As a restaurant owner, you’re no stranger to the ebbs and flows of running a seasonal business. Sometimes you’re flush with cash, and other times, you may barely be scraping by. You also know how important it is to continually invest in your restaurant so you can stay ahead of the curve. Whether it’s upgrading your equipment, launching a new marketing campaign, or hiring top-notch staff, there are many ways you can use some extra cash to fuel your success.
No matter what the reason, when your working capital is tight, a cash flow loan can make all the difference. In this quick guide, we’ll explain what a cash flow loan is, how it can benefit restaurant owners, and the steps you’ll need to take to secure a cash flow loan of your own. Let’s dive right in.
What is a Cash Flow Loan?
A cash flow loan is a type of unsecured borrowing that business owners can use to fund their day-to-day operations. These types of loans are often used for purchasing inventory, paying rent, meeting your payroll obligations, and covering other similar expenses. They’re typically paid back using the incoming cash flow of the business.
Common Types of Cash Flow Loans
There are several different types of business cash flow loans. Here’s a look at three of the most common.
1. Business Lines of Credit
A business line of credit essentially combines features of both a term loan and a credit card. With this type of loan, your lender provides you with a set credit limit, allowing you to withdraw as much or as little as you need, up to the maximum. Once you pay your debt back in full, it resets, providing you with a revolving pool of funds.
Unlike a traditional business loan, a business line of credit allows you to only pay interest on the funds you’ve actually borrowed. This can make it a good option for restaurant owners who want a backup source of credit, just in case something comes up.
2. Short-Term Loans
A short-term loan is quite similar to a traditional small business loan, except that they have much shorter repayment periods–typically between three and 12 months. These loans have fixed payments that are often made on a daily or weekly basis and are withdrawn directly from your business bank account. Many busy restaurant owners appreciate not having to think about making their payments on time and find that fixed payments make budgeting easier.
3. Merchant Cash Advances
Another common option actually isn’t a loan at all. Instead, it’s an agreement that allows you to receive a lump sum of cash upfront in exchange for a percentage of your future credit card sales. One of the biggest advantages of a merchant cash advance (MCA) is that your payments fluctuate with your income. When the slow season comes, you won’t have to worry about keeping up with a large loan payment. This extra flexibility can be a major benefit for restaurant owners.
Why Do Restaurants Need Cash Flow Loans?
Securing traditional business loans for restaurants can sometimes be a challenge. Lenders often label the restaurant industry as high-risk. And due to the nature of the business, it’s common for restaurant owners to have difficulty meeting the income, asset, and credit requirements set by traditional lenders.
You may find that it’s easier to qualify for a cash flow loan. Once you’ve been approved, you’re free to use the funds in any way you see fit. Taking out a cash flow loan can help ensure you have enough cash on hand to sustain your daily operations and take advantage of business growth opportunities when they become available.
How to Get a Business Loan for a Restaurant
Unlike conventional bank loans, cash flow loans for small business owners require a minimal amount of documentation. Instead of conducting a thorough business credit analysis, lenders who offer cash flow loans typically assess the borrower’s future earning capacity. These loans often don’t require a minimum credit score and do not require you to put up assets as collateral or personally guarantee the loan.
When seeking a cash flow loan from a trusted online lender, such as Zinch, you’ll find that the application process is quick and easy. Just answer a few simple questions, and our lending experts will walk you through the process so you can get the cash you need right away.
Now is a great time to explore the restaurant cash flow loans available through Zinch. Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
