Why do banks turn down restaurants for loans?

Restaurant lending is a category decision at most banks before it is ever a business decision. Margins are thin, the failure rate is genuinely high, and an underwriter with a portfolio to protect declines on the sector.

The balance sheet does not help. Almost everything you have is leasehold improvement and equipment that is worth a fraction of its cost the moment it is installed, so there is little a bank can secure against.

And most restaurants lease. No property means no collateral in the form a bank's model is built to recognise.

Card settlement arrives daily and is verifiable to the dollar. From an underwriting point of view that is unusually good information — better than the quarterly management accounts a bank would ask a larger business for.

Because repayment is taken as a share of card revenue, it flexes with trade. A slow February costs a smaller payment rather than a default, which is the whole reason the product exists for seasonal businesses.

Seasonality that reads as risk to a bank reads as a pattern to a funder looking at twelve months. A predictable summer peak is not instability.

A merchant cash advance underwritten on daily card settlement is the most common fit, because the funder reads exactly the revenue the bank discounted, and a true holdback shrinks on a slow night.

A new walk-in, hood system or range costs less as equipment financing, because the equipment secures it. Keep the advance for stock, staff and repairs that pay back within months, not for a build-out that pays back over years.

Six months of business bank statements, plus your card processing statements if you have them — processing data usually improves the offer.

Average monthly deposits as a real number, not an estimate.

What the money is for. Equipment, a build-out and covering a slow quarter are different risks and get different pricing.