Best financing options for restaurant owners
Running a restaurant requires quite an investment, and getting a restaurant financing has always been an uphill task for owners. It is somewhat difficult for startups to secure funding, and a lack of working capital has been the main reason for the failure of many businesses. Restaurant financing should be more accessible than it currently is; it is the only way to make running the business easy for entrepreneurs.
However, before capitalist and other forms of lenders would drop their cash for the running of your business, there are some questions you should be prepared to answer.
- How long has your business been in existence? This is a question of how long you have started, is your business a startup or your business has been running for quite some time? This would indicate if you have been in business and are looking to scale and expand on the scope, reach, and revenue of your business. The funding option you are eligible to pick is all dependent on the answer from this question. It is also a significant determinant in the interest rates you would need to incur, as well as the duration of the terms and the maximum amount of loan you can acquire.
- What would you be doing with the loan? Before you go out in search of a lender or capitalist, you need to have a clear cut strategy on what you plan to use the loan for. You need to ensure specificity when designing this. You need to know precisely what you would use the fund for, in growing your business. This would help the lender feel relaxed and willing to drop the cash. Hence, there is an increase in your chance of securing restaurant financing. Alongside the funding, you would also get reasonable rates, duration, and amount.
- State your FICO score: Your credit score is critical when you are trying to secure a restaurant financing. Of most banks and lenders there are, the whole lending process is premised on the strength of your credit score. However, some lenders don’t need detail of your credit score and its history to give you a loan.
- In annual gross sales, how much does your business make in total? You have a higher chance of getting the restaurant financing if you are one whose business makes quite a lot in annual gross sales. The higher you make, the better the terms you can negotiate. You should ensure that all your options are duly explored so that you find just the right lender to give you the loan that your gross sale would be able to foot. You should ensure that you wouldn’t be over-borrowing.
There are five main restaurant financing options you can pick from.
- SBA loans for restaurants: One of the best ways to get restaurant financing is with the Small Business Administration. Loans from SBA have excellent rates, offers, and suiting terms for businesses. This loan seems the best for businesses; however, it is not as easy as expected. They are tough to get, and in the case of being lucky, you are required to have the backing of personal assurance and collateral.
- Restaurant equipment financing: This is a great way to get your restaurant up and running. There is the option of leasing or financing the equipment needed at your restaurant. With this leasing, you get to enjoy the choice of making affordable monthly refunds of the loan. Remember, you should ensure that your sales can foot the loan you secure.
There are various packages you can go for, which range from 12 to 60 months terms. This span is flexible enough for restaurant owners. With this form of financing, restaurant owners get to enjoy amazing tax benefits too.
- Business credit lines (secured or unsecured): This is one of the easiest and prompt way for restaurants to secure funding. This option is designed to meet the specific needs of your business. One great thing about the business credit lines is that you are only required to pay what you consume. Your restaurant might not need financing as of the moment. however, this option is convenient in times of emergencies.
- Unsecured restaurant business loans: This is a quick and flexible form of loan that your restaurant can run on. This restaurant financing option makes it easy to get loans without having to lay down collateral. Also, there is no restricting policy or framework on how the investments are employed in the running of the business. It goes excellent with owners, either with good credit or a bad one. Business owners with tax defaults also have access to this loan option.
- Restaurant cash advances: This option is not a loan; it is somewhat a purchase of receivable on credit cards. In the past, this system of financing was pricey. However, there are now companies with more flexible terms. There is no payment set, there is also no need for a personal guarantee, and amazingly, you don’t need to leverage your cash.
Getting the appropriate restaurant financing is key, in the hope of bringing the business to scale.