If you're a restaurant owner you know that your business goes through lean times occasionally. During these periods your monthly sales may dip substantially which can cause you to lose most of your profit margin. While you might be able to get through a few of these times without losing your company all it takes is one unexpected expense or additional slow month to cause your business to go under. Restaurant factoring offers a way to help you get through slow periods without risking the welfare of your company.
What is Restaurant Factoring?
Basically, restaurant factoring allows you to get advance funds that are based on the credit card transactions you'll make in the future. Instead of having to wait until business picks up to make up for slow periods you're able to receive that increase in income right away to help tide you through the difficult times. The amount you're able to factor depends on the amount of your average transactions per month.
How Restaurant Factoring Works
Before you can sign up for restaurant factoring you'll have to pass certain criteria. Restaurant factoring is not a loan so you won't have to pass a credit check. You will, however, need to meet some standards before the factoring company will agree to advance you the funds. Factoring companies typically look at the amount of credit card sales you process each month and your overall sales volume as a way of qualifying you for the agreement.
If your application for factoring is approved then the factoring company will agree to issue you a merchant cash advance based on your future sales forecast. The firm will use your previous sales history to determine how much to advance you. Typically, you can receive the advance in as little as 48 hours. When you get the money, you can use it for whatever business expense you need. To settle the account you and the factoring company will agree to a certain amount that you'll repay each month. Rather than a specified repayment amount you can send a flat percentage of your future credit card sales. This means that you can send less during slow periods and more during busy times.
If you decide to use restaurant factoring, you might find that the arrangement offers an easy way to get through the slower sales months without having to go into debt. By repaying your advance on your own schedule you'll be able to settle your factoring arrangement without endangering your company.