Hardware Sales, Service & Repair • Educational Materials / Seminars/ Self Help • Escort Service & Adult Entertainment • Internet Business Lead Lists (All Types) • MLM – Multi Level Marketing (Product Sales Only) • Modeling Agencies & Talent Agencies • Moving Companies • Online Malls • Online / Mail Order • Event Ticket Sales • Private Investigators • Public Relations Services • Real Estate Related Industries • Security Equipment & Surveillance Equipment / Service Providers • Travel Agencies • Web Advertising • Vapor & Hemp
A High Risk ACH Small Business Loan can provide high risk small business owners with an upfront fixed amount of cash, up to $1,000,000 in as little as 24 hours. The funding amount is based upon a percentage of the businesses gross monthly revenue and cash flow, using historical credit card receipts and bank statements to determine the initial advance. The business pays back the advance, plus a percentage, often referred to as a discount factor, from a portion of their cash available plus a percentage. The remittances are drawn from the business customer on a daily basis until the obligation has been met.
One of the greatest benefits of a High Risk High Risk ACH Small Business Loan is that the funds can be used for a host of business expenses. There are typically no restrictions on how you choose to use your High Risk ACH Small Business Loan, however some of the more typical uses include:
Buying Equipment – Could a new computer, desk, telephone, cash register or software come in handy? Money to pay for the purchase of necessary business equipment could help boost your profits. And if this cash isn’t readily available in your account, a High Risk ACH Small Business Loan can provide you with these funds.
Paying Employees – Instead of running your business like a one-man show, a few extra hands could really help. Spending borrowed money on employee’s salaries can be the answer rather than disrupting your cash flow to cover this expense.
Purchasing Inventory – One of the most common uses for a High Risk ACH Small Business Loan is buying inventory. It takes products in stock to make business profitable, so it only makes sense to invest in enough inventory to make sure you always have enough to sell to clients.
Expanding the Business – If your business is experiencing some success, you might want to start thinking about taking things to the next level. A lump sum of cash might be just what you need to get business booming.
Other uses of a High Risk ACH Small Business Loan may include: Marketing Campaigns • Payroll • Franchise Fees • Debt Refinance • Leasehold Improvements • Expansion and Remodeling • Furniture and Fixtures • Machinery and Equipment • Inventory • Real Estate Purchase • Licensing Fees • Working Capital
High Risk ACH Small Business Loans are non-collateral borrowings, meaning there is no asset protection for the lender. Because there is no surety that the merchant borrower will repay the money or collateral protection for the High Risk ACH Small Business Loan, High Risk Business Cash Advance interest rates are higher than banks loans or business lines of credit.
There are a few other reasons your business may be classified as high risk, such as:
- Poor Credit
- Home Based Businesses
- Tax Liens
- Out of the Box Business
- Vapor or Hemp
- New Owner of Establish Business
- Businesses with Large Financial Liabilities
- Files over $200,000
- Many Position Files – Meaning you have multiple small business cash advances or MCA’s currently outstanding
- Construction or Construction Related Industry
Benefits Of A High Risk High Risk ACH Small Business Loan:
In addition to the much easier method of obtaining working capital from a High Risk ACH Small Business Loan provider than from a bank, the High Risk ACH Small Business Loan has a lot of incentives when it comes to small business financing:
- Much quicker approval times from a High Risk ACH Small Business Loan provider than a bank. This translates to faster cash-in-hand, allowing you to take advantage of current market prices.
- Whereas business loans require you to have collateral in order to gain favorable consideration, a High Risk ACH Small Business Loan simply requires you to be subject to a limited amount of conditions.
- High Risk ACH Small Business Loan is also much more beneficial to the cash flow of a company since it does not require any monthly payments or upfront fees that are characteristic of loans.
- There is no limitation on how the funds acquired from a High Risk ACH Small Business Loan can be used. Funds that are loaned through a financial institution must be used for the stated purpose by the business. As a result, money from a business loan has a very narrow scope of action as compared to money that comes from a cash advance.
- No worries about points of upfront fees
- A business stands to benefit more from a High Risk ACH Small Business Loan because of how payments are made.
Electronic Payments are Good for the Lender and Good for the Borrower
A daily or weekly ACH debit makes sense for lenders because it reduces the costs associated with processing a loan payment, ensures that payments are made in a timely fashion, and makes it possible for the lender to identify potential repayment issues within a couple of days, rather than several weeks—giving them enough time to try to help borrowers get back on sound financial footing and meet their commitments.
- ACH payments save the business owner money - roughly $1.22 per check
- It is convenient for the borrower who doesn’t need to take the time to write a check (particularly if the ACH debits are scheduled and automatic)
- The regular and timely payments help build and maintain a strong business credit profile
- Daily or weekly debits, as opposed to a monthly debit, reduces the size of each periodic payment making it easier for many borrowers to smooth their cash flow and avoid contributing to “lumpiness” in having large expenses due at the end of the month. This type of electronic direct debit makes capital available to some borrowers who might not qualify within a more traditional payment model.
Making High Risk ACH Small Business Loan Payments Work for Your Business
Millions of ACH transactions happen every day, but that doesn’t mean much if you can’t make it work for your business. With that in mind, here are 3 things that will help you do just that:
#1. Make sure you have the right kind of cash flow to accommodate the periodic payment frequency. If most of your monthly revenue is attributed to a handful of customers that make payments at the end of every month, a daily or weekly ACH pull from your business checking account might not work and may disqualify you from some loan types. This is one reason most online lenders want to see the last three or four months of bank statements. They want to make sure your cash flow will support the debit frequency (daily or weekly).
#2. Make sure you understand the amount that will be pulled with every periodic payment: A fixed payment will likely be easier to budget for. You’ll also want to determine if payments are only made on weekdays or if they will also take place on the weekends. The more you understand about the process upfront, the better you will be able to budget and prepare for each periodic payment.
#3. Make sure you understand what happens if you don’t have sufficient funds in your account: Nobody wants this to happen, but if it does, what does that mean for your loan? Making sure there is always enough in the account to make the automatic payment needs to be a priority, but sometimes circumstances might leave a business owner short. Most of the time, you’ll know before the payment is due. If that’s the case, reach out to the lender before the payment is attempted to try to make other arrangements.
Making payments electronically is an innovation designed to make small business loan payments seamless and easy for both the borrower and the lender. Ready to see if an ACH small business loan makes sense for your business? Call (855) 998-5874 or click below.