Finance Your Restaurant Company With Somebody Else's Credit Card

If you are inside the restaurant company, you undoubtedly will not need me to let you know how tough it might be financially.

While you might be developing up the reputation of your establishment, money is frequently tight and 1 undesirable night can imply an unprofitable week. As for money flow ? effectively, the cash certainly flows, doesn?t it? You just wish that far more of it was flowing in than out. And what about these slow periods? What do you do if they final longer than you anticipated? How do you get the funds you need to get your restaurant enterprise more than that hump.

OK, I?m painting an unfavorable picture right here, but funding might be a problem for even essentially the most productive restaurant, specifically should you wish to expand rapidly. The question remains: what is the finest way to get financing for your restaurant?

LOANS

A loan might be an apparent approach to raise finance for your restaurant organization, but look at it from the point of view of the lender.

The 2004 Restaurant Market Operations Report published by Deloitte & Touche LLP indicates that average pre-tax profit margins range from 4-7%. This means that, from the lender?s point of view, even a profitable restaurant is a big risk. The bigger the risk, the bigger the interest payments ? that is, in the event you even get approved for a loan at all. High interest rates, of course, can bring their own problems, particularly for a very low margin company such as the restaurant trade.

Lenders will, admittedly, appear much more favorably on you in the event you also own your premises. However, you will need to be aware that funding your organization using real estate as collateral means that it will be the potential resale value in the property that lenders are looking at. The purpose from the property itself may actually reduce its resale value as there would be a smaller pool of potential purchasers. Thus, many lenders set very high minimum loan amounts, which could not be suitable for your particular circumstances.

If you do decide to go the loan route, then speaking to a specialist lender with expertise within the restaurant industry is essential.

ACCOUNTS RECEIVABLE FACTORING

Factoring is a form of commercial finance where an enterprise can accelerate its cashflow by selling its accounts receivable at a discount. This means that the company doesn?t have to wait for outstanding invoices to be paid in order to receive the money necessary to finance the company moving forward.

For many service based organizations, accounts receivable factoring is an extremely good way of rapidly accessing money. However, restaurants rarely have much enterprise of this kind.

What they do have, however, is a high volume of credit card transactions. By leveraging these, budding restauranters can ? literally ? fund their restaurants with other people?s credit cards.

CREDIT CARD CARD FACTORING

Essentially, restaurants can sell their future credit card transactions and receive an advance on that money ? usually up to around $120,000. The funds can be used for any purpose ? from expanding premises to buying new equipment or whatever you want. This isn?t a loan, so there is no personal guarantee needed. It?s simply an advance against future credit card settlements.

The company purchasing takes a small, fixed percentage of future credit card transactions until the advance is repaid.

The advance money can typically be made available within 14 days, so ? for the restaurant business that is in require of a quick injection of funds ? this is a good option. Of course, there are restrictions on who can apply. Generally speaking, a restaurant would have to be running for more than 1 year, take over $5,000 per month in Visa/Mastercard transactions and have far more than 1 year left on their lease to qualify.

For the restaurant that has been in existence more than 1 year, this represents the very best method of further growing your organization at minimum professional or personal risk.

COMPANIES PROVIDING RESTAURANT FINANCING

There are a number of companies out there offering financing of this kind to restaurants. The main points to watch out for when selecting such a company are as follows :

i) Application Fee ? Companies charging an application fee should be avoided. To be honest, there isn?t much paperwork involved in this process, so an application fee is unnecessary.

ii) Closing Costs ? Again, companies charging ?closing costs? are greatest avoided. There are enough companies out there competing for your business.

For the young or established restaurant company, credit card factoring is the most effective way of acquiring the funds you will need to expand your organization. So, fund your restaurant using an individual else?s credit card !

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Source: http://keepersblog.com/finance-your-restaurant-company-with-somebody-elses-credit-card/

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