How does working capital help a bar, café or inn cover the costs that come before the sales?

What can hospitality businesses use working capital for?

Most owners use working capital for costs that arrive before the revenue does: opening or seasonal inventory, extra staff, marketing for an event, a large insurance renewal or license fee, or rent and payroll while a project keeps the doors partly closed. It is flexible money, so the discipline is tying each dollar to a specific plan.

• Bars and pubs: stocking beer, spirits and mixers ahead of playoff weekends, holidays or a street festival.
• Nightclubs and lounges: covering security, promoters and DJ bookings for a run of big nights before the door and bar receipts come in.
• Cafés: buying beans, milk and pastry inventory for a second location's first month, or hiring baristas before a college semester starts.
• Inns and small hotels: pre-season housekeeping staff, linens and a marketing push before bookings pick up.

If the money is going into a specific piece of gear, equipment financing is often the better fit because the equipment itself can help secure the deal.

How does repayment usually work?

Repayment is usually fixed: a set amount debited daily, weekly or monthly over a term that is shorter than most bank loans. Some products are repaid as a share of sales instead. Before you sign, ask for the total repayment amount, the payment frequency and whether there is any benefit to repaying early, because those three numbers tell you the real cost.

Short terms keep the total cost contained but make each payment larger. For a bar that does most of its business on Friday and Saturday, a daily debit that lands on a quiet Tuesday can feel heavy even if the weekly math works. Map the payment schedule against your actual deposit pattern before you commit.

If your sales swing hard by season, compare this against revenue-based financing, where payments typically move with sales.

When is a line of credit a better choice?

A line of credit is usually better when the gap repeats, such as slow January and February months every year or weekday lulls between big weekends. You draw only what you need and typically pay only on what you use. Lump-sum working capital fits one known expense with a clear payback, like pre-season inventory or a single event.

Many seasonal owners end up using both: working capital for a one-time push and a hospitality line of credit held in reserve for the months they already know will be thin. The mistake to avoid is taking a large lump sum to cover a recurring problem, then paying interest on cash that sits idle.

What does working capital cost, and when should you skip it?

Working capital typically costs more than a bank term loan or an SBA loan, because it is faster and asks for less paperwork. It makes sense when the expense clearly pays for itself soon, such as inventory for a sold-out event. Skip it when the money would only cover ongoing losses without a plan to change them.

Good reasons to use it:

• The expense produces revenue within weeks, such as event inventory or seasonal staffing.
• Waiting for a slower, cheaper product would cost you the opportunity.
• You have a clear view of how the payment fits your weekly deposits.

Reasons to pause:

• Sales have been falling for months and the money would only buy time.
• You already carry daily payments that strain cash flow.
• A cheaper option, such as an SBA loan, fits your timeline.

How do funders review a bar or café's application?

Funders mainly look at recent business bank statements to see average deposits, how steady they are and whether the account runs low. Requirements vary by product and funder; many look at time in business, monthly revenue and credit. For seasonal businesses, many funders read a slow month against the whole year, so a full year of statements helps.

Hospitality deposits have patterns funders see often: weekend spikes, holiday peaks, a summer or winter dip. Explaining yours up front, for example a lake-town café that earns most of its revenue between Memorial Day and Labor Day, tends to make the review smoother. Card processing statements can also show sales that land in the bank a few days later.

See how the process works from application to funding.

How do you budget cash for an event when customers pay deposits up front?

Build the budget in three buckets: deposits collected, refunds you may owe, and event costs still to pay. Deposits are not free cash until the event happens, because a cancellation or a refund policy can send part of them back. Run the plan twice, once at full attendance and once at weak attendance, and compare what is left in each.

The example below is illustrative only. A ticketed cocktail night with 150 guests booked at $40 each, a $22 average bar spend per guest who attends, and $9 of food and drink cost per guest who attends. In the weak scenario, 30 guests cancel and are refunded in full, 30 more do not show up and their ticket is not refundable under the stated policy, and 90 guests attend. Replace every figure with your own.

Three things the table shows. The $4,100 of fixed costs is due whether 150 guests or 90 attend, so a weak night cuts the result by more than half even though the cost line barely moves. The $6,000 of deposits only turns into $4,800 once refunds are paid, so spend against the lower number. And the gap that matters is timing: the band, rentals and staff usually have to be paid before the doors open, while the bar sales arrive after.

To use it, list your own fixed costs and the date each is due, then set them against the deposits you can safely treat as kept. If the weak-attendance column still leaves a positive balance, the event can carry itself. If it does not, the shortfall is the amount to plan for, whether that means a smaller order, a stricter refund policy or short-term financing sized to the gap. Funders look at how steady your deposits are, so a plan like this also helps you explain an event-driven revenue spike.

Updated September 14, 2026 · OpenTab Capital Funding Team