DoorDash to start lending money to restaurants

Eligible restaurants can use DoorDash Capital to buy equipment or pay rent, repaying the balance over time. It comes as many indies struggle with cash flow.
DoorDash sticker on a door
Photograph: Shutterstock

Some restaurants will soon be able to get financing from DoorDash.

The third-party delivery company Wednesday unveiled a new program called DoorDash Capital that will offer cash advances to eligible restaurants. Restaurants can use the money to buy equipment, pay rent or cover other costs like hiring and marketing, DoorDash said.

Restaurants will repay the advance via deductions from their DoorDash earnings. The financing does not carry interest, though there is a one-time fee of up to 10% of the funding amount. That fee is also paid in increments. Restaurants will have access to the funds one or two days after accepting the offer.

The program comes as many independent restaurants continue to struggle to generate cash flow. A survey last month from the Independent Restaurant Coalition found that 42% of indies that didn't get Restaurant Revitalization Fund aid were in danger of declaring bankruptcy or had already done so.

DoorDash said the financing program is designed to ease this problem for small businesses, which often struggle to qualify for regular bank loans. 

The company is working with technology company Parafin to administer the program. According to Parafin's website, it provides the capital and assumes the risk for the companies it works with.

Here's how DoorDash Capital will work:

  • Eligible restaurants will see a pre-approved advance amount in their merchant portal. The amount is based on the restaurant's revenue.
  • If they accept the offer, funds will appear in their bank account in one or two business days.
  • Repayment is automatically deducted as a percentage of the restaurant's daily DoorDash sales.
  • Once restaurants pay off the entire balance, they could be eligible for more capital. 

DoorDash estimated that restaurants would be able to pay back the advance "within one year."

The program was tested with more than 1,000 restaurants and garnered a Net Promoter Score of 80, DoorDash said. Net Promoter Score is a widely used metric that measures how likely a customer would be to recommend a product.

The offer is unique among U.S. delivery companies, and gives DoorDash another perk to attract restaurants as it continues to compete for supremacy in the U.S. delivery market.

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