Restaurant Owners - What Options Do You Have to Finance Your Restaurant?
As a restaurant owner, you have most likely already experienced the many ups and downs that come with owning your own establishment. Owning a restaurant is not only overwhelmingly stressful within the workplace, but it can also take a toll on your personal and family life as well. It is common knowledge within the restaurant industry that it can take as much as five years to begin to see your restaurant start to make a profit, and this is why many experienced restaurant owners recommend making sure that you have a steady flow of working capital available in the first couple years. Some even suggest calculating the amount of capital you think you will need until you are profitable, and then doubling – even tripling – that number before you are ready to run your own restaurant business! The real question, then, is where does that capital come from? Consider some of your options:
1) SBA Loans
Applying for Small Business Administration Loans are a common approach taken by many restaurant owners to finance their restaurants. What many restaurant owners do not realize is that the SBA does not make direct loans to restaurants; however, they assist restaurant owners and help educate them so they can apply for a loan through a bank or other financial institution. The SBA's role is then to act as a guarantor on the loan the restaurant receives from a bank. Getting approved for an SBA loan often requires having at least three years of financial information available. The fees can also be very high.
2) Bank Loans
So what exactly is a bank loan? They are simply loans provided to small businesses that can be secured or unsecured and can also have variable or fixed rates of interest. Large amounts can be borrowed with bank loans. While many restaurant owners find bank loans to be ideal, being approved for a this type of loan can be difficult because requirements are very strict. Furthermore, they don't often grant loan applications from small businesses. Because of the current economic status, banks are seldom offering unsecured loans to small and medium companies. To make matters worse, you must pay back the loan within the stated time or you can risk further financial problems for your business.
3) Bank Overdraft
Bank overdraft is a type of loan that is done by withdrawing an exceeding amount from your current account balance. It is synonymous to "overdrawn" cash. You may use this type of funding for your business as an intentional short-term loan. The payment for bank overdrafts will be taken from the associated fees which are applied in your next deposit. Bank overdrafts are flexible as you can change the amount borrowed within a certain limit, and interest only needs to be paid on the amount borrowed. However, bank overdraft loans cannot be used for large amounts of borrowing; their interest rates are higher than those of traditional loans; and the bank can change their mind and ask for money back before you're prepared to pay it.
4) Home Equity Loan
You can also use home equity loans to get funds for your business. This type of loan will consider your family home as a collateral. However, using your family home just so your company will get funded is quite risky. Before deciding to get a home equity loan, take time to carefully consider the possible risks that may be involved.
5) Merchant Cash Advances / Restaurant Cash Advances
Merchant cash advances are a relatively new method of funding your restaurant business that operate through your credit card receivables. With merchant cash advance, you can get your company fundedeven if you currently have a bad credit score. In order to repay the cash that an MCA provider advances to you, the provider will take a set percentage of your future credit card transactions. With merchant cash advances, also known as "credit card factoring" or "alternative restaurant loans," there is no need for any collateral or complicated paperwork, and you don't need to present a good credit card history. Many restaurant owners find that merchant cash advances provide them with theadditional working capital they need to keep their business running, and since the money can be used however the business sees fit, they are able to make substantial improvements to their business, generate more revenue, and easily pay off what they borrowed.
1) SBA Loans
Applying for Small Business Administration Loans are a common approach taken by many restaurant owners to finance their restaurants. What many restaurant owners do not realize is that the SBA does not make direct loans to restaurants; however, they assist restaurant owners and help educate them so they can apply for a loan through a bank or other financial institution. The SBA's role is then to act as a guarantor on the loan the restaurant receives from a bank. Getting approved for an SBA loan often requires having at least three years of financial information available. The fees can also be very high.
2) Bank Loans
So what exactly is a bank loan? They are simply loans provided to small businesses that can be secured or unsecured and can also have variable or fixed rates of interest. Large amounts can be borrowed with bank loans. While many restaurant owners find bank loans to be ideal, being approved for a this type of loan can be difficult because requirements are very strict. Furthermore, they don't often grant loan applications from small businesses. Because of the current economic status, banks are seldom offering unsecured loans to small and medium companies. To make matters worse, you must pay back the loan within the stated time or you can risk further financial problems for your business.
3) Bank Overdraft
Bank overdraft is a type of loan that is done by withdrawing an exceeding amount from your current account balance. It is synonymous to "overdrawn" cash. You may use this type of funding for your business as an intentional short-term loan. The payment for bank overdrafts will be taken from the associated fees which are applied in your next deposit. Bank overdrafts are flexible as you can change the amount borrowed within a certain limit, and interest only needs to be paid on the amount borrowed. However, bank overdraft loans cannot be used for large amounts of borrowing; their interest rates are higher than those of traditional loans; and the bank can change their mind and ask for money back before you're prepared to pay it.
4) Home Equity Loan
You can also use home equity loans to get funds for your business. This type of loan will consider your family home as a collateral. However, using your family home just so your company will get funded is quite risky. Before deciding to get a home equity loan, take time to carefully consider the possible risks that may be involved.
5) Merchant Cash Advances / Restaurant Cash Advances
Merchant cash advances are a relatively new method of funding your restaurant business that operate through your credit card receivables. With merchant cash advance, you can get your company fundedeven if you currently have a bad credit score. In order to repay the cash that an MCA provider advances to you, the provider will take a set percentage of your future credit card transactions. With merchant cash advances, also known as "credit card factoring" or "alternative restaurant loans," there is no need for any collateral or complicated paperwork, and you don't need to present a good credit card history. Many restaurant owners find that merchant cash advances provide them with theadditional working capital they need to keep their business running, and since the money can be used however the business sees fit, they are able to make substantial improvements to their business, generate more revenue, and easily pay off what they borrowed.
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