Your restaurant is packed to the full every day of the week and receives excellent reviews. Surely this is something to be happy over. But you cannot bask in the glory of your success when you have to consider expenses of modernizing your out of date equipment. Your successful deli may even lose its business to a larger restaurant chain that has opened up nearby.

Sufficient funding for restaurants is required to deal with this kind of cash flow nightmares. You need to have adequate capital to put your marketing and promotion plans into action. Or you may need to funds for important matters.  In general, every restaurant whether it is a well-established one or new to the business, needs outside funding unless you run an exceptional restaurant with steady cash flows.

There is always room for expansion, remodeling and upgrading equipment for which the cash flow in your restaurant will not always be enough for. Studies reveal that over 25% of newly set up restaurants fail in their first year, while 80% fail in five years.

Ready access to capital can be the only thing that decides the success or failure of your business. So, it is vital for restaurants to realize the importance of financing. Good funding can help you upgrade, meet the unexpected costs and develop your business.

Let us look at the various choices in funding for restaurants available now and how you can decide on the right funding choice for you.

Benefits of acquiring a good funding source

With the best option of funding for restaurants, you can achieve quite a lot of things including:

  •   Develop the existing restaurant into a more robust one that meets with the growing competition
  •   Open a restaurant in a new locality
  •   Update the interior décor, kitchen, and office equipment
  •   Make use of discounts on inventory while buying from suppliers
  •   Expand the franchise boundary
  •   Spend more on marketing tactics including promotions and advertising
  •   Manage the operating expenditure and payroll during low phases in business

Different funding sources to consider

With funding for restaurants providing so many advantages potentially, restaurant owners should be knowledgeable about the various funding options present so they can make a clear decision on the financing source they want.

Conventional loans

A line of credit or traditional loan is the usual funding for restaurants option that many think of first.

Offered by regional, community and national banks these loans have steep requirements for qualifying. You have to provide sufficient collateral and have a perfect credit score for the loan approval. Although the financing costs are appealing, most restaurants will not meet the requirements.

SBA-supported loans

While the SBA (Small Business Administration) does not loan money outright, it provides the guarantee to approved lenders.  The advantages this type of funding provides include friendly repayment system and competitive rates of interest.

The drawback in this funding option is the strict underwriting regulations that make it nearly impossible to get approval. Further, the process moves at a snail’s pace and the paperwork is cumbersome testing even the most patient restaurant owner beyond imagination.

Business credit cards

This is a common funding for restaurants that is handy in the short term. You can use the funds for furnishings, equipment or any unexpected expenditure.

The drawback with this funding type is the high rate of interest. And the funds you can receive are restricted by the credit limit.

Alternative financing

Alternative funding for restaurants such as Merchant cash advance is an easy way to get the funding you need quickly and without any of the laborious processes associated with the conventional loans. With the failure rate in the industry being high, it pays for restaurant owners to know the right funding that would get them out of a difficult situation and keep the business afloat without much hassle.

Due to the risks inherent in the industry any of the conventional loans and other types discussed above will not work as the lenders will be hesitant in giving the approval.

Minimal requirements

The requirements for becoming eligible for the merchant cash advance funding are very minimal. These include:

  • The restaurant should be in operation for a minimum of four months.
  • Payments should be mostly by debit or credit card.
  • Credit score should be over 500.
  • The paperwork involved is also very minimal as the entire process is done via online. When you have approached a specific funding partner for the advance and reached an agreement, the money will be in your account ready for spending.

Easy and quick cash advance

With merchant cash advance, you can get maximum funding for restaurants of about $100,000 in just a couple of days. This funding is not a loan but an agreement of sale and purchase wherein you receive a huge discounted payment in place of a specific amount of future sales via credit or debit card you make in your restaurant business.

For instance, if you receive funding of about $15,000 up front in exchange for an amount of around $20,000 of the future sales in your restaurant. The discounts can differ based on the agreement terms but they are from 16 to 40 cents per dollar that are funded.

Automated and flexible repayments

The repayment is fully automated. The funding partner gets a specific percentage of the daily sales you make via credit or debit card. The amount is taken directly from the payment processing mode. While the repayments vary, a vast majority of the funding is scheduled to be over in a span of 12 months.

With repayment depending on a percentage of daily card sales that is predetermined, the amount varies every day. On a day when you see good sales, you will be paying more and when there is a slump in the sales, you will repay less for that day. This type of flexible repayment makes merchant cash advance a highly appealing funding for restaurants that sees seasonal fluctuations.

Provided your restaurant has a verifiable sales record on credit or debit cards you can easily qualify and get the required funds immediately. What makes the merchant cash advance the best funding for restaurants is its easy, quick and flexible payment process. Moreover, your funding application will not be declined because of a tax lien on the payment plan or a discharged bankruptcy on your name.