Not many people have the finance to finance a restaurant that’s just picking up. Surprisingly, there is at least one startup company being opened every hour. So, you’re left to ask: Where do these people get the financing?
Some people sell all their belonging to raise some money to start their restaurant, which isn’t too bad.
On the other hand, some people join partnerships where they can invest. Lastly, other people opt for restaurant loans, which is by far the best option.
If you’re serious about starting your restaurant, here’s how to get a loan and get your business rolling:
Your Restaurant Startup Cost Revealed
Now, it’s meaningless to ask your bank to lend you a large sum of money without providing the necessary documents is useless. Therefore, the more information you have, the higher the chances of securing a restaurant loan.
And before you find yourself at the bank requesting for a loan, make sure you have a figure in mind that you need.
Usually, your loans and personal funds should cover:
Loan guarantee fee – This is the percentage loan amount that you’ll pay to the lending institution in case you fail to pay off your loan fully.
Loan repayment including the interest – This is the money you’ll pay at a regular specific percentage. Usually, you can agree on this with your lending institution.
Commercial lease – This is an amount you’ll pay every month to cover for the space you will be running your restaurant.
Restaurant insurance – This is a coverage that protects your restaurant against the unexpected calamities like theft, fire, property damage, accidents among others.
License Fees – It is important to note that license fees vary depending on the country or state you come from. All the same, one of the common licenses is liquor licenses.
Employee wages and benefits – Mandatory payments for tipped staff may differ from state to state. On the contrary, non-tipped workers should be paid a minimum of the state’s minimum wage.
Renovations – There’s a need to bring back the life of your restaurant building. Some glass fitting for the windows could be relevant.
Kitchen equipment– Honestly, are you going to operate a restaurant without the kitchen equipment? This is what ought to have been in the first spot. All the same, now you know that kitchen equipment should be your top priority when negotiating a loan.
Starting stock or inventory – You’ll need a stock to kickstart your restaurant business. Therefore, it would be best if you crafted a sample menu to help you in estimating the amount you’ll need. Additionally, you will need furniture and other stuff to get you rolling.
Working capital – It’s obvious that you’re down financially and that’s why you are seeking a loan, but you should have the idea of working capital. Working capital is that amount you will need to keep your restaurant business running every day.
Marketing capital – You need to get your brand out there, and it doesn’t happen by keeping quiet. You need to invest in a tactful marketing plan to ensure that you stand out from the crowd.
Restaurant Loans You Should Look For
There are many things you should put into consideration before you select the type of restaurant loan. These include the collateral requirements, interest rates, and down payments. Below are restaurant loans you can opt for:
1. Small Business Loans
Some banks have the option for small business loans, but most banks give small business loans using a partnership United States Small Business Administration (SBA).
SBA supports and protects your interest as a small business owner.
SBA must help you secure loans to start your business while also making it less likely for you to incur risks when you’re applying for these loans.
Usually, SBA has tons of options you can choose from, but the most common one is for restaurants.
Besides, SBA sets some guidelines which help the lending institutions when giving loans to those requesting for loans.
You can get a pre-approved loan from myinstantoffer to start your restaurant business, but there’s a need to have a good credit score.
2. Line Of Credit
In short, this is more of a credit card. It’s possible to get approved for a particular maximum credit, but you’ll only be required to use what you’ve spent.
That means that when you are approved for $50,000 line of credit and use just $25,000, then you’ll only pay the $25,000 that you have spent.
Just like a credit card, a line of credit also revolves. That is to say, as you trim your balance, there’s more credit for your future expenses.
3. Traditional Commercial Loan
Lastly, you can opt for a direct loan through your bank, but you must have a good credit score. Sadly, you’ll need to be patient because you’ll be required to wait for at least six months before you get approved.
The good news is that if approved, you’ll be given a much lower interest rate of between six to eight percent, which will save you.
Another thing is that you will also decide on whether to go for a short-term or long-term loan. Note that long-term loans aren’t the best if you are starting.
Over to You
It doesn’t matter the amount you need or your current financial status. You can still secure a loan from any of the banks or lending institutions to help you get started. Follow the guidelines above to a tee.