Forums: Discussions for entrepreneurs and small business.

Ok guys, I found this website and have been in contact with a representative who says she has shopped around and found someone who can help me with my funding for a small size café/restaurant.  The amount is $50,000-this is what I was asking for.  She said the only thing is that I would have to find a location where the lease is $5000/month and it is shared.  Or she said to find a location where a deli, banquet hall or catering company is attached to it.  A catering business that is attached would work fine for my catering too.  She also said that my payments for the loan would be taken out of my credit card sales…

 

Anyone heard of a deal like this?  I been praying so hard asking God to lead me and guide my way.

Serious responses please…..

 

Thanks

I don`t know about the location sugestion, but the credit card thing I have heard of.

If the copay she found does credit card sales financing you can go and find your own directly.

I have been told though that this is not the way to go in terms of financing your business. If I undersand how it works they give money up fornt and take a large percentage of your credit card sales automatically. The interst rate is very high from what I can gather. Also the terms are long so they make quite a bit of money off of you.

You may want to rethink going this route. 

You will have your own business, but a large lump some will be going to them cutting down your profit. You could off set this by selling additional items that counted only for cash sales. Pretty much cash sales will be how you are going to survive. Think about how much you will have in cash sales versus credit card payments against what is expected from the company. If you do not meet a certain quota, they will automatically draft your account leaving you less in the bank to pay your expenses and salaries. Keep this in mind.

I am not an expert on this area, but you are basically being offered an advance on credit card receivables.  Just like LisaPR suggested.

The interest rates are high on this type of financing - the effective cost of borrowing is likely to be in excess of 35% per annum.  It`s similar in cost to low volume factoring of accounts receivable for commercial invoices.  A lot of start up businesses grow by using factoring.  Just make sure that your margins can support the interest expense.

I`m a bit surprised that they`re trying to dictate the terms of your location...

Caveat emptor.