Restaurant loans can be a great way to start a new restaurant business. They provide the capital necessary to help the entrepreneur start up a new restaurant, attract customers and become profitable. Those who have successfully started a retail food business or restaurant before will tell you that proper funding is essential to a new restaurant venture.
Restaurants have plenty of expenses. They have to pay for employees, rent for location, materials, food, licensing and other costs. But, those are just the ongoing costs. Their are additional upfront costs for building out the restaurant, investing in business interiors like nice tables and modern digital signage, as well as marketing and promotion of the new restaurant business.
Unfortunately, securing a restaurant loan is almost as difficult as running the business itself. Since many loan companies already know that restaurants have high start up costs and a higher rate of failure, they are very strict on eligibility and lending. However, there are several options you may want to consider to get your restaurant funded and off the ground.
SBA Restaurant Loans
The small business administration offers loans for restaurants who wish to grow their business. Although the SBA is known for approving many business loans to restaurants, these are typically restaurants which are already running. For start up restaurant loans, they are known to be a much tougher lender or financing option. Makes you consider finding out how difficult CPA exam is, huh?
Crowdfunding restaurant startup capital is now one of the best ways to finance a small business. It allows restaurant entrepreneurs and other business owners to raise restaurant business funding without incurring debt from unsecured loans. When you crowdsource business funding, private individuals contribute to your fundraising goal. In return, you offer them perks. With certain business crowdfunding platforms, you can even offer states in business ownership. Crowdfunding restaurant startup costs is a wise idea to avoid restaurant business loans.
Traditional banks offer loans to small businesses. If your credit score is good, there is a chance that you could actually get a restaurant loan from a traditional bank. However, do not have to much help as banks also are aware of the high failure rate of startup restaurants.
If you have valuable assets, you can use them to secured loans for your restaurant business. A secure restaurant loan would allow you to collateralize your assets in the event you cannot pay your debt. This can be risky if you do not want to a precious asset like a house or a vehicle. You can read more about secured and unsecured loans.
Credit Card Loans
By leasing the equipment and staying low cost, it is possible to finance a restaurant start up through credit cards. Credit limits very for everyone. And, if you fall in the up tiers of credit reliability, you could have a $10,000 credit card limit. If you have a few of those, that is a significant amount of financing.
Once you have tried out these restaurant loan options, you may also want to explore factoring lines for working capital or venture capital for equity investment. More recently, restaurants have even turned to websites like kickstarter to crowd-source their funding as business loan alternatives. However, there is plenty of money available for restaurant loans. You just have to communicate a solid business plan and track record of success to really stand out from the competition.
Before You Get That Loan…
Just one thing to remember before you go apply for business credit card or that other restaurant loan. It takes a lot to get started in the restaurant business. Six, seven or even eight months can go by before you really get your footing. So whatever loan amount you think you need for your restaurant, add another six months expenses to that. Do not be afraid to overestimate your needs in the beginning. If you find that you do not need the extra money, excellent! Just pay it right back. However, you may be surprised to find that that extra bit of money will come in handy.