| If you are in the restaurant business, you | | | | forward. |
| certainly won't need me to tell you how tough it | | | | For many service based businesses, accounts |
| can be financially. | | | | receivable factoring is an extremely good way of |
| While you are building up the reputation of your | | | | quickly accessing cash. However, restaurants |
| establishment, money is often tight and one bad | | | | rarely have much business of this kind. |
| night can mean an unprofitable week. As for cash | | | | What they do have, however, is a high volume of |
| flow - well, the cash certainly flows, doesn't it? | | | | credit card transactions. By leveraging these, |
| You just wish that more of it was flowing in than | | | | budding restauranters can - literally - fund their |
| out. And what about those slow periods? What | | | | restaurants with other people's credit cards. |
| do you do if they last longer than you anticipated? | | | | CREDIT CARD CARD FACTORING |
| How do you get the funds you need to get your | | | | Essentially, restaurants can sell their future credit |
| restaurant business over that hump. | | | | card transactions and receive an advance on that |
| OK, I'm painting a negative picture here, but | | | | money - usually up to around $120,000. The |
| funding can be a problem for even the most | | | | money can be used for any purpose - from |
| successful restaurant, especially if you wish to | | | | expanding premises to buying new equipment or |
| expand quickly. The question remains: what is the | | | | whatever you want. This isn't a loan, so there is |
| best way to get financing for your restaurant? | | | | no personal guarantee needed. It's simply an |
| LOANS | | | | advance against future credit card settlements. |
| A loan may be an obvious way to raise finance | | | | The company purchasing takes a small, fixed |
| for your restaurant business, but look at it from | | | | percentage of future credit card transactions until |
| the point of view of the lender. | | | | the advance is repaid. |
| The 2004 Restaurant Industry Operations Report | | | | The advance cash can often be made available |
| published by Deloitte & Touche LLP indicates | | | | within 14 days, so - for the restaurant business |
| that average pre-tax profit margins range from | | | | that is in need of a quick injection of funds - this |
| 4-7%. This means that, from the lender's point of | | | | is a good option. Of course, there are restrictions |
| view, even a profitable restaurant is a big risk. | | | | on who can apply. Generally speaking, a |
| The bigger the risk, the bigger the interest | | | | restaurant would have to be running for over 1 |
| payments - that is, if you even get approved for | | | | year, take over $5,000 per month in Visa |
| a loan at all. High interest rates, of course, can | | | | Mastercard transactions and have more than 1 |
| bring their own problems, particularly for a very | | | | year left on their lease to qualify. |
| low margin business such as the restaurant trade. | | | | For the restaurant that has been in existence |
| Lenders will, admittedly, look more favorably on | | | | more than one year, this represents the best |
| you if you also own your premises. However, you | | | | method of further growing your business at |
| need to be aware that funding your business | | | | minimum professional or personal risk. |
| using real estate as collateral means that it is the | | | | COMPANIES PROVIDING RESTAURANT |
| potential resale value of the property that lenders | | | | FINANCING |
| are looking at. The purpose of the property itself | | | | There are a number of companies out there |
| may actually reduce its resale value as there | | | | offering financing of this kind to restaurants. The |
| would be a smaller pool of potential purchasers. | | | | main points to watch out for when selecting such |
| Thus, many lenders set very high minimum loan | | | | a company are as follows :i) Application Fee - |
| amounts, which may not be suitable for your | | | | Companies charging an application fee should be |
| particular circumstances. | | | | avoided. To be honest, there isn't much |
| If you do decide to go the loan route, then | | | | paperwork involved in this process, so an |
| speaking to a specialist lender with expertise in | | | | application fee is unnecessary.ii) Closing Costs - |
| the restaurant industry is essential. | | | | Again, companies charging 'closing costs' are best |
| ACCOUNTS RECEIVABLE FACTORING | | | | avoided. There are enough companies out there |
| Factoring is a form of commercial finance where | | | | competing for your business. |
| a business can accelerate its cashflow by selling its | | | | For the young or established restaurant business, |
| accounts receivable at a discount. This means that | | | | credit card factoring is the most effective way of |
| the business doesn't have to wait for outstanding | | | | getting the funds you need to expand your |
| invoices to be paid in order to receive the cash | | | | business. So, fund your restaurant using someone |
| necessary to finance the business moving | | | | else's credit card ! |