Different Funding Sources for Funding a Restaurant

2 January, 2013

In today’s unstable economy, a lot of different businesses can be adversely affected by an unsteady cash flow. A business could only run as well and as long as there is cash flow but there are unexpected times when funding is low and cash flow slows down. During these situations, businesses can come up short on capital and need to borrow some money to fix this problem. This can happen to any business, including restaurant business. Fortunately, there are a lot of different sources that restaurant owners could turn to, when they are in need of restaurant operating funds. Depending on the funding method the restaurant owner would need, there are a number of advantages and disadvantages from different funding sources. Learn more about the different funding sources with this article.

Personal Funds/Loans

Personal Funds and loans are those which can be asked from family and friends or by using money from emergency funds. When it comes to getting money from your own savings account, there are no requirements or any processing as the money is yours to begin with. The pitfall of borrowing from friends is that, if they are not paid before the agreed upon date, it can ruin relationships with them. Using your savings account can be problematic in the future, if a time comes when you are in dire need of those funds.

The Bank Business Loan

A bank business loan is a type of loan which is better known. This is a loan applied for and received from the bank. The loan is paid back before a predetermined date. Most banks would offer loans to business owners provided that they meet the requirements provided, by the bank. These loans could be secured with a caveat or unsecured loans. A major benefit of a business loan provided by the bank is its relatively low interest rates. The disadvantage however with Australian business loans from the bank is the long period it takes in processing the loan. Another disadvantage is the difficulty in applying for the loan. Not only are the banks very strict with their regulations but the bank has strict regulations in place, when it comes to business loan. It is because of their strict requirements that many business owners are denied business loans by the bank.

Merchant Cash Advance

The Merchant cash advance can give restaurant owners up to 450,000 dollars or more depending on the size of the business. This type of funding source is paid back through a process called ‘credit card factoring’. Through credit card factoring, the funding source gets paid back through getting a percentage of the restaurant owner’s credit card earnings. This is highly advantageous as applying for a merchant cash advance is very quick. It is also easy as you do not need to undergo a lot of formalities. As credit card factoring is used to pay back this funding source, it doesn’t interfere too much with business sales. One disadvantage of merchant cash advance is that they have quite a high interest rate. Only businesses which use major credit cards can apply for a merchant cash advance.

Depending on the restaurant owner’s needs, he or she could make use of one of these funding sources, to get business running smoothly again.

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