Imagine this: you have a great idea for a way to make your business work better. Maybe it’s expanding your outdoor seating to accommodate increased summer traffic. Maybe it’s adding new equipment to your kitchen to help your staff be more efficient or so you can offer new menu items. But then you hit the wall.
How am I going to pay for it?
The traditional first stop for restaurateurs has been a small business loan, and that route is certainly available to some business owners. But what do you do if a loan isn’t feasible? With markets differing across the country, and banks wanting to accept varying degrees of risk, the terms on loans are not always favorable to the business owner. They can, in fact, be down right prohibitive.
But there’s another option. A merchant cash advance is not a loan, and is a better choice for some businesses. Rewards Network, in fact, offers multiple options for restaurants to get the cash they need to make improvements that will help their business grow.
So, you’re lending me money, right?
No. Merchant cash advance provides the cash you need through a purchase of your business’s future credit card receivables. In other words, we agree to pay you upfront in a lump sum for a percentage of sales you will make over time. Loans are generally fixed and not based on your actual sales. Merchant cash advances are 100 percent relative to the volume of business you achieve through credit card sales.
But I have to pay it back?
Businesses that choose merchant cash advance as a method of restaurant funding don’t pay back a debt the way they do when taking out a loan. When your future credit card sales are sold to the company offering the merchant cash advance, you aren’t repaying; you’re delivering on a purchase already made.
And you are only selling future receivables in exchange for cash to the extent that they actually occur. If you close your doors or otherwise stop earning credit card income, you are under no obligation to pay. With a loan, your business must repay the principal and interest amount borrowed no matter what the ebb and flow of your business looks like.
How long does the approval process take?
Approval on a merchant cash advance can be as fast as 48 hours, while small business loans can involve up to a 60 to 90-day approval process.* Merchant cash advance also has an easier approval process than most commercial loans, which often require extensive business history to be compiled (among other requirements). Many businesses that do not qualify for a small business loan qualify for a merchant cash advance.
How long are the terms?
The average term for completion of payments on a merchant cash advance is up to 12 months. Small business loan repayment is generally structured over a 5 to 10-year term.**
How much is the monthly payment?
That depends. While you will have payment terms based on a fixed percentage of your monthly credit card sales, exactly how much money that is depends on your business’s success at any given time. If you have a slow month, the payment of receivables purchased through our merchant cash advance is lower. If you experience a business boom, your payment is larger and gets you closer to fulfilling the merchant cash advance terms.
Ultimately, merchant cash advance is a very flexible, cash flow-friendly, restaurant funding option for an industry that experiences more extensive roadblocks (and opportunities) than many others.
Need some ideas of how this type of cash flow can help you today? Read on:
*Business News Daily
**The Harvard State Bank and the Small Business Administration