Best Financing Options for Restaurant Owners
Being an owner of a restaurant can be both exciting and highly profitable. It could also be a big risk. In order to make your restaurant survive and thrive, it requires a firm business plan, delicious food as well as plenty of money. You will require money to recruit employees, pay them, replace broken equipments and of course, pay taxes. Most restaurant owners might feel overwhelmed by these financially tasking activities and sometimes, they resort to banks and direct lenders to help them finance restaurant purchases in order to avoid disrupting cash flow.
By opting to get financial help from banks and direct lenders, business growth can skyrocket while you can also retain the ability to carry out your normal activities. However, finding the perfect restaurant funding option available in the marketplace with rates, terms and conditions as well as quantities that best suit your interest can pose a real problem. With numerous options available, how do you make the right choices?
If you have ever looked into financing options for restaurants, the number of available choices can be rather overwhelming. When you want to choose a loan for your restaurant, it is advisable to take into account the application process, maximum loan amount available, funding time frames and term lengths. With this mindset, you will be well equipped and this will prevent you from making any hasty decision.
Below are some of the most common and best financing options that restaurants owners use to expand their business in 2019. They include:
- SBA Loan
This is one of the commonest form by which restaurant owners get funds. For owners who don’t qualify for a traditional loan, SBA (Small Business Administration) supported loans might be the next option for you.
The 7(a) Loan Program is the most common and in order to qualify, your restaurant must meet the following requirements:
- It must operate for a profit
- It must be considered a small business as defined by SBA
- You must have invested some of your money in the restaurant
- You must own a business in the United States
- Your plans for the money must be related to your business
- Ability to show a need for a loan
- You must have no debt obligations to the United States government.
If you meet the above mentioned requirements, an SBA supported loan may be the best option for your business. Some of the unique benefits of an SBA loan include: lower down payments, flexible overhead requirements and zero collateral needed for some loans.
- Equipment Loan
An equipment loan is basically used to purchase equipment. As a restaurant owner, with this loan, you can purchase the necessary equipments needed for the growth and expansion of your business. You can obtain equipments when starting your business or when your business begins to gain roots. You may need it in order to expand or to replace broken or faulty equipments.
The benefits of an equipment loan include:
- Flexible payment terms
- Newer and better equipments that will increase the efficiency of your business
- It requires less documentation than a traditional business loan
- It gives you the opportunity to purchase the best equipments.
- (Unsecured or Secured) Business Line of Credit
As a restaurant owner, a business line of credit is one of the easiest and fastest methods of getting funds for the immediate needs of your business. A small business line of credit is offered as unsecured debt which means that you don’t need to put up collateral that the lender can sell if you default on debt. It is a good choice for restaurant owners who are looking for ways to manage cash flow in a better manner.
However, many banks will require a business that has been in operation for some fixed number of years under the current ownership. Depending on your specific business needs, a small business line of credit can be the solution you need to meet your goals for your business growth. And the good thing is, you can obtain it at a pace that is right for you.
By maintaining a line of credit in good standing, your business can have the opportunity to be awarded better loan terms whenever you seek future financing.
- Restaurant Cash Advance
Technically, it is not a loan – it is a form of advance on future sales. A cash advance affords the restaurant owners the opportunity of receiving a cash infusion which they can spend on whatever they wish and whenever they wish. However, a portion of the cash advance is paid back at the end of each business day. This will be the trend until the advance is entirely paid back.
One of the advantages of cash advance is that restaurant owners do not have to pay more if they take a longer period to repay the actual amount. This is because the repayment is not based on a specific duration. Instead, it is based on a percentage of payment card sales.
Before you apply for any of the financing options listed above, make sure you do your research properly and ensure that you choose the right lender for you as this will result in quicker funding and higher growth potential.