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Being in the restaurant business is no easy feat. There’s competition everywhere, and regulations make it increasingly difficult to keep the doors open. But when the restaurant is packed with loyal patrons and the air is filled with culinary delights, there’s nothing else like it in the world.

Sobering research suggests that about one-quarter of all new restaurants fail within the first year of opening their doors. Operating a successful restaurant business for the long term requires savvy financial practices; one of which is having a steady cash flow that helps keep things running when the market slows down. As restaurant owners understand, certain seasons can bring ups and downs in food sales. Restaurant patrons can be finicky. Even one negative online review, or nearby street work can slow business. There needs to be money in the bank at all times to cover expenses ranging from employees to overhead. In these times, restaurant owners turn to merchant cash advance loans to get them over the hump.

Because United Capital Source believes in your restaurant business, and we’ve worked with thousands of restaurant owners over the years, we wanted to put together a guide for merchant cash advances for you. We hope it helps you make the right decision for your business.

WHAT IS A MERCHANT CASH ADVANCE?

Let’s first deal with the basics. In the simplest terms, a merchant cash advance is an advance on your future credit card sales. The amount is factored on your average amount of sales processed by your current merchant account, over at least a 90 day period. The merchant cash advance can be 50% of your monthly sales, all the way up to 125-150% of your sales, depending on how much you need. Then, payments begin with each credit card sale, with a small percentage repaid with future card sales over a generous repayment time frame that is aimed at not hurting your cash flow. This can be a great way to provide fast and easy cash, and you are essentially paying yourself first.

HOW CAN RESTAURANTS USE MERCHANT CASH ADVANCES?

There are a number of ways that a restaurant owner may choose to make use of a merchant cash advance. These reasons can include, but are not limited to:

  • Paying for an unexpected restaurant expense such as equipment or a required license fee
  • Expanding the restaurant with a new line of business or an added feature (e.g. buffet or outdoor bar)
  • Hiring, outfitting, and training a team of new staffers for the upcoming busy season
  • Meeting your budget goals and payroll responsibilities with cash flow during slow sales periods
  • Opening up a second restaurant location to meet customer demand
  • Paying for a new website and marketing campaign to bring in more business
  • Updating the restaurant décor and layout for a more pleasant guest experience
  • Taking advantage of vendor bulk discounts on inventory and equipment
  • Giving your best employees a much-deserved pay raise and benefits
  • Investing in a franchise or a complimentary business with a partner

The choice is up to you as the restaurant owner, how you decide you can use the money. There are no reporting requirements because the advance is based on your sales volume.

WHY USE A MERCHANT CASH ADVANCE INSTEAD OF A LOAN?

You may be wondering why not just take out a small business loan for your restaurant, instead of a merchant cash advance. There are certainly good reasons for both, but in this case we will examine the advantages of using a merchant cash advance. For one, the funding amount can be higher and easier to obtain than a small business loan, because it offers as much as 1.25-1.5 times the credit card sales over a certain period of time. A small business loan may have a set initial amount that can be borrowed and is based on a myriad of financial statements. A merchant cash advance also has more flexible repayment terms, which occur with each future credit card sale. There are no monthly payment dates to worry about as a tiny percentage of each sale is allocated to the advance payment.

WHAT IF I HAVE CREDIT CHALLENGES OR AM NEW TO THE RESTAURANT BUSINESS?

Have bad credit or just starting out? No worries! With a merchant cash advance, credit history is not a as large a factor as it would be with a conventional business loan. Instead, the lender looks at total credit card sales over a period of 3 to 6 months, and then sets an advance amount based on that. There are also no signing over collateral as this type of financing is unsecured for the most part. Your merit and ability to run a profitable restaurant are what’s considered.

IF I HAVE TROUBLE REPAYING THE MERCHANT CASH ADVANCE OR IF SALES SLOWDOWN, WHAT DO I DO?

A merchant cash advance is what we like to call ‘recession proof’ because it’s very flexible and terms can be adjusted to meet your business needs. If at any time business takes a downturn or you are facing repayment problems, it’s up to you to pick up the phone and request a review of your account. In just a few minutes, we can get you back on track with adjusted payment dates. Just keep processing your credit card sales normally in the meantime.

HOW CAN I GET THE BEST RATES AND FAIR TERMS WITH A MERCHANT CASH ADVANCE?

Getting the best rates for a merchant cash advance and small business loans can be a relatively painless experience. United Capital Source has access to a wide network of lenders and resources. The application process takes just minutes by phone and forms can be completed online. Have your merchant account information ready so we can assist you and get you the lowest rates. The recent formation of the Marketplace Lending Association speaks to the dedication of transparent policies and clear, ethical terms.  You can be confident when you connect with the team at UCS, you will have direct support with getting a merchant cash advance quickly and at today’s best rates.

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