Is a Merchant Cash Advance for Restaurants Right For You?

Wednesday, March 22 2023

Although the US restaurant industry processes hundreds of billions of dollars annually, running your own eatery does not ensure easy profits. In order to grow enough to withstand see heavy competition, you may consider a merchant cash advance for restaurants as part of your funding plan.

If you want to continue providing employment, serving the community with delicious meals, and expanding your popularity into surrounding regions, you need a financial buffer to smooth out the expected cash flow fluctuations. When bank loans take too long and credit issues affect your ability to get traditional financing, a restaurant cash advance from Shaw Merchant Group may be the best choice for you.

What Is a Merchant Cash Advance for Restaurants?

As the name implies, a restaurant cash advance provides immediate funding in exchange for up to 20% of future revenue plus interest. The amount you get depends on past records cash flow and credit ratings. Instead of a bank or other financial institution lending you money with traditional restaurant loans, the company is buying future profits. Payback happens daily or weekly based on revenue instead of monthly at a set amount.

Things to Consider Before Choosing a Restaurant Cash Advance

All financial decisions require careful consideration before signing the contract. When blowing your options for a merchant cash advance for restaurants, consider the following questions.

How many months will it take to pay off the restaurant cash advance? Three term periods exist: 12 to 14 months, 6 to 18 months, and just 4 to 8 months.

What is the factor rate of your restaurant cash advance? Instead of a set interest APR like you get with restaurant loans, and advance determines the total amount you pay back based on a factor rate. If your establishment has great credit and efficient cash flow, your rate may be as low as 1.1, but poor credit companies with fluctuating cash flow could have a 1.5 rate. This number multiplies by the total cash advance to determine your payback amount.

Are there any additional fees to get the cash advance? Some companies that provide merchant cash advance for restaurants charge additional fees for processing, underwriting, closing costs, or bank fees. Shaw Merchant Group offers these unique financing options with no bank fees at all.

How Can a Cash Advance Help Your Food Business Thrive?

All types of businesses that serve food or beverages can qualify for this type of funding. This includes the fanciest sit-down restaurant, a local diner, food truck, concession stands, a tavern, truck stop, or pizza parlor. If your future revenue can cover the advance, you have the opportunity to use immediate funding to improve your location, get new equipment, make updates, add new staff, order repairs and renovations, and launch new marketing campaigns.

When you use the restaurant cash advance wisely, it can springboard your business into higher profits down the road. If you wait too long to improve or upgrade, people will simply stop coming to your restaurant. With the quick cash advance decision on your side, you do not have to wait and worry about whether you can afford to operate or grow your food business.

Merchant Cash Advance for Bad Credit

Sunday, March 19 2023

If you are a merchant, then you know the struggles of even funding everyday operations, at times. A number of factors can affect the amount of free cash that you have available to complete purchasing, pay out payroll, accommodate other business expenses, and anything else that you might need to do to keep your business functioning at a healthy level. When your business finds itself short on cash, one of the best ways to address the immediate situation is with a merchant cash advance. However, those with bad credit often have a hard time getting a cash advance for their business. We’ll show you that merchant cash advances are indeed available for merchants with bad credit and give you the background information and tools that you need to start the process of getting a cash advance for your business, even if you have a history of bad credit.

About merchant cash advances

If you want to get a cash advance for your business, then the first step is actually familiarizing yourself with what merchant cash advances are and how they can help a business to survive. Merchant cash advances are short-term loans issued to small and medium-sized businesses that are having problems maintaining a healthy cash flow. These loans are usually put up against future processing income that the business might otherwise take in. To pay off the loan, the merchant can use the credit card processing income. These loans typically carry a higher interest rate, but are for a shorter-term, providing merchants with plenty of benefit.

How does credit affect ability to finance?

Any business owner knows the importance of credit on the ability to get financing, even for short-term loans. Businesses with bad credit often have a hard time finding a partner for financing, especially if they have had past issues with payments in the past. If you are a business with bad credit, then your options are rather limited when it comes to short and long-term loans. This is the reason that many businesses often turn to merchant cash advance services.

Are there options for merchants with bad credit?

Even though having bad credit is extremely restricting for businesses when it comes to financing their operations, it doesn’t mean that there are no options for businesses that have bad credit. In fact, there are several providers of bad credit merchant cash advances out there, but choosing one might be difficult. When you are looking into merchant cash advance services, you need to be careful who you partner with. Working with a reputable, well-known company that is passionate about helping businesses is the best option. We provide a wide range of merchant services that includes bad credit cash advances because we are in the business of helping our clients. We believe in the potential of your business and want to help you fund your operations, regardless of the challenges that you face.

What are the pros and cons of a bad credit cash advance?

Just like with any business decision that you have to make when under duress, there are pros and cons to taking a merchant cash advance as a business with bad credit.

The most substantial benefit of taking a merchant cash advance is that it will allow you to fund operations and keep your business afloat for the immediate future. A merchant cash advance is not always for businesses that are in bad shape. In fact, many businesses use a merchant cash advances service solely because they are having temporary cash flow problems that prevent them from operations at the highest possible level. WIth a cash advance infusion, they can move more products and make more money.

However, there are also negatives to taking a merchant cash advance. One of the most relevant and significant negatives is that these loans often carry high interest and while they are not meant to be long-term loans, they can become quite expensive if you don’t pay them off right away.

What can you use a bad credit cash advance for?

A bad credit cash advance can be used for any number of purposes. Most commonly, bad credit cash advances are used to fund short-term needs such as payroll, large purchases, renovations, and other large expenses that might come up and interfere with the day-to-day operations of the business. When you get your merchant cash advance, you are typically not limited to what you can use it for. Though, you would be served well to use it for a purpose that will allow your business to pull in money quickly to pay the loan off in a timely fashion. This way, the loan does not accrue as much interest. Regardless of the pinch that you find yourself in as a business owner or manager, you can usually rely on a merchant cash advance to help fund operations and get you through a tough time.

Choosing the Best Merchant Cash Advance Loans

Thursday, March 02 2023

Don’t have time for a traditional business loan? Maybe you don’t have the necessary qualifications, but your business needs money now. Where does that leave you?

A cash advance may sound like a good idea at the time. You need money now and the cash advance offers it. At what expense, though? Lenders charge triple digit interest rates in exchange for the fast cash. That doesn’t sound ideal, does it?

A merchant cash advance loan, though, offers quick access to cash with much better terms. While similar to a loan, it’s not your typical loan. Instead, you sell your company’s future sales whether bank deposits or credit card transactions.

How the Merchant Cash Advance Loans Work

You apply for the MCA loan like any other loan, but the process goes faster. MCA lenders look at your daily credit card receipts to determine how quickly you can pay the loan back. Many businesses get funds in as little as 24 hours.

What you get is a lump sum of cash. You may use it as you see fit. A few examples include payroll, advertising, paying vendors, or buying new equipment. The MCA lender doesn’t dictate how you use the funds.

They do, however, determine how you pay the loan back. You have two options:

Hold back a percentage of your daily credit card receipts
Send daily or weekly bank account debits

Unlike a traditional loan, you make daily or weekly payments. Your payments include interest and fees, which we’ll discuss below.

Merchant Account Loans and Interest

Merchant account lenders determine your factor rate (the cost to borrow) when underwriting your loan. The faster you can pay the loan back and the more stable your sales (credit card or cash), the lower the factor rate.

Factor rates vary between 1.15 – 1.5. Determine your loan cost by multiplying the factor rate by your loan amount. For example, if you borrow $30,000 with a 1.15 factor rate, you’d owe $34,500, paying $4,500 in interest/fees.

Finding the Best Merchant Account Loan

Understand the terms when choosing the best merchant account loan. Consider the following:

Factor rate – This is the cost to borrow the funds. You may see it as a 1.15 factor rate or 15%. Either way, you pay 15% to borrow the funds.
Holdback rate – This is the amount the lender will ‘holdback’ or take from your credit card sales or bank account. You agree upon this amount before taking the money. The greater your sales, the faster you can pay the loan back.
Term – This is how long it will take you to pay the loan back. It may be an estimate, however, since you promise a percentage or holdback rate of your sales. If sales are down, it may take longer to pay the full amount back. The credit card processing loan provides access to fast cash. Essentially, you borrow from your future sales to capitalize on an important purchase, marketing opportunity, or just to keep your business afloat.

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How Merchant Cash Advances Work

If you are a merchant or own a business, you have most likely heard of merchant cash advances before. Merchant cash advances are a common service rendered by merchant services providers that are designed to provide merchants with the cash flow that they may need to fund operations on a short-term basis in the event of a liquidity shortage. However, if you are new to merchant cash advances, there are plenty of things that you are going to want to know before you commit to a merchant cash advance for your business. Knowing everything you can about merchant cash advances is a great thing to help you know whether it is a good option for you in the long run.

What are merchant cash advances?

The first step to knowing whether a merchant cash advance is the right choice for your business is defining what exactly a merchant cash advance is and what the process involves. A merchant cash advance is mostly exactly what it sounds like--an advance on the money that a merchant would otherwise be getting further on down the road from a deposit involving activities like credit card processing. When a merchant is granted a cash advance from their merchant services provider, it means that they will get access to money that would otherwise be deposited into their account in a matter of days, weeks, or months. This usually comes up when a business has an urgent need for the money that they are expecting and they are willing to pay some interest on it in order to receive it early.

Reasons for a merchant cash advance

There are a variety of reasons that you might need a merchant cash advance for your business. One of the most common reasons is that there is a slow-down in business due to factors beyond your control and you need to expedite the funds that you are planning to get in order to meet the short-term obligations and bills for your business. Without a cash infusion, you could quickly find yourself in a bad situation as a business and being left unable to pay bills and staff your business. This is especially relevant in businesses that have slow transaction velocity or have low margin and rely on cash flow to run their business.

Another reason that a merchant cash advance might be needed is to fund a rapid expansion, purchase, or business opportunity that a business doesn’t have cash for right now, but is already owed. If your business had an opportunity come up for purchasing or expansion that you just can’t pass up, then a merchant cash advance could be a way to gain the funding that you need to take advantage of the opportunity and put your business in the best place to succeed possible. Though merchant cash advances do come with higher interest rates than what you would find with a financial institution such as a bank, they also provide you with access to faster funding than a regular bank funding solution.

How does it work?

For those that want to get the most out of their merchant cash advance, it is necessary to know exactly how it works so that you can get the insight that you need to decide if it is the right choice for you. The merchant cash advance process is a pretty simple one, and here is the breakdown of what you can expect when you are going through the merchant cash advance process.

Apply/determine eligibility

The first step in the process is determining whether your business is eligible for a merchant cash advance. This is usually a process that is done in conjunction with your merchant services provider. Your merchant services provider will take into account processing history, bank statements, and any other information that they can take in to help them determine whether your business is a suitable candidate for a merchant cash advance. You should be prepared during this process to provide any and all information that they will need to make the decision and keep your business an open book.

Get your cash

Once you are approved for your merchant cash advance, the next step is to get the cash that you are applying for. Once you have been approved, your merchant services provider will authorize a lump sum payment to your account, with the assumption that you will pay for this cash advance using future processing funds that would otherwise go to you. It’s important to remember that a merchant cash advance is not a grant that you get to keep cost-free, it does come with a cost and it does need to be paid back with future deposits.

Pay off the cash advance

There are multiple ways to pay off the cash advance that you take from your merchant services provider, but the most common is to take a portion of your processing for a defined period of time. One important thing to note here is that when a merchant services provider does this, the total amount that you pay will be above what you took out as a cash advance. This is the fee for using the service and it is something that you should expect. This is the most important step, as it will start to decrease the debt liability for your business and start to recuperate your borrowing power.

Finding a reputable and trustworthy merchant cash advance partner

If you are going to place emphasis on one part of the process to ensure that your merchant cash advance experience goes well, it should be to find a provider that aligns with your needs and will provide you with reliable and affordable access to merchant cash advance services. There is no better asset to a business than to have a reliable and trusted partner that they can turn to when they are in times of need. Make sure to choose your merchant services provider carefully and use a merchant services provider with a great reputation.