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You must have seen businesses resort to direct funding when they encounter a challenge or a sudden opportunity for growth. This is especially true of small business owners like restaurateurs. A restaurateur running a chain of profit-making, casual-dining restaurants may find an ideal property for his new restaurant. But he realizes that he does not have surplus cash to go ahead with it. How can he fulfill his dream? He approaches a direct lender, one that will offer him business funding.
Should restaurant owners go to banks or direct lending companies to fund their business?
Direct lending helps to fill the void by offering business owners quick, accessible funds. Traditional banks, on the other hand, are not equipped for this. To run a successful restaurant, you are going to need monetary support from time to time. In such a situation, direct financing helps. Today, direct lenders funding has also made it possible for you to kick-start your venture.
- Collateral: Traditional banks can hand out loans but these may not always be right for budding restaurant owners. While funds are available, banks demand collateral. The huge amount of paperwork needed and the criteria for loans to be worth more than $250,000 makes it challenging for restaurateurs.
- Strict Criteria: Banks will not have the funds every time and they are strict about those getting it. This is why startup restaurants often cannot get financial assistance from banks. It is here that direct funding can be a godsend. Such groups are now readily available and they have no issues working small businesses. This makes it the best go-to solution for restaurant owners.
- Application: When you apply for loans, it is a time-consuming and tedious process. Besides an application, you must submit multiple personal and financial documents for verification. Banks undertake a review and ask for in-person interactions. This entire process may take a month or longer; post-approval also, you may have to wait. Direct financing options are quick and less cumbersome. The group will guide you during application to ensure you fit the criteria.
- Fees: Banks typically charge fees for applications. So, there are many upfront costs involved when you approach a traditional bank for loans. Direct funding groups are far more cost-effective.
- Dependency on select clients: Traditional banks are usually skeptical of small businesses that record sales only from selected customers. Direct lenders are always keen to see diversity in an enterprise’s clientele. For instance, a local restaurant may depend primarily on its “regulars” to ensure steady earnings. This does not go down well with banks, making direct financing a much more appealing option.
So, as a restaurant owner, you will probably find direct funding options more reasonable and lucrative. They allow flexibility in payments and offer far more creative options. Direct financing however can turn out to be costlier than a traditional loan from the bank. This is because such companies act as liaisons and borrow funds from other institutions. They absorb risks or losses when their clients default. Moreover, applications are approved in record time. To enjoy all these benefits, you have to be prepared to shell out some more money.