As a restaurant owner, you need financing options to keep operations afloat. While having enough cash on hand to sustain day-to-day operations and grow is the ultimate goal, it’s, unfortunately, a pipe dream for many to get a traditional loan. You need flexible and reliable funding opportunities when a business loan is not an option. A restaurant cash advance provides the opportunity for working capital, purchasing equipment, and effectively navigating the ebb and flow of restaurant ownership.
If your small business wants funding from a traditional bank loan, you may be swimming upstream. Restaurants and the dining industry is an incredibly risky business ventures, something you know all too well. Even if your profits are sound and you’re not having any major issues — you may find traditional loans or funding options limited. Alternative financing options like merchant cash advances provide a reliable and fast route to cash flow that you can take advantage of immediately.
We will show you how your restaurant business can succeed through merchant cash advance funding. Here’s a quick breakdown of what we’ll discuss:
- A merchant cash advance is a fast way to get the restaurant financing you need
- You can use funds from a merchant cash advance however you need
- The application for a merchant cash advance is quick and painless
- Even if you have poor credit, you can get approved for an MCA
- Repayment is flexible and easy with MCA financing
- A merchant cash advance is the perfect financing solution for emergency spending, that a loan can perform as quickly.
How Does a Restaurant Merchant Cash Advance Work?
Merchant cash advances are purchases of future sales by funders to a business. The funder offers to purchase the future revenue of the business in exchange for a "discount". The business receives a lump sum upfront and repays to the funder a set percentage split of the business’s future revenue as repayment. Splits can be either a set percentage split of future credit card processing batches or a weekly or daily, Monday through Friday convenience ACH payment.
The cost for a merchant cash advance is the difference between the lump sum upfront (Purchase Price) and the amount that has to be repaid to the funder (Purchase Amount). It's called a discount because the funder is purchasing the future sales for less than what they will be. This difference is a factor rate.
- The purchase price is $40,000
- The purchase Amount paid back to the funder is $49,000 ($40,000 x 1.225 Factor)
- Factor Cost: 1. 225
- Purchase Percent (split): 15% of future credit card processing
In the above example, the business will be paying back $49,000 with 15% of all future credit card processing batches going directly to the funder until paid in full.
When funders offer a merchant cash advance they predict a repayment time frame based on current sales, Since sales can fluctuate in the future, the exact time of repayment is unknown but is estimated by the funder at the time of offer. Estimates of repayment vary between 3 to 18 months and are based on the risk scoring of the business they are making the offer to.
Benefits of Merchant Cash Advances:
- Flexible repayment terms attached to future restaurant revenue
- Excellent to poor credit score considered. No minimum credit score.
- Provides funds to owners with sub-prime credit
- Payments are attached to the future sales revenue of the business and will fluctuate
Why You Should Get Restaurant Cash Advances
Restaurant owners often need help accessing traditional financing options. This is where restaurant cash advances can be a valuable resource. Cash advances can provide immediate funding to help cover expenses such as inventory, payroll, and equipment purchases.
Additionally, they offer a more flexible repayment structure than traditional loans, which can help restaurant owners manage their cash flow more effectively.
1. Quick Funding & Easy Access to Funds
One of the primary reasons why so many restaurant owners rely on merchant cash advance options is the accessibility of fast funding. Whether you’re having a slow month or in an “off-season,” — there will be times when immediate spending is necessary.
This spending could come in the form of a repair, inventory upkeep, menu redesigns — you name it. Regardless, you can get ahead of day-to-day needs and prepare for the incoming high season. The application process for a restaurant cash advance allows the business owner to get fast funding and the additional working capital needed in 24 hours so that you can work on immediate needs and get the money now!
2. Spend How You Want
While many bank loans and business loans come with lending restrictions that determine how restaurants can utilize funds, a merchant cash advance doesn’t come with strings attached.
If restaurant owners need to use restaurant cash advances for new restaurant machinery, that’s great. If you need to work on marketing materials, cash flow, or general working capital, that’s fine too. The use of funds is completely in your hands with no lending restrictions.
3. Headache-Free Application Process
Another reason why merchant cash advances can benefit your restaurant operation is through a quick and easy application process. This restaurant business world never slows down, which means you’re constantly moving at break-neck speeds to keep up.
Bank loans and other financing will leave your head spinning with tedious and time-consuming loan applications. A traditional loan from the bank can take anywhere between 30-90 days after an application is submitted. From there, you’ll need to supply mountains of documentation, undergo review processes, sign complex agreements, and deal with a possibly drawn-out back-and-forth with the lending institution.
4. Bad Credit, No Problem
Unlike most business loans and traditional funding products, a merchant cash advance doesn’t require a high credit score for approval. You won’t need to risk your credit score by borrowing capital.
Many small business owners in the restaurant industry struggle to find funding due to a less-than-stellar credit history. When times get tough, and you need cash on hand to purchase food, upgrade POS systems, dining equipment, and other restaurant needs — a merchant cash advance offers a way to leverage the restaurant's credit card sales for instant money.
5. Flexible Repayment Based on Credit Card Sales
If we were to line up all of the funding options you have available, a merchant cash advance would certainly win the award for being the most limber. It’s a flexible solution that allows you to repay the advance while maintaining day-to-day operations.
A business owner can choose between the following payment plan:
- Fixed daily payments from a bank account (Business Cash Advance)
- Fixed weekly payments from the bank account (Business Cash Advance)
- Percentage of daily credit card sales from merchant processing (Merchant Cash Advance)
Most restaurants live and breathe credit card sales, so you can take full advantage of ongoing business operations to fulfill your funding needs. This credit card split allows you to easily navigate cash flow projections and maintain operations to grow effectively.
6. Fund Restaurant Emergencies
If there’s one industry that requires emergency spending, it’s the restaurant industry. Unpredictable seasons, malfunctioning equipment, inventory management, changing trends, and sometimes high turnover rate are just a few reasons emergency capital is needed. However, this cash can also go into expanding or improving operations. You need peace of mind through reliable and fast access to cash when you need it most.
As we’ve mentioned, other business loans lack the key advantages that a merchant cash advance offers. Primarily: speed, ease, and flexibility.
Frequently Asked Questions
Is merchant cash advance debt?
A merchant cash advance (MCA) is a debt, but not a loan, because it is only repaid by a percentage of future business sales, unlike a loan.
How do you explain merchant cash advances?
A merchant cash advance (MCA) isn't a loan but a sale of future revenue based on the sales deposited in a business' merchant account. A lump sum of money is provided upfront in exchange for a specified amount of future revenue.
How can I get out of a merchant cash advance?
If the restaurant business entity has no current or future revenue, then the business owner or restaurant is not obligated to repay any remaining balance.
Merchant Cash Advances For Your Restaurant
If you’re looking for reliable and fast merchant cash advance options for your restaurant, AdvancePoint Capital can help. We offer straightforward and quick access to the cash you need for your restaurant. Whether you’ve been denied a loan, you’re tired of looking for a loan, or you know you won’t qualify for a loan — there are always other options. With AdvancePoint Capital, you will get approved in minutes and be well on your way to the cash flow you need.
Many business owners have turned to Advancepoint for their financial needs. Check out our excellent reviews. We provide various options, including a business loan and other business funding products. Contact us today or get a quote through our easy quote finder. We’ll get you approved and put your restaurant in a position to succeed. We also offer a wide range of business loans for restaurants to help with other ventures or avenues for funding, including equipment loan options.