This Glenpine Funding article compares revenue-based financing with a merchant cash advance for a restaurant in Maryville, Tennessee. It covers offers from distant providers, a side-by-side table, what a holdback is, fixed against true-percentage collection, Blount County, TN restaurant counts, a worked example for a grill, term loans and lines as a third option, and a checklist.
Revenue-Based Funding Offers From Providers Far From Maryville, TN
Revenue-based and cash advance providers operate nationally, so a Maryville, TN restaurant may get offers from companies in other states. The agreement's governing law, the provider's legal name and how disputes are handled all appear in the document; read them.
A provider's location does not change the arithmetic. Ask for the total to be paid or remitted, the percentage taken, and what happens if sales fall.
Revenue-Based Funding Versus a Merchant Cash Advance in One Table
| Revenue-based financing | Merchant cash advance | |
|---|---|---|
| What it is | A loan, in many agreements | A purchase of future card sales; not a loan |
| What is taken | A share of monthly revenue, all sources | A share of card sales (holdback) |
| Total due | A cap, a multiple of the amount advanced | The purchased amount, set by a factor |
| If sales fall | Payments fall with revenue | Collections fall if it is a true percentage |
| End date | When the cap is reached | When the purchased amount is collected |
Merchant cash advances explains factor and holdback in more detail.
What Is a Holdback Payment on a Restaurant's Card Sales?
A holdback is the percentage of each day's card sales a cash advance provider takes. Illustration only, invented figures: with a 10% holdback, a day of $2,400 in card sales sends $240 to the provider (our arithmetic). The rest settles to the restaurant.
Under a revenue-based agreement, the equivalent is the revenue share, applied in many agreements to monthly revenue rather than daily card sales.
Holdbacks in Accounting and Real Estate Versus a Holdback on an Advance
Elsewhere, holdback means other things. In construction and real estate it is money withheld until work is finished, close to retainage. In accounting it can mean an amount held back from a purchase price until conditions are met. Those meanings share the idea of money held back, but they have nothing to do with a restaurant's card sales.
Fixed Remittance or a True Percentage of Sales
Some advances take a true percentage of card sales, so a slow week means a smaller collection. Others take a fixed daily or weekly debit estimated from past sales, with a reconciliation process if sales drop. A fixed debit does not shrink on its own in a slow week; the restaurant has to ask for reconciliation.
Ask which method an offer uses, how reconciliation is requested and how long it takes. A revenue-based agreement's payment also depends on how revenue is reported each month.
Blount County, TN Restaurants by Service Type, 2023
County Business Patterns counted 71 full-service and 90 limited-service restaurants with employees in Blount County, TN in 2023, 161 by our sum, with 4,595 employees (County Business Patterns 2023). Food services and drinking places as a whole numbered 219 employers.
Restaurant loans covers equipment, purchases and payroll for those kitchens.
A Grill With Uneven Card Sales: Both Products Worked in Dollars
Illustration only, invented figures: a grill receives $40,000. Under an advance with a factor of 1.3, $52,000 of card sales is to be collected at a 10% holdback; with card sales of $52,000, $31,000 and $44,000 in three months, collections are $5,200, $3,100 and $4,400 (our arithmetic).
Under revenue-based financing with a 1.35 cap, $54,000 is due at 6% of total revenue; with revenue of $68,000, $41,000 and $57,000, payments are $4,080, $2,460 and $3,420 (our arithmetic). The same $40,000 as a 24-month term loan at an invented 11% annual rate costs about $1,864 a month and about $44,744 in total (our arithmetic).
Term Loans and Credit Lines as the Third Comparison
A term loan has a fixed payment and a known end. A business line of credit charges interest only on what is drawn and can be paid down from a strong week. Both are read on the restaurant's deposits and the owner's credit, and both can come to fewer total dollars than either sales-based product.
Working capital fits a one-time gap. Compare all of them on paper before signing anything.
A Restaurant Owner's Checklist Before Signing an Advance or a Revenue-Based Agreement
- The total to be paid or remitted, in dollars.
- The percentage taken, and whether it is a true percentage or a fixed debit.
- How reconciliation works if sales fall.
- Any fees, and any terms for finishing early.
- Whether an existing advance would be paid off or stacked.
- Any personal guarantee and the default terms.
Then call (865) 252-6156 with the offer in hand, or use the online form.
By Glenpine Funding · Updated
