Business Funding vs Using Your Own Cash: What Should a Café Consider?

Business funding can give cafés another way to manage large expenses without using all of the cash available in the business. But when a café has money in its account, should the owner use their own cash or consider external funding?

Using money already in the business can feel like the simplest option. There is no application process, no funding agreement and no additional repayment to manage. However, using a large portion of available cash can also leave a café with less money for everyday expenses, unexpected repairs or future opportunities.

Using Your Own Cash

Using existing business cash is one of the simplest ways to pay for an expense.

For a café, this could mean using money already in the business account to purchase a new coffee machine, replace a commercial fridge, buy additional stock or refurbish part of the premises.

The main advantage is straightforward: there is no external repayment.

Once the expense has been paid, the café does not have to make monthly repayments or contribute a percentage of future sales towards the purchase.

However, there is another side to consider.

Imagine a café has £20,000 available in its business account and needs £12,000 for a new commercial coffee machine and refurbishment.

Paying for everything immediately would leave £8,000.

That might be enough to cover normal expenses — or it might not.

The café still needs to pay staff, suppliers, rent, utilities and other operating costs. If the coffee machine breaks down again or an unexpected repair is needed, the remaining cash reserve could become important.

The Advantages of Using Your Own Cash

There are several reasons a café owner may prefer to use money already available in the business.

No Repayments

There is no loan or cash advance to repay when the café uses its existing funds.

No Additional Funding Costs

External funding may involve interest, fees or other costs. Using existing cash avoids those additional funding costs.

Immediate Access

If the money is already available, the café can make the purchase without waiting for an application or funding decision.

Complete Control

The café owner can decide how the money is spent without having to meet the conditions of an external funding provider.

However, using available cash is not automatically the best option simply because the money is there.

What Happens When a Café Uses Too Much of Its Cash?

Cash in a café’s bank account is not necessarily spare money.

A busy café may have regular daily card sales, but it also has continuous expenses.

Coffee beans need to be ordered. Milk and food need to be restocked. Staff need to be paid. Rent and utilities still need to be covered.

There can also be unexpected expenses.

A commercial dishwasher could stop working. A fridge might need replacing. Equipment may require servicing.

This is why maintaining a healthy cash reserve can be important.

If a café spends most of its available cash on one large purchase, it may have less flexibility when something unexpected happens.

When Could Business Funding Be Worth Considering?

Business funding may be an option when a café needs to make a significant investment but does not want to use all of its available cash.

For example, a café might want to:

• Upgrade its commercial coffee machine
• Add outdoor seating
• Renovate the customer area
• Replace kitchen equipment
• Purchase additional stock before a busy period
• Introduce a new food menu
• Hire additional staff
• Expand into a second location

Rather than paying for a large investment entirely from its own cash, the café could consider whether external funding would allow it to spread the financial impact while retaining money for normal operations.

The cost and terms of the funding would still need to be considered carefully.

Funding Can Help Preserve Working Capital

Working capital gives a café the flexibility to continue operating while managing its everyday expenses.

Consider a café preparing for the summer season.

It may want to purchase additional outdoor furniture, increase stock and bring in extra staff before customer numbers increase.

The investment happens before the additional revenue arrives.

Using all of the café’s available cash could make the investment possible, but it could also leave less money available during the period between spending and generating the additional sales.

Business funding could be considered as an alternative way of managing that upfront cost while retaining some existing cash within the business.

Funding for Growth vs Covering a Cash-Flow Problem

It is also important to understand why the café needs the money.

Funding used to support growth is different from funding used to cover an ongoing cash-flow problem.

For example, a café might consider funding to purchase a second coffee machine because it expects customer demand to increase.

That is a growth investment.

On the other hand, if a café regularly struggles to pay suppliers or staff because its normal revenue is not covering its operating costs, taking additional funding may not solve the underlying problem.

Understanding the reason for needing the money is therefore an important part of the decision.

What About a Cash Advance?

A cash advance is one type of business funding that may be relevant to cafés because cafés typically process regular card payments.

Rather than using a traditional fixed monthly repayment, some cash advances are structured around future card sales.

Repayments can be collected as an agreed percentage of card turnover.

For example, a café that has a particularly busy weekend may generate more card sales, meaning the amount collected towards the advance could increase. During a quieter period, the amount could reduce with the lower card turnover.

This type of structure can be different from a traditional business loan with fixed monthly repayments.

However, café owners should always consider the total repayment amount, fees, terms and the effect that repayments could have on future cash flow before agreeing to any funding.

A Simple Café Example

Imagine a café has £25,000 available in its business account.

The owner wants to spend £15,000 on a new coffee machine, equipment and a small refurbishment.

There are two possible approaches.

Option 1: Use the café’s own cash

The café pays the full £15,000 immediately.

It has no additional funding repayments, but its available cash falls from £25,000 to £10,000.

Option 2: Consider business funding

The café uses some of its own cash and considers funding for the remaining cost.

This could leave more money available for stock, wages, bills and unexpected expenses.

Neither option is automatically better.

The first avoids funding costs. The second may provide greater cash-flow flexibility but introduces a financial commitment.

The café needs to consider which approach fits its financial position.

Questions to Ask Before Using Your Café’s Own Cash

Before making a large purchase, consider:

How much cash will remain?

After paying for the equipment or refurbishment, will there still be enough to cover normal expenses?

What unexpected costs could arise?

Cafés rely on a range of equipment. Repairs and replacements can happen when they are least expected.

Will the investment generate additional revenue?

If the money is being spent on new equipment or an expansion, consider how it could contribute to future sales.

Is the café’s revenue seasonal?

A café may have significantly different trading periods throughout the year. Keeping sufficient cash available during quieter periods can be important.

Questions to Ask Before Taking Business Funding

If you are considering funding, look beyond the amount you can receive.

Consider:

• What is the total cost?
• How are repayments calculated?
• How long will the funding last?
• How will repayments affect daily cash flow?
• Are there additional fees?
• Can the funding be repaid early?
• Is the amount being borrowed appropriate for the expense?

It is also important to avoid taking more funding than the café actually needs.

So, Should a Café Use Its Own Cash or Business Funding?

There is no universal answer.

If a café has a healthy cash reserve and can comfortably afford an expense without affecting its everyday operations, using its own money may be the simplest option.

If paying for a large investment would significantly reduce its working capital, the café may want to consider whether external funding could provide greater flexibility.

In some situations, a combination of the two may also be appropriate.

For example, the café could use some of its own cash towards a new coffee machine while considering funding for the remaining amount.

The important thing is to look at the full financial picture rather than focusing only on the amount currently sitting in the business account.

Final Thoughts

For café owners, deciding between using existing cash and taking business funding is ultimately a cash-flow decision.

Using your own money means avoiding additional funding commitments, but spending too much of your available cash can reduce the financial buffer you have for everyday expenses and unexpected costs.

Business funding can provide access to additional capital while allowing a café to retain some of its existing cash, but it also comes with costs and repayment obligations that need to be understood.

Whether you are replacing a commercial coffee machine, preparing for a busy season or considering a larger expansion, looking at both options can help you decide how best to manage the investment.

Breathe Payments provides card payment solutions and access to business funding options for businesses, including cafés and other hospitality businesses.

Call: 0203 985 9080
WhatsApp: 07723 505366
Email: info@breathepay.co.uk