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Why Restaurants Use Merchant Cash Advances?


RestaurantA cash advance is a payment made out to a merchant in return for a set upon percentage of debit and credit card sales. Cash advance institutions provide businesses with a lump sum amount against that business’ future credit and debit card sales. Cash advances are mostly utilized by restaurant and retail companies that usually have strong credit card sales.

When it comes to a restaurant cash advance, repayments are automatically handled by the respective credit card processing company. This works by taking an agreed upon percentage on the daily debit and credit card sales. The cash advance repayment structure results in fluctuating repayments amounts that are dependent on the business’ cash flow. This translates to paying less amounts in periods of reduced sales and paying more in periods of increased sales.

Many cash advance recipients do not qualify for other traditional sources of funding such as a bank loan due to their lack of collateral and / or bad credit. With a merchant cash advance the restaurant is able to have a fast source for its working capital with the following benefits:

• Acquire new equipment
• Modernize restaurant design and decor
• Utilize volume discounts and limited-time offers from suppliers
• Establishing a new location
• Ramp up capacity in response to an upswing in demand
• advertising and Marketing campaigns
• Riding out a slow sales period

Restaurant merchants favor the cash advance funding option it presents to their businesses. Apart from freeing funds where other traditional lenders such as banks would decline to advance funding, cash advances are popular because of their simple process and almost instant liquidity. This makes restaurants especially attracted to this model of financing as it offers access to quick business to remain competitive.

With a merchant cash advance, a restaurant owner is equipped to anticipate and handle the volatile food market. This ability provided by a cash advance to seize emerging opportunities and cater to the evolving food service industry might just be the difference between a hot spot restaurant and that of a struggling business.
A restaurant cash advance is the most preferred source of funding by restaurants due to the following factors associated with a cash advance:

• Quick turnaround
• Application process is easy
• Sales -based repayment
• Low entry bar

The food service industry, especially restaurants have been known to use merchant cash advances for funding their operations. Restaurants operations are such that access to quick funding is important for the restaurant to continue being competitive. Hence the popularity of merchant cash advance among restaurant owners, a merchant cash advance provides near instant access to funds.

With business capital fast becoming hard to obtain during these tough economic times, many restaurant owners are turning to merchant cash advances as alternative funding options. With a merchant cash advance, a merchant is guaranteed an easy application process and fast funds approved. Unlike other funding options that require some form of guarantee, this type of funding is solely dependent on the credit and debit card sales.