Question for owners...

Having been open a year now, I have been cold-called by several companies wanting to give me money based upon a percentage of my credit card transactions. I have heard everything from 3% to 15% of monthly batch totals. Is this something that anyone does and is it legit?? While I don't need "fast cash" I could use a cool 30k to pay off my SBA bank note. Any/all feedback would be greatly appreciated!-Thanks in advance-Dave

Dave,
I'm not a restaurant guy, but a finance guy, and my gut tells me this is a very expensive way to "borrow" money. My guess is the internal interest rate you would pay is probably a multiple of what your SBA note is charging. Because these companies deduct small amounts from each transaction, I think they assume the owner will never realize how costly it is. I'd perform an experiment and ask one of the cold-call guys what their internal rate of return is expected to be on an average relationship. I don't think they'll tell you ....

Dave,
I'm not a restaurant guy, but a finance guy, and my gut tells me this is a very expensive way to "borrow" money. My guess is the internal interest rate you would pay is probably a multiple of what your SBA note is charging. Because these companies deduct small amounts from each transaction, I think they assume the owner will never realize how costly it is. I'd perform an experiment and ask one of the cold-call guys what their internal rate of return is expected to be on an average relationship. I don't think they'll tell you ....

One of the guys actually said that "they will end up costing a little more than a bank" but that was all he would divulge. My bank nut is rather high though and they would be unsecured with no guarantee. My only reason for concidering it is SBA is Federal and I don't much care for having my N*&% that close to the fire. Thanks for the help though and I'm inclined to think that if it sounds to good to be true...........

I'd think of it like a car lease ... a high built-in rate that is hard to ever actually determine. But, I could be way wrong, and am still curious to see if anyone has done this, as you had asked.

Do they not have to provide some sort of disclosure document before you enroll? Before doing anything, I'd want to see the APR, all fees and any sort of termination penalties. That said, I'd still be suspicious. Sounds shady.

Having been open a year now, I have been cold-called by several companies wanting to give me money based upon a percentage of my credit card transactions. I have heard everything from 3% to 15% of monthly batch totals. Is this something that anyone does and is it legit?? While I don't need "fast cash" I could use a cool 30k to pay off my SBA bank note. Any/all feedback would be greatly appreciated!-Thanks in advance-Dave

Hey Dave,
I'm not sure if you're referring to a program like Rewards Network, but if you are, here's what I think...Rewards Network offers a "money now" loan which is paid off with your credit card transactions. You can call Steve Tayse for more information.


I tend to feel like any money you borrow from a place like that is going to be a HUGE % paid back. I don't know if I believe the 3-15% thing....I think they tend to be more like 30+.

They also have a program that gets diners THROUGH the door by offering incentives (sky miles, u promise points) etc, and they, in turn get a percentage of the check.

We currently are enrolled in that latter program. Each month, I get a statement that tells me who dined, how much they spent, number of visit, and their experience. I can't say I've seen a huge difference in sales, but according to the reports, we do have several repeat diners....

Hope this helps

We currently are enrolled in that latter program. Each month, I get a statement that tells me who dined, how much they spent, number of visit, and their experience. I can't say I've seen a huge difference in sales, but according to the reports, we do have several repeat diners....

Hope this helps

I belong to that Delta Dining Skymiles program. It is a bit of a driving force when selecting a restaurant. The user has to register any or all credit cards (including a spouse) they intend to use at the restaurants. I wondered how the program benefits a restaurant. Thanks for posting this info Ashley!

D,

5 years ago we participated in such a program. Last year we were part of a class action law suit against this Company. There are several companies who do this, and many of them are now defendants in law suits.

It is much like a lease. They use whats called a "money factor" versus an APR%. In the end the typical rate ends up being 30% or more!. But what got them in trouble is how they make it hard to get out of the program. You cannot prepay the loan, you must give written notice before your term ends, if you dont it automatic renews, etc, etc. There are too many other restrictions for me to remember.

So my advice...........stay away.

Regards,

Tony
Still making pizza, and loving it