Running a successful Restaurant business means a fast flow, both in and out, of cash, thus creating a possibility of a requirement of more and more cash either to meet business requirements or for new appliances or an extension plan. If you use your Credit Card to obtain finance for your restaurant to meet any of these requirements, you are burdening yourself with a high interest you are to pay on the advance & considered as a bad option.
If you utilize your Merchant Account to meet the finances for your restaurant of any of the above requirements it will be considered as a good option. Always consider the high rate of interest you are likely to pay when using the credit card. In case you are not able to pay at the given time calculate the extra interest you are likely to pay for being a defaulter. You will feel the guilt of being a bad businessman apart from wasting extra finance.
It is better to consider using Merchant cash advance for required finance for the restaurant. It will be an appropriate choice and will prove to be more beneficial for you.
What is this Credit Card Factoring ? Well let us explain in detail with reference to the need of finances for restaurant:-
1. Credit card factoring is an agreement between two businessmen, one who is running the restaurant and another who will provide needed cash to the restaurant owner. This cash is provided on the basis of being paid back with an agreed share from the credit card revenues.
2. Restaurant owner or the financier will arrange for the payments through credit cards by the customers of the restaurants, for this credit card machines are to be installed in the restaurant by the financier company, this will help them to keep track of all transactions made through credit cards.
3. Restaurant is required to be in business for a minimum of 4 months and can demonstrate process of Master Visa Card history of few months. It means the restaurant customers are using credit cards for payment to the restaurant. Monthly transaction should be around $2000 to $2500. To qualify for this Merchant cash advance the perquisites’ are simple:-
- Application is based on one page form.
- An ID ( one with your photograph)
- Merchant processing statement
- Business bank statement.
- Tax returns not required for an advance below $ 75000.
4. The Merchant cash advance provided can be used for anything in the restaurant, no conditions are attached. No collateral or mortgages are required. The agreement is based on the future sales of the business. Funds required are made available within a period of 10 days at the maximum.
5. Payback of the Merchant cash advance is based on very flexible terms and conditions. No monthly requirement of hefty amounts, instead you are required to pay back a little portion of the revenue you receive through master visa card payments made by your customers. More revenue you receive more you payback, your sales are low in a particular month, you pay back accordingly.
6. The interest rate charged by the financier is most likely to be more as compared to what a bank would charge on a similar amount, if you compare it with the time frame in which you receive the cash, that is almost immediately, and the flexible repayment plan, you will realize the boost your business is getting from it is worth an extra payment of 5 or 6 percent.
Remember a loan obtained from a merchant account by a restaurant is not a loan in real sense. It is in fact a financing process by a businessman who is investing his money in a running business of another businessman, to gain a percentage of profit of his sales. To keep a check on the sales Credit Cards are utilized to ascertain the revenue obtained. This is called Credit Card Factoring.