ACH loan: a short-term business loan repaid via daily/weekly fixed ACH debits. 15-40% APR, 6-18 month term. Reports to credit bureaus. MCA: a sale of future receivables at a discount, repaid via daily/weekly ACH debits. 1.20-1.50 factor rate (≈40-100% APR), 3-12 month term. Doesn't typically report to credit. To the borrower, both feel identical — daily debits from the operating account. The cost difference is large: ACH loans are usually half the effective APR of equivalent MCAs. Always shop both in parallel; pick MCA only when ACH loan is unavailable.
The ACH-loan-vs-MCA confusion drives more avoidable cost than almost any other small-business financing decision. The two products debit your account the same way every business day; most borrowers don't know which one they have until they look at the contract. This guide compares the two on legal structure, cost, qualification, and credit reporting. For broader context see MCA vs working capital loan.
Legal Structure (The Actual Difference)
From the borrower's view both are identical: capital comes in, daily ACH debits go out. But legally:
- ACH loan: a loan. Lender is regulated as a lender. Quote uses APR. Principal and interest tracked separately. Reports to commercial credit bureaus and (with PG) consumer.
- MCA: a purchase-of-receivables. Provider buys your future revenue at a discount. Quote uses factor rate. No principal/interest distinction — just total payback. Often does not report to credit bureaus because it's not a loan.
The legal distinction matters because: APR usury caps don't apply to MCAs in most states, MCA enforcement uses different mechanics in default, and credit reporting differs.
Side-by-Side
| Dimension | ACH Loan | MCA |
|---|---|---|
| Legal structure | Loan | Sale of receivables |
| Pricing | APR (15-40%) | Factor rate (1.20-1.50, ~40-100% APR) |
| Term | 6-18 months | 3-12 months |
| Repayment | Fixed daily/weekly ACH | Fixed daily/weekly ACH |
| Credit reporting | Yes (commercial + with PG, consumer) | Usually no |
| Min FICO | 580-650+ | 500-550+ |
| Min TIB | 6 months | 3-6 months |
| Speed | 24-72 hours | 24-48 hours |
Real Cost Example: $50K Capital Need
Same $50K, two structures:
- ACH loan: $50K, 12-month term, 28% APR, daily ACH. Total payback: ~$65,000. Cost: $15K.
- MCA: $50K, 1.30 factor, 6-month term, daily ACH. Total payback: $65,000. Cost: $15K.
Same total dollars on a 6-month MCA vs a 12-month ACH loan — but the MCA carries 6 months while the ACH loan carries 12. The MCA effective APR is double. If the borrower pays back the ACH loan in 6 months early (most allow with reduced interest), the ACH loan ends up materially cheaper.
And the bigger comparison: a 6-month ACH loan vs a 6-month MCA at typical pricing:
- ACH loan: $50K, 6-month, 28% APR. Total payback: ~$57,000. Cost: $7K.
- MCA: $50K, 6-month, 1.30 factor. Total payback: $65,000. Cost: $15K.
Same speed, same daily ACH, half the cost on the loan structure.
Why Borrowers End Up on MCAs
- Sub-580 FICO — ACH loans typically have a credit floor; MCAs flex lower
- Under 6 months in business — ACH loan minimums are tighter
- Already have an ACH loan — lenders cap how many concurrent ACH loans they'll fund; MCA stacks aren't loans so the same restriction doesn't apply
- Marketing — MCA brokers are aggressive; the borrower didn't know an ACH loan existed
When Each Fits
ACH loan fits when
- You qualify (580+ FICO, 6+ months TIB, $10K+/mo revenue)
- You want credit reporting to build business credit
- You're not already running multiple concurrent loans
- The lower cost matters — almost always
MCA fits when
- You don't qualify for an ACH loan (sub-580 FICO, under 6 months, etc.)
- You don't want credit reporting (rarely the right reason)
- You have an immediate cash crisis — but stacking MCAs is the wrong fix
Next Step
If you have an MCA quote in hand and want to verify whether an ACH loan beats it, compare ACH loan and MCA offers — one application reaches both products.