With so many restaurants located all over the world, you do not have to struggle to look for a perfect establishment to visit and get a delicious meal to eat. Besides, thousands of investors are investing in the food industry every year.
Operating a business restaurant can both rewarding and exciting. On the other hand, it can as well be somehow risky, as 80 percent of startup establishments are closed down within the first year in business. For you to avoid such fate and make sure your restaurant business survive and become successful, make sure you implement a solid business plan, provide tasty food and have additional funds.
It is evident that there are so many funding alternatives accessible for your restaurant or foodservice business. Nevertheless, the majority of those options might not be readily available the moment you need them. As many restaurant owners have learned the hard way, the worrying high failure rate of this industry has made financial institutions hesitate to give out loans to eligible restaurant owners. Even if the Small Business Administration partly guarantees the loan, they intentionally decline your loan application.
The scenario makes alternative funding a vital source of financing for the restaurant industry. A merchant cash advance is the most preferred form of alternative funding for many restaurant owners since its lenders can provide up to 100000 US dollars in financing in just a few days.
A merchant cash advance is not a loan in nature; rather it is a purchase and sale contract where you are offered a discounted advance amount. You will repay the advance by giving a percentage of your future credit and debit card sales of your restaurants. For an instant, a financing investor might give you 20000 US dollars advance for the right to 25000 US dollars of your restaurant’s credit and debit future sales. Note that discounts vary depending on the specific conditions of every agreement. The discounts range from 17 to 40 percent of the total amount funded.
Since the repayment plan is automated, your lender will get a fixed portion of your daily credit or debit card sales straight from your payment processing system. Usually, the repayment term varies whereby the most lenders prefer a full refund within six months to one year.
Note that the amount you will be required to pay back will vary each day since the loan repayment is mostly based on a predetermined portion of your daily credit and debit card sales. When your sales are good, you will need to pay more, and when the sales are slow, you will repay less. Its nature of flexibility makes a merchant cash advance an excellent alternative for restaurant owners that encounter seasonal fluctuations.
Basic qualification requirements for merchant cash advance
- Your restaurant must be in operation for at least four months
- Most of your payments must be made by credit and debit cards
- You must have a personal credit score that is above 500
In most occasions, a merchant cash advance can be instigated with a simple online application. Once you get linked with your potential lender and finalize an agreement, your funds will be transferred to your business bank account.