A restaurant is paid at the table, mostly by card, every day it opens. Its costs don't wait for the busy season: rent, staff, stock and the odd broken fridge all come first. The funding that tends to fit follows the takings. For most card-taking hospitality businesses, that means a cash advance repaid from card sales, with equipment finance for kitchens and working capital for bigger one-off costs.
Which funding tends to fit, and why
| Funding type | Tends to fit when... | Why it suits hospitality |
|---|---|---|
| Merchant cash advance (MCA) | You take most payments by card and turn over at least R600,000 a year | The card-split version takes a share of your card takings. A quiet week means a smaller collection. The South African SME Finance Association's Code of Conduct says the cash advance is "suitable for all businesses that accept debit and credit card transactions", and recommends an affordability assessment for businesses with low profit margins. |
| Asset finance | You need kitchen equipment, a cold room, a delivery bakkie or a generator | The equipment is what the funding is for. Repaid monthly over an agreed term. Match the term to how long the equipment will last. |
| Working capital | A refit, a second site, or several costs at once; or turnover under R600,000 a year | General funding not tied to one item. Usually repaid in fixed instalments. |
Invoice discounting and purchase order funding rarely fit a restaurant, because diners pay on the day. They may fit a caterer that invoices corporate clients or holds a confirmed event contract. See invoice discounting.
The quiet-season question
Many hospitality businesses have a busy season and a quiet one. Before you take any funding, look at your weakest months, not your best.
With card-split repayments, a set share of your card takings goes to the funder until the agreed total is paid. SASFA's Code of Conduct describes this as a purchase of future card receivables, not a loan, and says "There is no set period of payment of the purchase price". So in a slow month you pay back less, and it takes longer. The total you repay doesn't change.
With fixed daily or weekly repayments, the amount stays the same whether the restaurant is full or empty. It's easier to budget in a steady month, and harder in a quiet one. Each funder sets out a fixed-repayment advance differently, and the agreement states its legal structure, so read it before you accept.
If your takings swing a lot, read uneven cash flow first.
If you're already repaying a card machine advance
Some card machine providers offer their own advance, repaid as a percentage of daily sales. If you already have one and want funding from someone else, expect the first advance to be settled when the new one pays out. SASFA's Code says a business's other SME finance is to be settled when new funding is paid out, so it isn't repaying several at once. Two deductions from the same takings can leave too little to run the kitchen. See top-ups and second advances.
What funders usually want from a hospitality business
- Recent business bank statements showing regular takings. Funders ask for different periods. The NEF's application form, for example, asks for business bank statements for the past 12 months. We'll tell you what your funder wants.
- If you take cards, some funders look at your card sales history. One card machine provider, for example, only offers its own advance to merchants who have taken payments through it for 6 months or more.
- Company documents and the directors' ID.
We work with retailers, hospitality operators, contractors and transport businesses. We can help registered Pty Ltd companies and close corporations (CCs) that have traded for at least 12 months and need from R50,000. For a cash advance, we look for turnover of at least R600,000 a year.
Next step
Check your fit. It takes about 2 to 3 minutes and needs no documents to start.
Sources
- sasfa.net: an MCA is a purchase of future card receivables and not a loan
- sasfa.net: 3.3 "The MCA is suitable for all businesses that accept debit and credit card transactions, however, an affordability assessment is recommended for businesses with low profit margins
- stlm.gov.za: Business bank statements for the past twelve months
- support.yoco.help: a card machine provider's own advance
- ikhokha.com: another provider's advance