A restaurant cash advance is a cash advance against future restaurant receivables. That is, the restaurant essentially sells a portion of future revenue in exchange for immediate cash for the business. If you need capital for your restaurant, a cash advance may be a good option for your business.
This type of financing differs from a traditional bank loan. In a loan, the business borrows money with the intention of repayment with interest. A cash advance, on the other hand, is the sale of future revenues at a discount. There is no lending involved in a cash advance. For this reason, it may be attractive to businesses that want to avoid loans, which can accrue long-term debt for the organization.
Typically, a restaurant cash advance application requires a credit check, bank statement records, and other financial information, if needed. Once the application is approved, the restaurant can use the cash advance for a wide range of things, including:
- Emergency repairs or purchases
- Tax payments
- Equipment purchases
- Working capital
- Remodeling or expansion
- Employee hiring and wages
- Property purchases
The rates associated with a restaurant cash advance depend on a factor rate. Using the factor rate determined for your application, your rates will be calculated based on the amount you will be getting in the advance. In addition, there will be fees to cover aspects such as underwriting, banking fees, and other expenses. These fees can range from a few hundred dollars to as much as ten percent of your total advance. In addition, there will likely be fees associated with failure to meet repayment terms and other penalty fees.
Whether you need capital to pay vendors, replace equipment, or pay staff, a restaurant cash advance can be a good financial solution for you. Knowing what this financing is and how it works can help you make the decision whether you should apply.