The hospitality industry can be overwhelming at times – serving consumable goods to customers can become very tricky when attempting to maintain an optimally balanced customer experience. Unlike many other industries, the hospitality, also known as the service industry, operated on a much different spectrum when it comes to finances. For the most part, the majority of inventory purchases for a bar or restaurant must be replenished more frequently and at upfront costs. This can make maintaining inventory while staying within the budget an interesting task. So, how do bar owners do it? Let the Empower Lend team shed some light on how your bar or restaurant can stay afloat during the slow seasons!

restaurant-funding-capitalOut of all of the alternative lending options that are available to those in the industry, it is merchant cash advances which seem to particularly appeal to bar and restaurant owners. While it may be due to the timely funding, which most lenders can accomplish within 48 hours – or possibly the convenience of not having to submit a funding budget to showcase how the funds will be allocated. Each business owner may have their own reasoning, however, the pattern between the masses is unmistakable – merchant cash advances are the favorite amongst business owners in the industry!

What is an MCA Loan?

A merchant cash advance, also referred to as an MCA loan or MCA funding, is a form of business financing know as revenue-based lending. This essentially means that while there may be several qualifying factors considered, the business receives funding approval based on the collateral of their future receivables. Merchant cash advance loans are slightly different from traditional bank funding in it that they do not require returning a lump sum payment. Many alternative lending products will establish daily or weekly repayment structures, which offers a bit more added convenience for the business owner to handle their expenses.

Why Bar Owners Prefer MCA Loans

business-funding-for-restaurantsMerchant Cash Advances tend to have much less stringent requirements than either SBA loans or traditional commercial banks loans. Small business funding is often attached to strict credit requirements, complicated contracts and excessive documentation required with the application. This alone, separates MCA loans from other lending products. The merchant cash advance application process requires basic information regarding your business structure and revenue.

Since MCA loans do not require the same type of collateral as traditional bank loans, many restaurant owners find it easier to qualify. Bar & restaurant owners often have difficulty when it comes to showcasing consistency in their budgeting, as the lenders would prefer to see it. It is not uncommon to find patterns in the service industry that rely more on seasons than customer retention.

Bar owners need access to capital quickly in order to capitalize on changing trends in the ever volatile and ultra-competitive industry. In this regard, MCAs are hard to beat with advances being approved in as little as 48 hours.

Benefits of Merchant Cash Advances for Restaurants

Another perk of an MCA loan is that this type of business funding is not required to be placed on your credit report. As this form of business funding is typically utilized consistently throughout the fiscal year, bar & restaurant owners prefer to keep the revenue stream private, in attempts to avoid potentially investors deeming the useful resource as a sign of -high-risk.

Merchant Cash Advance Funding Tips for Restaurant Owners

Merchant cash advances can be the saving grace for venues to overcome the slow seasons. Many restaurant owners find it successful and proactive to apply for a merchant cash advance just before the end of their busy season, using the proceeds to stock up on inventory and marketing campaigns. By doing so, they reduce the strain to restock during the months they are generating less revenue without sacrificing goods, services or customer experience.  

Applying for a Merchant Cash Advance

If you own a bar or restaurant and believe it may be time to inject some working capital into the business, merchant cash advances are likely to be your best option. Between their leniency, expediency, and flexibility – a merchant cash advance can help your business maintain stability, even during the slower seasons. Applying for an MCA loan is much like applying for a business credit line in that you can access capital as you need it without being required to present an in-depth allocation budget for approval. In addition, they may be open to negotiating the API unless it is their policy to have it fixed. Even in the case of the latter, different lenders have different rates and so diligent research is required to make an informed choice.

Ready to learn more about applying for a merchant cash advance loan? We’ve shared some great articles on our blog with application tips, funding resources and success stories. Visit the Empower Blog now!