Case Study – Restaurant and Bar Company

This restaurant and bar business was growing quickly and was reasonably profitable however as the building is leased, there was no security to offer any lender. Our client had an urgent need for a cash injection because of a combination of factors:

1) a burglary which led the loss of cash takings;

2)it was a quieter time of year;

3) urgent repairs to kitchen and freezer equipment all seemed to come at once and

4) annual sales were growing faster than its working capital could support.

CFO obtained a merchant card facility loan of £28,800 for this business. Essentially the way this works is a loan is provided against the future credit and debit card takings of the pub and restaurant. In this case the company averaged about £30,000 takings a month on card payments. After obtaining the loan, repayments commenced immediately, but not in the normal monthly loan repayments fashion.

Instead, payments are taken directly from future card and debit payments at the rate of 18% per day. So if for example the business took £1,000 on cards a day, it would receive cash of £820. The loan was repaid within 7 months.

Typically there are no interest charges but the fees are not insubstantial, for this urgent but very helpful urgent cash injection.

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