Coffee Shop Business Loans

Looking for loans for coffee shops? Here’s an overview.

It’s hard now to imagine a time when that signature green-and-white Starbucks logo did not loom at many major intersections. Coffee, once a freebie in many offices, became a high-end ticket item as consumers flocked to pay between $4 and $7 for that caffeine fix — not to mention a breakfast sandwich or pastry to go along with it. Many other competitors sprang up, and small business loans for coffee shops became a popular topic among financial professionals. If you are looking to expand your mom-and-pop coffee shop operation or are looking for loans for coffee shop locations elsewhere in your city, take a look at how the process would work, so that you can decide whether it would work for you.

Why would I need coffee shop financing?

Operating a small business successfully requires a careful balance. You have to pay attention to detail on both the service and marketing levels, and you have to work long hours – likely much longer than what you were working before you decided to go into business for yourself. When you hit a point where you can grow – where you need to grow to keep the momentum going – but you don’t quite have the liquidity that you need, then that’s where coffee shop business loans come in. If you wait until the money to expand is already in your bank account, you could find yourself falling behind the competition. Once your business is to a point where your revenues would make it feasible to pay back a business loan, then it can make a lot of sense to take on the risk because of the reward that it will bring.

Why do banks make it difficult to secure merchant capital for coffee shop operations?

A lot of banks make getting that financing a real hassle. They take your application, but then they wait weeks or even months before they review it completely and render a decision for you. In the meantime, you’re waiting for your chance to grow. If the loan is for renovations or relocation, you’re stuck in a less than ideal location while the lending committee spins its wheels and makes you wait. If the loan is for business expansion, then your competitor could snap up that key location that you noticed going up for lease just a couple of weeks ago – a location that you could have run at a significant profit. Loans for coffee shops and other types of businesses are available from non-traditional sources – an area in which Best Bridge Capital (Amansad Financial) is gaining traction.

What about a small business loan for coffee shop operations?

Small business loans for café owners are another way to go. If you have some collateral to put down (such as the building in which the coffee shop operates, equipment that you own and use to run the shop, or even another real estate property that is not part of what the business uses) then you have a higher chance of having your café business loans approved, and approved at a lower rate of interest. What about an unsecured business loan for a café? There are some lenders who will make this kind of loan, even some among the traditional banks. You would pay a higher interest rate for an unsecured loan, but if your personal and business credit ratings are high enough, you can gain approval. The risk that you take on is a monthly fixed payment for this new loan, but if you have run the numbers and can accommodate this within your existing revenue stream, then taking that risk could pay off in terms major growth.

What can you tell me about a merchant cash advance for coffee shops?

Another alternative that has become very attractive to business owners is the unsecured merchant cash advance. This is a type of business loan for a cyber café or other coffee shop owners that requires minimal documentation in the way of personal credit but needs a relatively high amount of sales via debit or credit card. You get the lump sum up front that is based on a factor rate, and then each day that you are open, a set percentage of your daily (or weekly) debit and credit income card receipts go to the funder. It is a bit more expensive than a traditional loan; however, it provides the perfect bridge solution to get a business from point A to B. There are two reasons that this type of financing is more expensive than a traditional loan. First, the factor rate associated with the lump sum will determine the cost of financing for you, and if you look at that factor rate and compare it with interest rates, you can see that the factor rate costs more. Also, if your business takes off (which means that you will be making larger payments each day to repay the advance), there is no reward for early payment. The payback for you is that you don’t face a fixed monthly payment, so if business drops, you are not on the hook for a payment that you cannot afford to make without taking on additional debt form another source.

What will you need when you apply for a Merchant Cash Advance or a Business Cash Loan Advance?

Plan to provide the following with the completed application:

  1. Copy of government issued ID for all principal owners
  2. Business Articles of Incorporation
  3. Business License
  4. 3 to 6-month Merchant Statement History
  5. A void cheque with your company name
  6. Copy of Business Property Lease (if you rent) OR Most Recent Mortgage Statement & Copy of Land Title/Deed (if you own the property)

Note: Business Financials and Profit Loss Statements are required for advances over $75,000.

Taking out cash advance for cafe’s and other small enterprises does not have to be stressful. Let us guide you through the process, finding you the resources you need to be successful.