To be sure, the recent news that the U.S. Congress had declined to appropriate more funds to the Restaurant Revitalization Fund (RRF) came as a major blow to many restaurants that have been struggling to stay afloat during the pandemic – particularly independent restaurants that had not received government funding previously. Following the news, both Sean Kennedy of the National Restaurant Association and Erika Polmar of the Independent Restaurant Coalition warned of the difficult decisions that many thousands of restaurants would have to make in the coming months as a result.
So what now? Restaurant operators have grown accustomed to pulling themselves up by their bootstraps and there is more of that to come as businesses mine for new sources of funding. Even if the capital isn’t as available from sources like traditional bank loans as it once was, it does exist. Restaurant Hospitality has reported that independent operators have had some luck in tapping nontraditional financing sources. Those include such options as online lenders like Kabbage from American Express, which offers business loans to restaurants looking to cover everything from equipment expenses to marketing to hiring staff. Others, such as InKind, buy food-and-beverage credits from restaurants and then sell them to customers instead of charging restaurants for repayments. Operators with equipment expenses on the horizon may benefit from equipment financing or leasing, which can help preserve cash flow.
If you have a highly engaged and motivated following in your neighborhood – and many independent restaurants do – you might also consider raising money through charity fundraisers like GoFundMe or the Barstool Fund. Such crowdfunding organisations have a range of structures, so you can also opt for one that helps a business raise money and pay it back (Kiva is one example), one that offers small rewards in exchange for donations (as with Kickstarter), or one that gives investors an equity stake in the business (like Wefunder).
As we reported last month, private equity investment may also be an option for restaurants that have a clear sense of not just their balance sheet and risks, but also where they are willing (and unwilling) to compromise in terms of the values and strategic direction of the business. You might also consider a merchant cash advance if you have strong sales but aren’t able to qualify for a loan – the rates are high, so it’s an expensive option, but the barriers to entry are low, making it a viable solution if you need a short-term cash infusion.
Foodservice CEO is provided for informational purposes only. It is intended to offer foodservice operators’ guidance regarding best practices in running their operations. Adherence to any recommendations included in this Guidance will not ensure a successful operation in every situation. Furthermore, the recommendations contained in this website should not be interpreted as setting a standard of operation or be deemed inclusive of all methods of operating nor exclusive of other methods of operating.
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