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Restaurant Loan

Michelle Adams

We know that the restaurant industry is extremely complex — but receiving financing to help grow your restaurant doesn’t need to be. Startup costs can be high in hospitality; you need significant capital to purchase expensive equipment and large amounts of inventory. In addition, the cyclical and seasonal nature of the business means you need capital on hand to deal with any unexpected opportunities or emergencies. Restaurants operating in the United States have significant industry competition, so it’s important to make sure that you advertise and market your product actively and consistently.

For all of these reasons, we made access to competitive small business loan options available for restaurants. Our restaurant business lenders provide options that are built specifically to help new and existing restaurant owners with any financial requirements they may have. We’re proud to be helping various small business owners in the hospitality industry with their dream of operating a successful and profitable restaurant.

Opening up a restaurant with funding

If you are thinking about opening up a new restaurant, you will need a large amount of funding to be able to get the job done well. There are many different exorbitant start up costs in the restaurant business which could put your business under before you even get started. Although you may want to open a restaurant if you have been dreaming of doing so for a long time, it helps to understand what the process entails. Almost 60% of new restaurants have to close their doors within the first year of opening. According to CNBC, almost 80% of restaurants go out of business in their fifth year. This means that for your business to increase its competitive chances, it helps to know what your financial needs are and what to expect. 

Know how much you need

One of the reasons that many restaurants don’t succeed is that they are actually undercapitalized. This means that they have underestimated the amount of funding that was actually required for them to thrive. Getting a comprehensive financial assessment is one of the first steps to take when it comes to getting funding for your small business. There are both fixed and variable costs which need to be assessed as you plan to open your restaurant. Estimating potential profits, customer volume, and the cost of supplies and equipment will all go a long way toward helping you determine exactly how much funding is required for you to open up your new restaurant.

Restaurant Loan

Who Offers Restaurant Business Loans

Restaurant loans are considered risky investments for many traditional lenders — particularly if you’re just starting your business. This is because the restaurant industry is extremely hard to crack, and suffers from its own cyclical nature. For this reason, many traditional lenders require extensive documentation and collateral when issuing loans to new or existing restaurants. Years of experience, established credit history, and extensive business planning are just a few of the things your lender might ask you for during the application process. Some banks may even want up to 30% of the principal loan amount in cash prior to granting you financing. As you can tell, these requirements are extremely difficult to meet for new business owners. We’re committed to helping you access capital quickly and without the hassle of traditional lending services!

We don’t require the same extensive documentation that other creditors insist on. Instead, we ask for a comprehensive business and revenue plan when making our decision on granting restaurant loans. Our application process is automated through our online web portal. Our lenders can give you a decision in a fraction of the time that it takes most of our competitors. Loans of up to $150,000 are available to restaurant loan customers!

Do you need cash on hand?

When applying for a restaurant business loan through traditional lenders, you may need to be prepared with cash on hand. This is because they will want to see that you are making a significant investment in your restaurant business. The normal amount you will need to invest is 20% to 30% of the total loan amount. However, if you are applying for a very large loan amount, they may request that you have 50% of the total amount available and ready to go.

What to expect from the loan process

Restaurant owners who want to prepare themselves for the loan process can benefit by knowing exactly what to expect. Lenders will require proof of revenue or proof of the restaurant’s ability to turn a profit. This means that they may request extensive paperwork showing financial projections, business plans, and more. In the case of collateral-backed loans, the business owner will be required to show proof of the asset’s value prior to the loan being secured. Some of the collateral that a restaurant business owner can put up for a loan includes restaurant equipment, a home, car, or other personal possession.

Have documents organized

Getting all of your documents together before the loan process commences is one of the best ways to prepare for your loan. The lender you are applying with will likely have a section on their website outlining which particular documents you will need to get started.  

Business experience

Many lenders want to know that you have the relevant business experience to succeed in the restaurant industry. In order to demonstrate this experience, you will need to show that you have either worked in the restaurant business or taken hospitality courses to know what to expect. Alternatively, you can also choose to partner with someone that has the relevant business experience in the restaurant industry.

Credit score inquiry

A lender will want to know what risk a client poses and one of the ways of doing this is by inquiring about their credit score although there are lenders who offer start up business loans no credit check. Obtaining a copy of your own credit report is advised before beginning the loan process. This will allow you to know exactly what your credit score is so that you can be well prepared throughout the loan process. The normal credit score that traditional businesses will require is a credit score of 650 or higher.

Demonstrate ability to repay the loan

In addition to looking into your credit score, a lender will also want to check into your ability to repay the loan. By showing them a solid business plan with clear evidence of how they will get a good ROI, you can convince potential lenders that you are a good risk for their lending services.

Apply Through Business Line of Credit

Instead of going for traditional sources of funding such as local banks, restaurateurs can also apply for a loan through Business Line of Credit Hub. In this way, they can put their application in and get a response from a variety of different lenders who can provide access to funding. Exploring funding options through a business line of credit can help restaurant entrepreneurs to make the best decisions for their funding needs. Check out business line of credit requirements.

Restaurant Loan

What is a Business Line of Credit

A business line of credit differs from a traditional loan in that it is not repaid in installments like a term loan. Instead, it functions more like small business credit cards in that funding is made available to a business on a revolving basis. There is no interest assessed on the funds until the business owner taps into them and starts using them. Additionally, the interest is usually much lower in a business line of credit than with a traditional term loan. However, it's important to note that a business line of credit may have fees associated with it which a business owner should be aware of.

Is a business line of credit right for your restaurant?

When considering your loan options it’s important to consider whether or not a business line of credit is the right choice for your restaurant. This is because a business line of credit offers many benefits however, it is still a good idea to compare your options before making a final decision.

A business line of credit is typically used for short-term cash needs such as paying immediate expenses, purchasing inventory, investing in quality food ingredients, and getting payroll expenses covered. However, a business line of credit is not normally used for the purchase of large restaurant equipment. If your restaurant is looking for funding for buying large equipment such as walk-in freezers, refrigerators, stoves, ovens, and other large equipment, a business line of credit may not be the best option.

Why get a business line of credit

If you have secured funding for your large equipment needs from another source, then a business line of credit can allow you to get the funding you need for smaller, more daily expenses. From replenishing food to ordering new flatware and cooking utensils, there are many reasons that your restaurant may need quick access to cash. Below are some of the reasons to consider getting a business line of credit loan.

  • Fast access to cash
  • Easier to qualify for
  • Bad credit is allowed
  • Lower interest rates than term loans
  • No stipulations on spending

When you examine the advantages of having a business line of credit, you can see that it can help you meet your day to day operational needs. A steady source of funding can help your restaurant get through the more challenging times so that you can ensure your restaurant doesn’t close its doors before its time.

How Can A Restaurant Business Loan Help My Business

There are a multitude of ways that a restaurant loan can help your business sustain and advance its current operations. In addition, restaurant business loans are perfect for individuals looking to open up their first restaurant. Once you receive your financing you are free to use the capital at your own discretion within your business. But here are some of the primary ways our restaurant business loan customers use their loans:

  • Purchasing major kitchen equipment
  • Investing in additional inventory
  • Undertaking marketing or advertising campaigns
  • Investing in staff training
  • Expanding current menu offerings
  • Hiring additional staff for seasonal increases in customer base
  • Researching current food trends and possible business routes

These are just some of the ways a restaurant business loan could help improve your operations. So, what are you waiting for? Are you a veteran? If so read more about how to get a va business loan. Head to our online application portal and apply today!

Ensure Your Restaurant Succeeds

Your restaurant succeeding is contingent on a number of different factors. Some elements are beyond your control such as determining how many customers you will get after you open your doors. However, you can control certain other elements such as how much planning you put into the restaurant before you open it. You can decide how much funding you apply for to make sure that your restaurant is very well funded. This will allow you to withstand the storms of up and down sales so you can have the success you have been hoping for.

Exploring your options in funding your restaurant can help you learn about what options are available to you to help you meet your short and long-term financial goals. Whether you opt for a traditional loan or a business line of credit, you can finally have the funding you need so your restaurant business can reach new heights.