Toast launches Toast Capital to help restaurants get loans – Crunchbase News
Grill, a restaurant management company valued at more than $2.7 billion, wants other restaurants to have more green on their menus. Capital, of course.
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Toast started Toast Capital so its customers could get loans, keeping restaurant-specific idiosyncrasies in mind, such as “seasonality and restaurant profit margins,” according to Tim Barach, CFO at Toast. Toast will offer loans between $5,000 and $250,000 to restaurants that are already working within the Toast network.
Where a new patio costs around $150,000 or a new walk-in refrigerator can cost up to $10,000, which could set a business back, a loan in this range can help a struggling small business growth (or unexpected new changes).
“Right now, the typical process restaurants go through to get financing is to spend weeks or months applying for a loan from their bank, only to find out later they haven’t been approved,” Barash told Crunchbase News. “Many end up going to loan sharks or putting huge amounts of money on their credit cards.”
Toast says its only competitor is the status quo: traditional bank loans or credit cards, mixed with compound interest or annual and late fees.
A few crumbs
For starters, Toast Capital does not lend to restaurants outside of its customer base. So within its Toast network, the company says it gives fast and flexible loans, which I imagine is good for a business with good days and bad days.
I asked Barash from Toast to walk me through an example.
First, flexible: He told me that if a restaurant makes, say, $5,000 on Monday, but makes $10,000 on Tuesday, the restaurant will “pay less on the day it makes less.” So it’s a model where you pay a percentage of what you earn each day.
Now, fast: Toast says eligible customers — those who have been on the Toast point-of-sale platform for at least six months — can apply for a loan in minutes, then receive funds within one business day.
Let’s say a coffee shop in Boston is having a bad month because of a few snowstorms. According to Toast, the loan would represent lower than normal figures with a percentage-based repayment.
A larger slice
A kind of competitor based in San Francisco, Brexit, comes to mind. The startup also claims fast and flexible funding for volatile businesses, startups. Brex recently raised $100 million in a round led by Kleiner Perkins Digital Growth Fund. Existing investors also joined in, including Y Continuity Combiner, GreenOaks Capital, Ribbit Capital, Global Daylight Saving Timeand IPV. Its total known funding to date is $315 million.
Brex, which offers a credit card and now cash to startups, is valued at around $2.6 billion, a figure it hit in less than two years. Founded in 2011, Grill is currently valued just slightly above that figure, at $2.7 billion.
At first, Brex and Toast Capital might be competitors of some sort. Both companies offer quick loans to businesses often overlooked by traditional systems. The difference is in the nuance. Brex offers a credit, while Toast Capital offers a loan which, although flexible, has a fixed fee by means of a factor rate (more here).
The bottom line: We’re in a time when startups aren’t afraid to take on traditional banks, so Toast’s leap out of pure software is timely, and while surprising in some ways, not as risky as it once was. the past .
Drawing: Li Anne Dias
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