Obtaining financing to help your restaurant can be a daunting task. This is mainly because many restaurant owners rent their locations. Without hard assets to use as collateral, banks are reluctant to provide financing. Also, some restaurant owners have less than perfect credit, causing problems for them to get the funding they need.
But do not despair. You still have real options to get the restaurant financing you need to grow, care for emergencies that may arise, and to provide an appealing atmosphere for your clientele.
Here are two of those options:
A very popular option for restaurant financing is short-term loans. They are very adaptable and funding is quick. In the past, they have been on the expensive side, but now somewhat cheaper.
Having bad credit is not a deal breaker. Most of the short-term loan options are geared toward your present sales. Usually three to six months of your latest bank statements are needed to show proof of deposits and expenditures. Not much paperwork required.
Many times, both approval and funding can take place within one day. This is helpful when emergencies arise. No more waiting for a month or so just to find out if you qualify for a loan. Some restaurant, and franchise owners, use short-term loans as a means of ongoing financing. Helps them with cash flow for advertisement, provide new services, or just fix up the place.
Some short-term loan providers require a restaurant to be in business for at least a year and the loan must be paid back in a year’s time. Other loan providers only require you to be in business for three to six months and loans extend out to five years. Terms determined by credit and loan amount.
Also, some are offering a business line of credit. A line of credit is advantageous due to the ability to access funds as you need them without going through the loan process again. Interest is only paid on the amount you are using, not the entire amount available to you.
A warning though: Do not take out more than one short-term loan at a time. Doing so can put a strain on your business. This practice, called stacking, has had a detrimental effect on some businesses. Responsible lenders will not give you a loan if you already have a short-term loan. The remedy is that they will wait until you pay off the existing loan, or if possible, create a loan that pays off the existing loan and gives you available funds.
Equipment lease financing:
Many restaurant owners may not know this, but they can lease tables and chairs as well as their kitchen equipment.
Leasing equipment saves a large outlay of capital or the need for a loan. Only pay a small monthly payment. Terms are flexible, extending payments normally up to five years.
Do you have a cooler going on the brink? An equipment lease can replace that cooler quickly. Would you like to add a smoker to your cooking abilities? An equipment lease makes that possible with no down payment and a low monthly payment.
What if a building system fails, like the ventilation system? Replacing it can put a financial strain on your landlord and close your restaurant while he acquires the finances to fix it. That will result in a lot of lost revenue for you.
Your landlord can also lease the equipment that operates his building as well as cover part of the cost of installation. Having the funding in less than a week will limit the financial impact on your restaurant business.
Both short-term loans and equipment leasing are excellent financing options for restaurant owners. These restaurant financing options have high approval rates and are easily accessible. Application process is simple, little paperwork is necessary, and funding is quick!