In recent years, businesses needing restaurant loans have been treated as an almost separate, and some may say unequal, category of financing for business loans. Many lenders that understood the special needs of restaurant owners are no longer lending, and other lenders have placed them on a so-called "black list" separate from other small and medium sized businesses because they are considered too risky.
This has left restaurant owners in a real predicament as they fight to regain much of the working capital that they lost in the economic downturn. Even healthy establishments have seen their lines cut due the banking collapse, and this has forced restaurant owners to seek out other sources of financing such as secured equipment loans, commercial mortgages, etc.
However, these types of loans are different and not really catering to the needs of restaurant owners because of the fact that restaurants need a steady infusion of working capital, even when business is slow, to keep deliveries flowing through their back door. Without it, the business will be forced to close, even if traffic is healthy. Because mortgages and secured business loans take a lot of time to process, underwrite, and decision, they have not been able to fill the financing gap that currently exists.
This has left business owners in the unsavory position of having to accept cash advances from their credit card processing company. These high rate, unregulated advances are quick and feature low documentation. However, they often comes with many strings attached such as the requirement to switch processors, buy equipment and pay large upfront fees. Added to this is the fact that the interest rates on these advances can often exceed 50% and may change at any time during the repayment period
Luckily, a better way has entered the market in the form of a new, regulated business loan called credit card receivable financing, that is as quick and easy as a cash advance without all the disturbing requirements such as buying equipment and switching processors. On top of this, the rates are normally 50-80% lower than a merchant cash advance with no upfront fees.
It's time the restaurant business owners had a real, cost effective option when it comes to obtaining restaurant loans for their establishments. Today's economy demands creative solutions to the capital intensive needs of business, and this new option that is on the market that fills a gap that major banks and the SBA have left.
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