DoorDash is Now Lending Funds to Restaurants

Steven Spielberg

The money comes through a cash advance, not a loan, and doesn’t include interest or hidden fees. 

For the past several years, DoorDash has sought to prove it’s more than just a third-party delivery aggregator. 

Prior to COVID, the company opened a shared ghost commissary with multiple restaurants, called DoorDash Kitchens. In February 2021, it launched a Main Street Strong Accelerator program to provide financial and educational support to businesses owned by women, immigrants, and people of color. 

Now, the country’s largest third-party delivery provider is adding yet another description to its arsenal—financial lender. 

The company recently rolled out DoorDash Capital, a service that provides financing to certain DoorDash merchants. The funds can be used for costs such as equipment, marketing costs, rent, hiring, payroll, and more.

“As we continue to listen to our partners and adapt our services and offerings to meet their needs, one key area where they have asked for support is quick and easy access to capital,” Chief Revenue Officer Tom Pickett said in a blog post. 

DoorDash is working with Parafin, an embedded fintech company, to offer the initiative. Eligibility is limited to DoorDash businesses that have a sustained sales history.

The process starts with qualified merchants seeing a pre-approved amount in their Merchant Portal under the “financing tab.” If the offer is accepted, the business will receive funds in their bank account in as little as one to two business days. No other paperwork is required and there is no impact on a business’ credit score. Pre-approved offers are valid for 30 days, and then reassessed. 

DoorDash Capital is a cash advance, instead of a loan, and includes a one-time fee that will be paid over the duration of the advance. Pickett said no hidden charges, recurring interest, or prepayment penalties are involved.

To repay the advance, businesses use DoorDash as they normally do, and Parafin will automatically collect a percentage of sales from the company’s bank account. The repayment schedule depends on a company’s typical payout timeline with DoorDash. For instance, if a restaurant is on weekly payouts, Parafin will collect repayment weekly. 

During the pilot program, more than 1,000 merchants used DoorDash Capital and gave the service a Net Promoter Score of more than 80. 

Chad Williams, co-owner of A King’s Cafe in Philadelphia, said he used DoorDash Capital to purchase a new fridge and stove, allowing the kitchen to run more efficiently. Additionally, Noree Tyler, owner of Chada Thai Restaurant in Norman, Oklahoma, use funds to install an air conditioning system and pay for deep cleaning services. 

“The successful recovery of the restaurant industry requires continued investment,” Pickett said. “Restaurants are the fabric of our local economies, and it’s important that we continue to invest in their businesses. With DoorDash Capital, we hope to help our partners looking for accessible lending find an alternative option and invest in their businesses for the future. In our evolving efforts to support restaurants, we will continue to develop products and services rooted in strengthening our restaurant community.”

Pickett noted that most small businesses don’t qualify for traditional bank financing because of strict requirements. He pointed toward a 2020 Small Business Credit Survey commissioned by the Federal Reverse Banks that found 35 percent of small businesses with revenue between $100,000 and $1 million received bank funding in the past five years. 

Many operators are searching for more financial aid after the quick closure of the $28.6 billion Restaurant Revitalization Fund. The RRF received more than 370,000 applications asking for $76 billion last year, but more than 177,000 restaurants and bars came away empty-handed. The Paycheck Protection Program, which wasn’t without criticism, ended last May.

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