3 Funding Options to BOOST Your Restaurants Revenue.
#1. Restaurant Term Loan - Running a restaurant takes a lot of dedication and constant cash flow. For quick restaurant financing, term loans may turn out to be your best solution. This new alternative to traditional bank loans offers several advantages and delivers the cash you need for your restaurant in record time, often times in as little as a few days. Our term loans range from $50,000 to $1 Million with rates between 7.99% to 24.99% APR.
The approval criteria for restaurant term loans are much like those of restaurant bank loans. You’ll need a financially profitable restaurant that’s been operating for at least one year and taking in $1 Million or more annually. It's important to know that both your personal and restaurant financial history, as well as your credit scores will most likely be the deciding factor during the application process. This includes your FICO and SBSS score. Term loans are tailored to finance restaurant owners with a profitable restaurant and great personal credit.
Unlike bank loans, collateral is not typically required for term-loan approval, depending on the amount borrowed; signing a personal guarantee to repay the loan should be sufficient. Another important area that sets these loans apart from bank financing is turnaround time. While bank loans require a wait of two to six months before disbursement, you should have your term-loan funded within about a week of completing the application.
A term loan is what most people think of when they think of restaurant lending. They are loans with a set repayment time, set number of payments, and have a fixed or variable interest rate. The terms of the loans vary, from 1 year to 4 years fully amortizing. You can use a restaurant term loan to meet virtually any restaurant need, including purchasing restaurant equipment or inventory, working capital, paying back other debts, meeting tax obligations, or large single purchases. Our term loans have no pre-payment penalty, and they can be re-financed to better rates as your restaurant improves.
#2. Restaurant Cash Flow Loan - Even if your restaurant is growing, you may find yourself needing extra cash to cover day-to-day expenses such as payroll, rent and inventory, or to pay for short-term projects that could grow your revenue in the long run. Uneven cash flow is one of the biggest challenges of restaurants throughout all industries. In a perfect world, you’d walk into your local bank and walk out with a restaurant loan long before you wound up in a cash crunch. Well, those days are long gone! If you haven’t been in restaurant at least two years, or lack good credit and collateral, chances are a traditional bank loan is never going to happen.
In order to deal with this shortfall, a cash flow loan may be your best option. For this type of restaurant financing, lenders provide you funds and use your future expected cash flow as collateral for the loan. You’re essentially borrowing from cash that you expect to receive in the future by giving the lender the rights to a predetermined amount of these receivables. These are primarily used for working capital or take advantage of short-term ROI opportunities. Your credit scores will usually be checked, but they play less of a role. As the name indicates, the lender is more concerned with inspecting your cash flow (usually bank statements) to approve your application. Turnaround time is another great feature of a cash flow loan, as funding usually takes place in a matter of days.
A restaurant ash flow loan may be used for any restaurant expense, but some common uses are:
Working capital for restaurants
High ROI short-term opportunities
Purchasing highly-discounted inventory
Short-term cash flow loans are best used for short-term projects that would divert money from day-to-day expenses but ultimately grow your restaurant, like taking on a big contract with a major company or adding extra seating in your restaurant. If you need cash fast, a cash flow loan may be your lifeline.
#3. Restaurant Merchant Cash Advance or Credit Card Cash Advance for Restaurants - A Merchant Cash Advance (MCA) can provide restaurant owners with an upfront fixed amount of cash in as little as 24 hours. The funding amount is based upon a percentage of the restaurant's credit card receivables or daily cash balances using historical credit card receipts and bank statements to determine the initial advance. The restaurant pays back the advance, plus a percentage, often referred to as a discount factor, from a portion of their credit card receivables or cash available plus a percentage which is often referred to as a discount factor. The remittances are drawn from the restaurant customer on a daily, or weekly basis until the obligation has been met. MCA's are good options for restaurant owners who may not have strong credit but have lots of credit card activity and need financing quickly.
One of the greatest benefits of a Merchant Cash Advance is that the funds can be used for a host of restaurant expenses. There are typically no restrictions on how you choose to use your Merchant Cash Advance, however some of the more typical uses of an MCA include:
Buying equipment – Could a new computer, desk, telephone, cash register or software come in handy? Money to pay for the purchase of necessary restaurant equipment could help boost your profits. And if this cash isn’t readily available in your account, a Merchant Cash Advance can provide you with these funds.
Paying employees – Instead of running your restaurant like a one-man show, a few extra hands could really help. Spending borrowed money on employee’s salaries can be the answer rather than disrupting your cash flow to cover this expense.
Purchasing inventory – One of the most common uses for a Merchant Cash Advance is buying inventory. It takes products in stock to make restaurant profitable, so it only makes sense to invest in enough inventory to make sure you always have enough to sell to clients.
Expanding the restaurant – If your restaurant is experiencing some success, you might want to start thinking about taking things to the next level. A lump sum of cash might be just what you need to get restaurant booming.
When does it make sense for a restaurant to use a Merchant Cash Advance? An MCA is an option when a restaurant needs access to capital quickly to take advantage of an opportunity to purchase inventory at a discount, a special marketing opportunity, or other short-term capital need. And, because credit requirements are less stringent, it could be an option for a restaurant that does a lot of credit card transactions, but might have less-than-perfect credit.
In addition to the much easier method of obtaining working capital from an MCA provider than from a bank, the Merchant Cash Advance has a lot of incentives when it comes to restaurant financing:
Much quicker approval times from an MCA provider than a bank. This translates to faster cash-in-hand, allowing you to take advantage of current market prices.
Whereas restaurant loans require you to have collateral in order to gain favorable consideration, an MCA simply requires you to be subject to a limited amount of conditions.
A cash advance is also much more beneficial to the cash flow of a company since it does not require any monthly payments or upfront fees that are characteristic of loans.
There is no limitation on how the funds acquired from an MCA can be used. Funds that are loaned through a financial institution must be used for the stated purpose by the restaurant. As a result, money from a restaurant loan has a very narrow scope of action as compared to money that comes from a cash advance.
No UCC-1 is required for an MCA
A restaurant stands to benefit more from an MCA because of how payments are made. So, if a restaurant’ income slows down, payments are adjusted to reflect this change in income.
Our expert funding advisors are ready to learn about your restaurant needs to determine if a Merchant Cash Advance is right for you and we do so with speed and transparency.