Merchant Loans for Restaurant Owners

Merchant cash loan or merchant loan is a form of finance available to commercial entities that are engaged in activities related to trading of goods and services. These entities offer loans to individuals who otherwise would not qualify for bank finance either because of credit rating issues or lack of affordability of collateral. In short, merchant loan is a lending tool that is given to business firms, small or large, in the form of cash advances and is completely different from other business loans in terms of regulations and operations.

Merchant Loan for Restaurant - Why?

Most banks and traditional credit establishments in the United States and Canada do not finance restaurants as they are considered a high risk business. Add to this the fact that restaurants often need money in a hurry to satisfy the changing tastes of customers and you have a recipe for disaster. However, there are other sources of finance for restaurants.

Most restaurants, even those turned down by banks, are eligible for merchant loans. These are a special kind of loan that restaurants, among other merchant establishments, qualify for. Here, the credit is advanced against the future sales of the restaurant. The loan provider takes back the money as a percentage of your credit card sales. This is a good way of repaying loans as there is no fixed expenditure from your end. You pay more only when the sales or business is good.

For this the minimum eligibility criteria requires you to accept payment by credit card, have a minimum credit and debit card sales of  affixed figure, typically $2,500 or so a month, and a current lease (with perhaps a year to go for renewal).

These conditions vary from fund provider to fund provider, but they are more or less the same.

Merchant Loans for Restaurant Owners - Things to Consider

Business owners are required to fulfill certain eligibility conditions as enumerated below. You can have quick access to finance normally within the first week of opening up of your restaurant. In ordinary cases, it could be U.S$100,000, but, in extra-ordinary cases depending upon the location and the business potential of the restaurant, it could be up to U.S.$500,000. The following eligibility conditions normally apply:

• Aspiring restaurant owners should not have unresolved bankruptcy issues.

• The business should be in operation for a period of at least six months (irrespective of the track record) and should have an unexpired lease of one year in balance.

• It should generate sales through the credit card anywhere between U.S. $2500 and 3500 per month.

Advantages of Merchant Loans

Unlike banks, where the loan takes a few months to be processed, here your loan amount is released within 72 hours or at the most a week. This ease of obtaining a loan and the speed with which it is delivered makes this form of financing apt for restaurants.

Another major advantage with merchant financing is that there are no conditions attached to the loan on how it should be spent or on what. You can spend it to pay your employees, or remodel your business, or renovate, or just about anything else that need the cash. As there are no restrictions on how it should be spent, the entrepreneur is at liberty to use it according to their discretion.

There is the added advantage that these loans typically do not require a second collateral or a personal guarantee. There are no fixed rates of interest, you have to negotiate to get yourself a good deal. There are no fixed due dates – you pay when you get paid. You aren't under any obligation to take the loan.

These loans and cash advances are tailored to meet the needs of merchants and restaurant owners. The greatest advantage, apart from the speed of the transaction, is the fact that you pay only when you earn. This eases the strain on the owner during lean periods of business. During good times you pay up faster again with no pre-payment penalty. Use this simple method to improve your cash flow and your business.