(PRWEB) February 09, 2012
USA Today reported on February 5th, 2012, a surge in service industry growth for January with the fastest pace in 11 months. Employment index is also up, according to the same survey, to the highest it’s been since February 2006. With all of the growth in this sector, businesses are expanding in record numbers and all of them are seeking funding in order to do so. In order to meet demand, Paramount Merchant Funding is expanding its own merchant cash advance program.
Merchant cash advances are becoming a more common source of funding for restaurant owners looking for help with inventory and expansion costs. In order to deal with higher demand, cash advance providers like Paramount Merchant Funding have been stepping up their restaurant programs. “Big issues like inventory costs are driving a lot of owners to look for alternative funding sources,” said a company spokesperson. “Many owners are surprised to learn that they can use their cash for these requirements but the word is spreading.”
There is a fine balancing act between sales and inventory. Every restaurant owner knows the frustration of watching good inventory go bad in slow periods and the anxiety of having to tell customers that menu items are unavailable. In order to keep profit margins high, the best place to start is analyzing stocking practices.
With the current economy, customers who do decide to spend on eating out (a discretionary purchase in anyone’s budget) are less likely to be forgiving of a place which consistently doesn’t have the dish they want or offer any specials to change up the standard menu. Once is enough to drive away a potential returning patron. In order to maintain what is written on the menu, restaurant owners may find they are spending more than they are turning out, in which case their menu needs an overhaul. However, many restaurants are finding that the demand is there but the cash upfront for suppliers is lacking.
In order to increase sales, many restaurants have installed bars or simply begun serving alcohol. While non-alcoholic drinks are high earners and long standing inventory, they are still calculated with the food costs. Alcoholic drinks are big earners as well and can boost sales, attract new customers and provide opportunities for expansion. While stocking a bar is not easy, and installing one from scratch even harder, the inventory shelf life is very long and the added benefits are undeniable if the new addition is managed correctly.
Many suppliers are willing to extend credit or put off collecting payment for restaurants who do catering and need a big shipment and will only get paid later. This practice may work for some business models but it could also develop into a bad habit if over-used. Putting off payment on stock that will definitely turn over is one thing, taking out credit in the hopes of selling the product off before it goes bad is quite another.
“Most owners don’t realize that they can come to us for these kinds of financing problems,” said Dan Smith, co-founder and CEO of Paramount Merchant Funding. “Merchant cash advance is a great option for short term inventory costs and for the general health of the restaurant. We’ve seen a lot of owners, weighed down with debt before they realize they don’t have to be a slave to their suppliers.”
Restaurant finance for inventory and liquor can be complicated. For an owner or manager, it may be tempting to stick with the suppliers he or she already knows but they may not be the best bet. Suppliers’ job is to get the owner to order more, not to help them pay for what they need. Lines of credit may be issued but their main concern is moving stock, not restaurant financing. Restaurant owners may be unaware that financing for inventory is available from other sources, the same places they would turn to for renovation, expansion and improvement funding: merchant cash advances.
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