Merchant Cash Advances For Restaurant Financing

The thing about restaurant financing is that it has to obtained and used at exactly the right moment for it to help grow the business. Such timing allows the restaurant to keep the faith of its employees and suppliers. It also helps the restaurant hire more staff when most required, and fund promotions, do advertising, and in general expand the business.

Normal loans are hardly going to help with these funding needs, because the loan money would arrive like the cavalry in western movies – after the dust settles. The real hero who can save the town here is something called a merchant cash advance (MCA). It might be instructive to do a comparison of these MCA against traditional loans.

There are four main differences to consider. First, unlike traditional loans that need some form of security, an MCA is unsecured. It doesn’t need any security or a down payment, and average credit is usually enough for approval. The approval rate for MCA is also comparatively very high and very fast (one to seven days).

The next key difference is that MCA can be used for anything the restaurant urgently needs the money for. This includes things like payrolls, ads & promotions, temp hires and material purchase for large orders, etc. Traditional loans, on the other hand, are usually only granted for tangible and capital assets like equipment. This flexibility in using the advance for any purpose required can provide a big boost to a struggling restaurant.

Next, there is also a major difference in how the amount is repaid. Traditional loans have a fixed repayment period and fixed monthly payments that have to be sent to the lender, no matter what. But an MCA repayment is linked to the restaurant’s future credit card sales and the lender only gets a percentage of the card transaction volume. This is very helpful for the restaurant in case business is not so good during the repayment period.

Also, an MCA does not an associated interest rate. The principal on traditional loans needs to be repaid along with the interest due, all of which is factored into the monthly payment schedule. But with an MCA, all that happens is that a specific part of the restaurant’s future credit card receivables are sold at a discount to the lender.

As for the details, the standard routine for merchant cash advances is that the restaurant hands over around 15% to 20% of the card sales to the lender. In return, the restaurant owner gets an advance that’s somewhere in between 70% to 100% of the restaurant’s monthly card transaction amount. But if required, lenders can provide advances that equate to over twice the monthly card sales.

While the exact repayment period for this kind of restaurant financing will vary based on future card sales, the standard period of repayment is around 6-12 months. The restaurant’s POS and back office systems are reprogrammed in order to split each transaction to the agreed percentage between the restaurant owner and the lender. This ensures that no one has to go through the pain of sending or collecting monthly payments.

Restaurant financing is what you will need if you’re planning for putting up a business. will aide you in looking for merchant cash when you need it.

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