What Is an ACH Debit?
An ACH debit is a transaction in which a business authorizes a third party, such as a lender, landlord, or service provider, to withdraw funds directly from its bank account.
In MCA and small business lending, ACH debits are common for repayment of advances and loans. They also appear for ongoing obligations like lease payments or insurance premiums.
These debits are important signals for underwriters. Operators track them to understand a merchant’s existing obligations and to assess repayment capacity.
How Does an ACH Debit Work?
ACH debits move money electronically through a centralized network.
- Authorization: A merchant authorizes an entity, such as a lender or landlord, to pull funds from its bank account.
Initiation: On the scheduled date, the entity submits a debit request through the ACH system.
Settlement: The funds are transferred from the merchant’s account to the recipient’s account, usually within one to two business days. - Repetition: Recurring ACH debits may happen daily, weekly, or monthly depending on the obligation.
In Heron, ACH debit activity is mapped during scrubbing.
- Parsing statements: ACH transactions are identified and categorized from bank statements.
- Recurring detection: Regular debits are flagged as ongoing obligations, such as rent or existing advances.
- Risk signals: Debits tied to other funders highlight potential stacking risk.
- Next action: Parsed ACH obligations are written back into CRM fields, giving underwriters a clear picture of repayment capacity.
This automation makes ACH insights available instantly instead of requiring manual statement review.
Why Is an ACH Debit Important?
For brokers and funders, an ACH debit is important because it directly affects repayment ability. Heavy ACH obligations suggest reduced free cash flow, while missed or failed debits raise risk flags.
Heron enhances this step by identifying ACH debits automatically, mapping them to categories, and surfacing stacking risks. This ensures underwriting decisions are based on a full and accurate picture of merchant obligations.
Common Use Cases
ACH debit analysis is applied across risk assessment and underwriting workflows.
- Identifying payments to other funders as a sign of stacking.
- Categorizing recurring obligations like rent, payroll, or utilities.
- Flagging failed ACH payments as risk signals.
- Calculating true repayment capacity after accounting for obligations.
- Tracking trends in ACH activity over time.
FAQs About ACH Debit
How does Heron handle ACH debits?
Heron parses ACH transactions directly from bank statements, identifies recurring debits, and maps them into structured CRM fields for underwriting.
Why are ACH debits valuable for MCA brokers and funders?
They reveal existing financial obligations that impact eligibility, repayment capacity, and appetite fit. Without analyzing ACH activity, underwriters may miss critical risks.
What outputs should teams expect from ACH debit analysis?
Teams can expect structured CRM fields that categorize obligations, highlight stacking risks, and provide a clear view of recurring expenses.