Pubs and bars are flocking to secure nontraditional methods of financing to build kitchens and support expansion, it has been claimed.
With operators continuing to face cash flow pressure, merchant cash advances are being used as a way to manage operations and pay for infrastructure.
A merchant cash advance is designed as a quick way for any business that accepts credit and/or debit cards to raise capital. This type of funding is a fast and flexible alternative to a bank loan or overdraft.
London-based lender 365 Business Finance has witnessed a 60% year-on-year increase in pub and bar owning customers over the last 12 months, making it the second biggest client type currently signing up to merchant cash advance products.
A similar increase in demand is expected throughout 2020.
Managing director, Andrew Raphaely, commented: “Pub and bar owners are under pressure as increasing costs have put strains on their cashflow. We’ve seen a significant increase in demand for our merchant cash advance service as these business owners have sought funding to help manage cashflow, as well as to expand their businesses, refurbish and – increasingly – fund improvements to their premises, such as renovating kitchens or adding guest rooms.”
Mr Raphaely said many pubs and bars are also using merchant cash advances to aid with stock and expansion ahead of major sporting events, such as this summer’s UEFA Euro 2020.
“One of the reasons our merchant cash advance has proven so popular with pubs and bars is its flexibility,” he said. “As repayments are taken as a small percentage of future card sales, it means the business only repays the advance when it receives card payments from customers – so if it’s a slower month, less is repaid and the business’ cash flow is not adversely impacted.”