If you’ve ever researched small business funding options for your restaurant, then you will have come across a merchant cash advance loan. A merchant cash advance is designed for small businesses that receive a large portion of their payments via credit cards or debit cards. Therefore, this makes them an ideal financing solution for those working within the restaurant industry.
Keep reading to learn more about a merchant cash advance, including what it is and whether it’s right for your restaurant.
What is a Merchant Cash Advance?
For small businesses that require funding but lack the assets to serve as collateral, merchant cash advances provide a common and alternative financing option. A merchant cash advance involves securing the loan with future sales made using your card payment terminal.
This makes it a flexible type of small business finance for companies that primarily receive payments via credit cards or debit cards.
How Does a Merchant Cash Advance Work?
With a merchant cash advance, a lender acquires a company’s future cash flow. Then, the business’s future card transactions, together with a fee the lender charges, are used to repay the borrowed funds. The lender usually takes a fixed percentage, known as a “holdback,” from each subsequent sale made via your card terminal until the loan is fully repaid. This also allows the repayment amount to always be sent straight to the lender, thus preventing the business owner from having to withdraw funds from their bank account to make repayments.
Are Merchant Cash Advances a Good Idea for Restaurants?
Now that you understand what a merchant cash advance is, as well as how it works in a restaurant setting, you may be wondering if obtaining one is a good idea for your own business.
Here are the main reasons why a merchant cash advance is a suitable funding solution for those within the restaurant industry:
Flexible Repayments Based on Credit Card Sales
A merchant cash advance is a flexible option because it enables restaurants to pay back the advance while continuing regular business operations. The majority of restaurants rely almost entirely on credit card payments from their patrons. This allows them to capitalize on ongoing operations to meet their financing obligations while managing cash flow estimates and keeping the business running smoothly.
No Need for a High Credit Score
Some small business owners in the restaurant sector find it difficult to get financing due to lower credit scores. Unlike many traditional forms of funding, however, a merchant cash advance doesn’t need an applicant to have a high credit score in order to apply or be approved. This is because your restaurant’s credit card sales act as collateral, thus helping lenders to determine whether you have the financial means to pay back the debt.
Because a merchant cash advance isn’t a loan, but rather a form of credit, you also won’t have to put your credit score at further risk by borrowing capital.
Quick and Easy Online Application Process
After an application is filed, a typical loan from a bank may take anywhere from 30 to 90 days to process. After that, you’ll have to submit a plethora of paperwork, go through time-consuming review procedures, sign complicated contracts, and deal with constant back and forth with the financial institution.
This already puts restaurant owners at a significant disadvantage, as their industry constantly moves at a fast pace. Therefore, when restaurant owners require fast funds for their business, they can’t afford to slow down.
Thankfully, merchant cash advances provided by online lenders, such as Zinch, have a fast and easy application process that can be completed online in just minutes.
Fast Approvals and Access to Funds
There will be occasions when you need to make quick purchases, regardless of whether you’re facing a slow month or seasonal downturn. This is why so many restaurant owners opt for a merchant cash advance over other forms of funding, as their convenience lies in their fast approvals and access to funds.
With a merchant cash advance from Zinch (known as our popular Zinch Flex option), applicants receive an outcome within just 24 hours. Additionally, they are able to access their required funds in as little as two days.
Fewer Lending Restrictions Than Traditional Loans
A merchant cash advance doesn’t have many of the same restrictions that some bank loans have, which limit how business owners can use their money. This means you can spend your acquired funds on anything your restaurant needs, whether that’s new equipment, staff wages, marketing materials, or general working capital.
Restaurant owners feel more comfortable knowing they have greater control over how they can use their funds to help their business grow.
Does Your Restaurant Need a Merchant Cash Advance Loan?
Contact us at (714) 500-6622 to learn more about your small business loan options with Zinch. You could qualify for up to $250,000 in just 24 hours.
