ACH vs Lockbox

Plenty of business owners don’t want to change their processor for a number of reasons. Good rates, a long-standing professional relationship, or multiple business locations make it too difficult for them to do Split-Funding with their prospective lenders. An ACH or Lockbox method may be the answer they need; depending on the size of their Cash Advance, or if they have a positive cash flow.

In a Lockbox approach, the lender creates an additional third party bank account where the business owner’s Visa/MasterCard receivables are deposited. This is where the funds are saved every time the merchant batches out. This usually takes about a day to post into the account. The lender then withdraws his daily percentage, and the rest of the money is forwarded to the merchant’s own bank account. This process usually takes an additional of 24 hours to complete. The only drawback to the Lockbox method is the time it takes before the Visa/MasterCard receivables could be posted. The entire procedure would need 3-4 days. However, this is a great solution for business owners who want privacy.

The Automated Clearing House (ACH) method is simpler and quicker. Instead of switching over to the lender’s preferred processing company, a business owner can stay with his current one as his Visa/MasterCard receivables are deposited into his bank account as usual. The only difference is that the merchant gives the lender access to his online bank account. The lender then debits his percentage everyday through this method. For business owners who are concerned with security, some banks offer limited access setup upon request.

Both these methods rely on the lender to manually debit their percentage everyday. Lockbox and ACH may not be available to all merchants; especially those with poor cash flow. There may also be an additional fee for using these types of services.

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