Restaurant Startup loans what you need to know before applying for any loan. Here are some of the best types of restaurant loans. Before you go making any decisions you will want to read this first. Finding founds for you restaurant isn't going to be easy.
Don't Let Money Stop You From Chasing Your Dreams
Lots of people dream of starting their own restaurant but very few people can do it with just the cash and assets they personally have available. A restaurant isn’t the kind of business you can start on a shoestring, or easily bootstrap your way into a bigger operation. As a result, the financing of a restaurant startup is often the most challenging in the aspect of getting started for any entrepreneur looking to get into this field.
Here is what you need to know to get your first restuarnt startup loan. The first step to getting your restaurant startup loan is to have a very well thought out business plan. You can’t begin to finance a project of this magnitude without a very good understanding of what you are actually going to end up getting. Well, you can but the results are almost always a disaster!
Equally, or maybe even more important in some cases, is a financial plan that shows you the exact cost you will incur to launch your restaurant, including not only the cost of getting to the point of opening the doors but where the business generates enough cash to pay all its bills every month.
Our Restaurant Startup Checklist or the Restaurant Startup Kit both come with a solid business plan template and a monthly operating expense worksheet. Both of these will help when applying for your restaurant startup business loan.
You may find this article helpful as well: What They Don't Tell You About Restaurant Startups
Once you have your restaurant business plan and some carefully crafted financial projections in hand, you can begin evaluating your options for financing. The first place to always look is your own funds. Not only are these the easiest to get, but few other people are likely to put any money into your restaurant startup if they know that you yourself aren’t investing in the business.
The next most likely place to look is friends and family. While there are pros and cons to taking money from these sources, statistically they are one of your best bets for raising money for your restaurant startup.
The next option to get your restaurant startup financed is with a small business loan. Most business owners know that running a business requires, planning, hard work, dedication, and education. But even with all of those elements present, one of the main necessities from business success is money. The right business loan will allow the restaurant owner to get the restaurant startup loan/loans that work best for them. The next couple of paragraphs talks about a few different loan options.
Loan option: Merchant Cash Advance
A merchant business is a business that sells merchandise and/or services. Some examples of merchant businesses are retail stores, restaurants, and automobile repair shops. A merchant cash advance is a purchase of a business future credit card receivables, making it the best business loan option for merchant businesses.
Any business that regularly processes credit card transactions can use a merchant cash advance, although a business will usually be required to process a minimum of 2,500 a month in credit card sales in order to be considered for a merchant cash advance.
Merchant cash advances work well with merchant businesses because the repayment is taken as a small percentage of the business daily credit card sales, allowing merchants to continue business as usual as their merchant credit advance is repaid.
Merchant cash advances can be used for inventory, advertisement, working capital, or anything else that a merchant business may need, as there are usually no restrictions on how a merchant cash advance can be used.
Business Loan option: Small Business Startup Loan
The initial costs of starting a restaurant are quite often more than expected, for this reason, restaurant startup business loans can sometimes be a necessity.
When providing startup loans, most lenders will require an applicant with a business plan, and provide a personal financial statement. Lenders want to know that a business has a good chance of surviving and producing funds in order to repay the loan. And in a worst case scenario, they want to know that they can count on the borrower to repay the loan if the business fails.
Restaurant startup business loans grant potential business owners access to a sum of money that will finance or assist in financing the building of a business from the ground up. Starting a business usually takes more than the money saved, raised and scrapped up from friends and families. The restaurant startup business loan can fund the initial expenses a restaurant business produces.
Business Loan Option: Equipment Leasing
This is a popular one amongst restaurants. Some restaurant startup owners do not need money for inventory, tables or décor. Instead, they only need money for equipment. A restaurant business converts raw materials into food, and therefore requires the use of a variety of equipment.
For restaurant startups, equipment leasing may be a good option. Rather than just lending money, equipment leasing companies lend equipment, providing most restaurant startups with the option of purchasing the equipment after a certain period of time with a dollar buyout option.
Restaurant Myths and Restaurant Loans:
Many people have heard the starting myth that nine out of 10 restaurants fail within their first year of opening. Hearing this can make anyone who is contemplating going into the restaurant industry think twice about it.
But according to H.G. Parsa, associate professor in Ohio State University’s Hospitality Management program, as quoted in a Business Week article, this is not true.
After researching, he found that realistically, 3 out of 5 restaurants close or change ownership within their first year of business.
According to the article, Parsa also identified “…lack of sufficient startup capital as one of the major elements that contribute to a restaurant failure,” leading him to believe that many banks won’t lend to restaurants because they may believe those mythical statistics. The article states, “typically, the ones that do lend money require you to pay it back with sky-high interest rates or put up significant collateral…”
But even if banks are wary of lending to restaurant startups for the reasons mentioned above, there are another option restaurant loans.
Restaurant Loans can be used for startup restaurants, or for restaurants that have been in existence for any length or time. The loans are unsecured, so there is no collateral required, nor are there fixed monthly payments. Restaurant loan payments are made via the restaurant's credit card sales. Once a restaurant owner receives a restaurant loan, whenever customers use their debit or credit cards to pay for their food or drinks, a small percentage of the sale goes to repay the restaurant loan. This allows the loan repayments to go with the flow of business.
Another benefit of the restaurant loan is borrowers receive the opportunity to renew their restaurant loan once 60 percent of their previous balance has been paid. Therefore a new restaurant can get a loan and the money funded into the account of his / her choice within the first week of the restaurants opening. These renewal opportunities allow restaurant owners to have access to an ongoing source of business financing, as they can renew their loans as many times as they like.
Increase your chances of restaurant success by getting a restaurant loan and having enough money to finance everything that a successful restaurant needs by using one or multiple or the ways listed above. It is going to take drive and determination.
*results may vary