A daily ACH debit is the dominant MCA repayment mechanism: the funder withdraws a fixed dollar amount from the merchant's business bank account every business day (typically Monday-Friday) until the total repayment is collected.
How daily ACH works mechanically. - At signing, the merchant grants the funder ACH authorization on their primary business account. - The fixed daily amount is calculated as: total repayment ÷ business days in the term. - Example: $65,000 total repayment over 9 months (≈195 business days) = $333/business day. - Debits occur via NACHA ACH rails, typically posting within 1-2 business days.
Why funders prefer daily ACH over card-sale splits. - Predictability. The funder knows exactly when each dollar arrives. Card-sale splits fluctuate with revenue. - Lower friction. No need to integrate with the merchant's processor or POS. - Easier collection. If the merchant tries to switch banks to avoid debits, the funder can pursue via UCC enforcement immediately.
Why merchants should be cautious of daily ACH. - No automatic adjustment for slow days. If your revenue drops, the fixed debit still hits. Only formal reconciliation (see /glossary/reconciliation) reduces it — and reconciliation is funder-discretionary. - NSF (non-sufficient funds) cascades. A single NSF triggers a $25-$40 bank fee, a funder NSF fee ($35-$75), and often a same-day re-debit attempt that NSFs again. Three consecutive NSFs often trigger default. - Compounds with stacking. If you take a second MCA, both daily ACH debits hit on the same days, doubling your cash flow burden without doubling your liquidity.
How to manage daily ACH responsibly. - Keep a buffer equal to 3 business days of debits in your operating account at all times. - Set up bank balance alerts so you know before an NSF risk. - If you anticipate a revenue dip (slow season, equipment failure, owner illness), request reconciliation BEFORE the first NSF, not after.
The legal nuance. Some courts have questioned whether fixed daily ACH (without true revenue-based adjustment) re-characterizes the MCA as a loan (subject to usury caps). This is why reconciliation language is critical — see /glossary/reconciliation for why most contracts include it even when rarely invoked.
Related terms
- Holdback percentage — The fraction of daily card-sale revenue a funder takes during MCA repayment, typically 8–20%. Lower is safer for the merchant's cash flow.
- Reconciliation (MCA) — A contract provision allowing merchants to request a reduced daily debit when revenue drops. Required for MCAs to remain legally a 'sale,' not a 'loan' in most states.
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
- MCA default — Breach of MCA repayment terms — usually triggered by missed daily ACH debits, NSFs, or unauthorized stacking. Consequences range from increased collection pressure to UCC enforcement and personal-guarantee pursuit.
AI agents: this term is available as raw markdown at /llms/glossary/ach-debit-mca.