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ACH debit
Also called ACH pull, automatic debit, direct debit.
A pull of funds from your account initiated by the funder under the authorization you signed, and the collection method behind most daily and weekly funding payments.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
When you sign an MCA contract or a loan note you also sign an ACH authorization. It names the account, the amount or the method of calculating it, and the frequency. From then on the funder pulls; you do not push. That is the point of the structure, and it is why funders underwrite the bank account as much as the business.
Amounts can be fixed (a set daily or weekly figure) or variable (a percentage of settled card volume, or an amount reset after reconciliation). Fixed daily debits are the norm even in agreements that describe themselves as a percentage of receipts, with the percentage applied only if the merchant requests a reconciliation.
You can revoke an ACH authorization with your bank and you can add a debit block or filter. Neither cancels the underlying obligation. In practically every funding agreement, interfering with the debits is itself an event of default, separate from missing a payment, and it is usually the fastest route to acceleration.
Returned debits generate a fee under the contract and a return code at the bank. A pattern of returns shows up in the next funder's bank statement review long after the balance is repaid.
Where this one catches people
Business accounts have far weaker unauthorized-debit rights than consumer accounts. Under Nacha rules a consumer generally has 60 days to return an unauthorized entry; a business account debited under a corporate entry code generally has to return it within two banking days. Discovering a wrong or duplicate debit a week later usually means arguing under the contract, not reversing it at the bank.
Worked through
A merchant on a 1,100 daily debit puts a debit block on the account after ten payments. The block stops the pull, but the agreement lists it as an event of default; the funder accelerates the remaining purchased amount and files under the security interest. Nothing was saved and the balance became due at once.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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ACH debit — common questions
What does ach debit mean?
A pull of funds from your account initiated by the funder under the authorization you signed, and the collection method behind most daily and weekly funding payments.
Where does ach debit catch people out?
Business accounts have far weaker unauthorized-debit rights than consumer accounts. Under Nacha rules a consumer generally has 60 days to return an unauthorized entry; a business account debited under a corporate entry code generally has to return it within two banking days. Discovering a wrong or duplicate debit a week later usually means arguing under the contract, not reversing it at the bank.
Is ach debit the same as an interest rate?
ACH debit is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does ach debit apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit, Revenue-Based Financing.
Is there a worked example of ach debit?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside ach debit?
ACH, Acceleration clause, Default, NSF fee, Reconciliation.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.