Rise of the Indies: How independent restaurants are keeping ahead of the competition

Financial provider 365 Business Finance has seen a growing trend in the use of merchant cash advances by independent restaurants, as a means to keep ahead of the competition and grow their businesses while many chain restaurants suffer losses and closures.

The funder has revealed a 100% increase in demand for its services so far in 2019, as restaurants and pubs seek cash advances to expand, refurbish, redevelop and invest in equipment, staff and training, and to help with working capital and VAT payments. Such businesses are bucking the trend in the casual dining sector, which saw 120 closures in London alone last year.

“Gone are the days of 2015 and 2016 when there were three new restaurant openings for every closure. Many new concepts have failed, whereas the tried-and-tested businesses have fared much better,” said 365 Business Finance managing director Andrew Raphaely. “The need for business funding has increased due to rising costs and a requirement to take a competitive edge – be that through expansion, redevelopment and refurbishment, or investment in staff and training. The closures of homogenous chains in the casual dining sector, such as Prezzo, Carluccio’s and Jamie’s Italian, have given the independents an opportunity to get a stronger foothold in the sector.”

With 1.7 million UK consumers visiting a restaurant at least once a week, the opportunity for independent restaurants and pubs to take a slice of the action is clear, and an increasing number of them are targeting growth to capitalise on the trend of consumers to favour local, independent locations instead of large chains or out-of-town restaurants.

“Independent restaurants are telling us that their customers value the personal approach, knowing that their food is locally sourced and that the restaurant is part of the community, not a corporate machine,” said Raphaely.

When it comes to getting the funding to develop and expand their businesses, many restaurants and pubs are turned down by high street banks or are required to secure loans against their business or property, supply business plans and commit to lengthy terms. A merchant cash advance from 365 Business Finance is designed to match businesses’ cash flows, with repayments taken as a small percentage of debit and credit card sales, so they only pay back the funding when their customer pays them. The cost is fixed up-front regardless of how long it takes to pay, with no late fees or hidden costs.

Joel Braham, founder of The Good Egg restaurant, said, “The merchant cash advance from 365 Business Finance helped a huge amount. Cash is key in this business, when you’re buying food and have set payment terms, you have VAT costs, PAYE increasing with more staff – on any day there’s a huge amount of money going in and out of the business, so keeping on top of that can be hard. You can prepare for these things but there are some times when you need help and I think the merchant cash advance is great.

“It was straightforward to set up – all the hard work is taken care of for you and you get your card payments in your bank account in exactly the same way. If you can demonstrate that your business is operating and generating card sales, then it’s a simple, short process.”

365 Business Finance funds UK businesses with merchant cash advances from £5,000 to £200,000. Eligible businesses must have been trading for six months and take at least £5,000 per month in debit and credit card transactions.