Restaurant Financing and Merchant Cash Advances

Merchant cash advances had their humble beginnings in the restaurant business. Roughly 15 years ago alternative small business lenders figured out a new type of restaurant financing based on credit card sales. Even with poor credit, no collateral, or newly established restaurant it didn’t matter. As long as you were processing credit cards you could get fast capital or a merchant cash advance. Most restaurants used it for expansion, inventory, and equipment purchasing. The ingenuity of this type of restaurant financing to help restaurants find fast capital was a true game changer. Restaurants didn’t have to go to banks, submit reams of paper work and financials, provide collateral and tax returns, etc….and wait weeks or months to receive a loan. Restaurant owners who needed fast cash had merchant cash advances at their disposal.
Restaurant financing prior to the merchant cash advance product was a difficult process. The merchant cash advance is not a loan at all rather an advance on future credit sales. There is no term on this funding product. The lender providing this advance is repaid a total fee amount on a daily basis. The amount is not fixed. It is a percentage of the daily credit card sales each day. This is called the “hold back.” It is roughly anywhere from 8% to 35% of a restaurant’s (and now any type of merchant processing credit cards) daily credit card sales. The restaurant owner does not have to worry about bouncing checks as the payment is removed prior from him/her receiving the previous day’s merchant processing receipts.
Merchant cash advances greatest advantage is the speed of funding. From applying to funding can take as little as 5 days. In can be a day if it is a returning merchant with a history with a lender. The amount they can borrow is usually a percentage of monthly sales. Some lender may lend 100% of of the credit card sales up to 200%. So if a restaurant shows a volume of $30,000 in credit card sales for the month they may receive as much as $60,000 in an advance. There are other factors that determine the exact funding as well including average number of sales, average sale amounts, and type of credit cards. Restaurants of all types utilize this kind of restaurant financing (or merchant cash advance). Pizza shops, sub shops, sandwich shops, deli’s, fast food franchises, white table cloth, family style buffets just to name a few. Regardless of the type of restaurant, merchant cash advances provide the benefit of fast capital with little hassle. Huge franchises like McDonald’s and Burger King have had franchisees that used this type of restaurant financing. Usually to open a new location. With franchises they can receive merchant cash advances up to $250,000 per location regardless if its a single owner. There is no other “lending” product that can provide this. To apply for a merchant cash advance click here