Why a Capital Advance May Be Better for Your Restaurant Than a Traditional SBA Loan?

Are you a restaurant owner? If so, you know the value of every dollar that goes in and out of your business. You also know the value of positive cash flow. With the right funding, you can meet your operational costs or invest in new supplies or equipment. 

But how can you decide whether a traditional loan through the U.S. Small Business Administration (SBA) or a capital advance is best for you? Here’s how these two funding options differ — and why a capital advance may be a better option for your restaurant.

Merchant Capital Advance vs. SBA Loan

Loans backed by the SBA are a popular option for restaurateurs and other business owners. Unfortunately, these loan programs typically come with high eligibility requirements.

These requirements can include a strong credit score, a lengthy business history, and a compelling business plan. Without these elements, you may find it challenging to secure the loan you need.

A merchant capital advance (MCA), on the other hand, isn’t a loan at all. Instead, it’s simply an advance on your restaurant’s future revenue. A third-party provider will purchase this revenue from you. You’ll receive a lump-sum advance that can be used for your operating expenses or to invest in business expansion projects.

How a Capital Advance Can Benefit Your Restaurant

While traditional SBA loans can be a reliable funding option, restaurant owners may appreciate the distinct benefits offered by a merchant capital advance. Here’s how an MCA compares to an SBA loan in several key areas.

No Credit Score Requirements

Most traditional SBA loans have high credit score requirements. Business owners can expect to undergo a credit check, after which the SBA lender will base your eligibility and loan terms — including your loan amount — on your company’s credit history.

Capital advances don't require a credit check. This can make them an ideal option for restaurant owners who need to improve their cash flow but lack a strong business history to qualify for a working capital loan.

Less Business and Personal Risk

SBA lenders commonly ask you to put down some form of collateral, which can be a business asset or even your business real estate property. Depending on your lender, you may also have to make a personal guarantee.

This means that you will be personally responsible for at least a portion of the loan if your restaurant fails to meet its obligations.

A capital advance, on the other hand, requires neither a guarantee nor collateral. As a result, you may discover that they’re a welcome alternative to traditional SBA loans, while still giving you access to cash.

Faster Funding

While an SBA express loan can provide you with a quick influx of cash, most other types of loans can involve a long wait, during which time you may miss out on a new business opportunity.

Since a capital advance isn’t a loan, it takes much less time to process and receive. As a result, you’ll have the money in your hands much sooner, giving you the means to invest in your restaurant on your terms — not your lender’s.

Broaden Your Menu

Growing your restaurant involves broadening your menu in a variety of ways, whether that’s through strategic financing or programs like Simpay Select Plus, which can help you minimize the impact of credit card fees. 

With the support of a capital advance, you can get the working capital you need to expand your operations and set your restaurant up for success.