ACH vs Lockbox

Many merchants are hesitant to change their processor for numerous reasons.  Maybe they have good rates with their current processor, a long standing relationship with them, or have multiple locations and aren’t interested in complicating things.  An ACH and a lockbox method may be available to merchants depending on the size of the advance and whether the merchant has positive cash flow.

In a lockbox advance, the lender creates an additional third party bank account where the merchant’s Visa/MasterCard receivables are deposited.   When the merchant batches out, the funds are deposited into the third party bank account.  This usually takes a day to post into the account.  The lender then withdraws his daily percentage, and the rest of the money is then forwarded to the merchant’s bank account and then it takes an additional day until the money posts into the account.  The drawback of this method is that it takes usually three to four days for the merchant’s Visa/MasterCard receivables to post into his bank account; however this may be a good solution for merchants who are concerned with privacy.

The Automated Clearing House (ACH) method is much simpler and quicker.  Instead of the merchant switching over his processing to the lender’s, he stays with his current processor and his Visa/MasterCard receivables are deposited into his bank account as usual.  The only difference is that the merchant gives the lender access to the merchant’s bank account online, and the lender debits every day from the bank account his percentage.  As stated, this is a much quicker process for the merchant, but he may not feel comfortable with lenders having access to their bank accounts, all though there are methods for setting up a limited access and view with most banks.

The drawback for the lender with both these methods is that he must manually log in everyday and debit the account.  As stated before, this method may not be available to merchants suffering from poor cash flow.  The merchant might have to pay an additional fee for these services.  For top lenders who specialize in ACH and Lockbox advances click here!

To learn more about processing companies click here!