US snack maker Diamond Foods has lifted its earnings forecast for its upcoming fiscal year after 12 months of “record” results.
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Years before I got into the merchant cash advance industry I managed a restaurant. I have to say that managing a restaurant can be pretty stressful. It is very much a balancing act between offering good food and service and making a profit. Profit margins are very slim, and if you cut back on quality, the customers know it. That doesn’t give you much room to grow.
Banks are very apprehensive about loaning money to restaurants, mainly because so many of them don’t last more than the first year. It is true; getting past your first year can be a challenge. Most restaurant owners spend all of their money on opening the restaurant and don’t leave enough left over for marketing, upgrades or emergencies.
Having access to working capital can have a huge impact on the success of your restaurant. Many of the restaurants that failed last year would still be here today if they had had access to just enough cash to get them through.
If the banks aren’t going to loan them money, who is?
There is a business loan alternative that many restaurant owners have already taken advantage of. It is called a merchant cash advance (or merchant loan). Unlike a bank that turns down nearly 90% of small business loan applications; a merchant loan has an approval rate of 90% for most providers. This has opened the door for thousands of restaurant owners who though that they could never get funded.
Banks rely on good credit and collateral as the basis for lending money. With a merchant cash advance, all you need is a 6 month history of processing at least $2,500/mo in credit card sales. The more you process; the more you are eligible for.
The reason they are able to do this has a lot to do with how it is paid back. Rather than making out a check each month, a merchant loan uses your credit card processor to automatically deduct a small percentage from your daily credit card sales to pay it back. This automatic payback is effortless and has very little strain on your business. It is important for the advance provider not to advance you more than you can comfortably pay back. Your success is in their best interest as well.
What are the benefits for my restaurant?
You can use the money for anything you want. Other restaurants have used their advance for
Other advantages include;
As you can see there are many advantages to getting a merchant cash advance for your restaurant. However they won’t help unless you use the money wisely. Only use the money if you are sure that it could help your business. Use the following link to learn more about how a merchant cash advance can help your restaurant.
Author: Christopher Ronk
Article Source: EzineArticles.com
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Washington, DC, United States (AHN) – Burdened by a weak economy and the use of electronic communications, the Postal Service is studying options to keep itself viable after its request for a 2 cent increase in rates was denied.
The agency wanted to raise the price of first class mail to 46 cents, and that of postcards to 30 cents by next year. The Postal Regulatory Commission, however, unanimously ruled Thursday against a rate hike, saying there were no exigent circumstances to justify it.
The Postal Service has the power, under a 2006 law, to implement rate increases higher than the annual cap but only during exigent situations such as a natural disaster or terror attack.
“The Postal Service’s cash flow problem is not a result of the recession and would have occurred whether or not the recession took place. lt is the result of other, unrelated structural problems and the proposed exigent rate adjustments would neither solve nor delay those problems,” the commission said.
The author of the 2006 law, Sen. Susan Collins (R-ME), had opposed the request for a price increase.
“In addition to not meeting the criteria set forth in the law, the exigent rate case is simply a bad business decision,” she said in a statement. “Rather than help restore postal solvency, an exigent rate increase will worsen the Postal Service’s crisis by further driving down mail volumes and thus revenues.”
The Postal Service expects a budget gap of about $7 billion next year despite cost cutting measures worth $10 billion in the last three years.
The agency receives no federal funds for its operations and depends only on revenues from postage and other services. It wants Congress to restructure its $5.5 billion annual payment to the Retiree Health Benefit Fund, an obligation it said it was able to pay for this fiscal year.
“The financial risk remains,” said postmaster general John Potter. “We will carefully manage every dollar we spend in the upcoming fiscal year. Our current forecast shows that we will not have sufficient cash to make the $5.5 billion payment due on Sept. 30, 2011.”
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Martin Coles left Starbucks in December to “pursue new opportunities,” helped on his way by a year’s salary worth about $725,000, plus a year of medical and dental insurance and job hunting services worth up to $14,000.
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The Lighting Change Is Anticipated to Save Chili’s $3.7 Million per Year
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How do you add variety to your child’s school lunch during the school year?
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Getting funding for a restaurant this year of 2008, is definitely harder on a national level is more difficult then ever before.
Why You Will Find It Difficult To Get A Loan
Unfortunately bank loan officers do not like to do restaurant financing! This year of 2008 is a very tough year, foreclosure rates the highest ever in the history of the United States, a credit crunch due to the mortgage crisis, lenders cherry picking their loans, even denying borrowers with good credit.
So as if the food and hospitality industry was not already difficult for getting restaurant loans, it is much more harder to get loans then ever before due to the recession that is happening currently around major cities in the united states, gas prices going off the roof creating a domino effect in many many industries, consumers not spending as much, going out less due to super high gas prices.
Restaurant failure is the main reason why bankers are Leary of lending money to a new start up restaurants, if the borrower applicant does not have a proven track record in the food and hospitality business.
Success for food service businesses is viewed by bankers as minimal. Their hesitation is due to higher failure rates in the industry for new restaurant owners with no experience opening a restaurant. Unless you have enough collateral to make the loan risk free, banks will usually not approve your loan. This belief is not well founded, since the data is skewed, therefore, it is not accurate and hurts you when you apply for a loan.
Traditional money lending institutions are Leary of lending money to a new restaurant, if a the borrower applicant does not have a proven track record in the food and hospitality business.
What Can You Do To Increase Your Chances Of Success With Your Restaurant
Restaurant Consultants — Set aside some money from your working capital to consult with one. They will help maximize your chances for restaurant success and minimize your chances for restaurant failure; this is the main reason to to speak to a restaurant consultant.
Restaurant Training — Seek out those companies that provide restaurant training
Restaurant Marketing — Become an expert in restaurant marketing, consult with someone who will help you create a great restaurant marketing plan. Implement a moving targets and birthday marketing campaign to generate immediate cash for your restaurant, which you can find out more info with the author of this article.
Restaurant Management Training — Seek a company that will train your restaurant manager.
Restaurant Accountants — Seek out CPA accountants that specialize with restaurant accounting software and restaurant accounting systems.
Restaurant Floor Plan – Warning, pay attention to how you layout the front, back, kitchen area! Could cause to lose profits if you do implement a good efficient cost effective floor plan.
What Are Your Restaurant Funding Options & Sources
Soliciting partners
* Selling stock
* Venture capital
* SBA
* Loans from relatives
Insurance policies cash values
* Credit from food suppliers
* Personal savings
Collateralized loans from your personal assets
* Credit from equipment suppliers
Up till now if you are having problems getting financing for your existing restaurant, your options were limited. There is a product called the business cash advance or merchant cash advance that is a possible solution to you when you find yourself being turned down for restaurant funding.
Author: Edwin De Leon
Article Source: EzineArticles.com
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Many borrowers are surprised to learn that they may actually have more options on restaurant loan options for free standing, non franchise properties than franchise restaurants. With conventional financing and SBA loans it’s almost a no brainer to go the franchise route. However, many CMBS lenders will not consider restaurant mortgages if the business is tied to a franchise agreement.
First of all CMBS lenders (commercial mortgage backed securities) are a nontraditional source of capital that due to their “back office” structure have produced some of the most creative and aggressive restaurant loan options in the industry. For example 85% financing and 30 year fixed rates on restaurants, with rates right in line with bank financing. They’re able to do this because the individual loans are pooled together and sold to investors in the form of bonds, which essentially reduces the investors risk due to the diversification of loan structure, building type, and geography.
CMBS lenders do not like the franchise agreement between the franchisee and franchisor. In essence, these agreements are very cumbersome and limit the rights of the lender in case of borrower default. It becomes more difficult for the lender to go after the collateral to get paid back. So, many of these creative restaurant loan options are not available to the borrower.
If your in a franchise agreement now, and own the property your business occupies, then consider the SBA 7a loan for your refinance. Many borrowers are under the wrong impression that they cannot refinance with SBA loans. The exception are if the new loan will save the borrower 20% on their existing mortgage payment (this is on a cash flow basis), existing loan floats, has a balloon on it or if their existing interest rate will be reduced by 2% or more (keep in mind that most rates are currently in the 6%’s) from the proposed 7a loan refinance.
Also, another major misperception about the SBA 7a loan is that it’s always a floating rate loan. 99% of the time this is accurate. However there are a few sources that offer this program as a 5 year fixed 25 year amortization loan.
If, and going back to the original point, you own your property and run a non franchise restaurant out of it, then you’ll have all three options available to you – CMBS, SBA and conventional. With CMBS loans you will have the option of 30 year amortization loans, rates fixed for as long as 30 years, loan to values as high as 75% on refinance and 85% on purchases.
Author: Jeff Rauth
Article Source: EzineArticles.com
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Many people have heard the startling myth that nine out of 10 restaurants fail within their first year of opening. Hearing this can make anyone who is contemplating going into the restaurant industry think twice.
But according to H.G. Parsa, associate professor in Ohio State University’s Hospitality Management program, as quoted in a Business Week article, this is not true.
After researching, he found that realistically, 3 out of 5 restaurants close or change ownership within their first year of business.
According to the article, Parsa also identified “…lack of sufficient startup capital as one of the major elements that contribute to a restaurant’s failure,” leading him to believe that many banks won’t lend to restaurants because they may believe those mythical statistics. The article states, “Typically, the ones that do [lend] require would-be restaurateurs to pay sky-high interest rates or put up significant collateral…”
But even if banks are wary of lending to restaurant owners, especially new ones, for the reasons mentioned above, there is another option; restaurant loans.
Restaurant loans can be used for startup restaurants, or for restaurants that have been in existence for any length of time. The loans are unsecured, so there is no collateral required, nor are there fixed monthly payments. Restaurant loan payments are made via the restaurants credit card sales. Once a restaurant owner receives a restaurant loan, whenever customers use their debit or credit cards to pay for their food or drinks, a small percentage from the sale goes to repay the restaurant loan. This allows the loan repayments to go with the flow of business.
Another benefit of the restaurant loan is borrowers receive the opportunity to renew their restaurant loan once 60 percent of their previous balance has been paid. Therefore a new restaurant can get a loan and the money funded into the account of his/her choice within the first week of the restaurant’s opening. But it doesn’t stop there. These renewal opportunities allow restaurant owners to have access to an ongoing source of business financing, as they can renew their loans as many times as they like.
Increase your chances of restaurant success by getting a restaurant loan, and having enough money to finance everything that a successful restaurant needs.
Author: Gaston Castro
Article Source: EzineArticles.com
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From a conventional stand point restaurant loans are taking the worst of it as the credit crisis has seemed to have worsen. Special use properties such as restaurants are always the first to feel the tightening as the process to sell the facility in case of borrower default is more difficult that your typical general use property that will have a wider pool of buyers.
Conventional financing for restaurants, meaning loan issued directly by the funding banks, without any guarantee by the SBA or other such institutions, are getting very conservative. Loan to values are hover at 55% on refinances and 60% on purchases. Debt coverage ratios have tightened as well from a 1.25 to a 1.3 and with some banks a 1.4. Meaning that for every $1 of proposed mortgage debt the borrower would still have $.40 left over after all expenses and proposed mortgage have been paid.
In addition, the cap rates have really been taking a beating with conventional sources. For example, I recently spoke to a bank loan officer that said they are putting on a minimum 10% capitalization rate on all restaurants regardless of the market.
The solution is to think non conventional for either purchase or refinance money. For example it’s still possible to get 85% financing on purchases on a 5 year fixed 25 year amortization loan, if you work through the right sources.
One loan program that deserves mention is the SBA 7a loan as it was designed for niche building types like restaurants, motels, etc. They can go as low as a 1.1 debt coverage ratio, and business projection can be used to supplement cash flow if it’s too low to meet the guidelines. Which in a cash business like restaurants, where most owners understate there income is very important.
CMBS sources are still out there though on a limited basis. For example, a 30 year fixed rate mortgage at 80% financing is still available. Primary benefit of course is that the borrower doesn’t have to worry about their rate fluctuating.
Author: Jeff Rauth
Article Source: EzineArticles.com
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