Owning a restaurant business is a dream for many – hard work, and good planning can make it a reality. The cost of opening and running a restaurant business represents the main factor keeping people back from doing it.
It makes no difference if you are an experienced chef, a prolific entrepreneur, or a food lover – you can still make things happen, yet you need to plan everything running a restaurant in the smallest details.
Finances represent the main factor in the process. Unless you are loaded, chances are you will need to find funding in one way or another. Here are some good choices.
Family and friends
You may not need to look after restaurant loans if your family members and friends are financially independent and doing it right. It is much easier than getting a loan from a bank.
This option brings flexibility when it comes to terms – much easier than dealing with a lender. Friends and family are normally more forgiving and less likely to chase you with collectors.
The interest rate will also be lower – if any, at all. Your friends and family will not be bothered about your credit score or the economy.
Again, you will not need an actual credit history, as your close ones are aware of your skills and current job. Plus, you will not even need collateral.
Last but not least, the people who might lend you some money are those to who you are super close to – they are practically your support network.
On a negative note, money could ruin friendships, so you must be careful there. At that point, social interactions could become awkward and might be avoided.
Online lenders
Getting a small business loan from online lenders could be helpful if you do not need huge amounts of money. You will be able to prove that you can repay the loan and go through some credit checks – everything is done online.
Fast funding is one of the main benefits of the process. You will be able to get money within hours only. If you need some money in a rush, this is one of your best choices.
Other than that, approval rates are pretty high. In fact, some online lenders will not even bother with a hard credit check – some of them specialize in poor credit people.
You will not require collateral when doing it online, even if your credit score is not the best. But on a more negative note, you will not be able to get a fortune, but relatively small amounts of money.
Other than that, it is worth noting that all these benefits come with a cost. If you plan to repay the loan quickly, fine – otherwise, APR rates will be much higher than a traditional loan.
Grants
Grants might be a good option if you know where to look and you work hard enough – you may also require lots of patience.
Each grant will come with some conditions – such as the minimum number of employees or perhaps the annual profits.
You must find economic development agencies in your area and get in touch with them. Some agencies will also guide you accordingly.
Then, there are small business grant contests – some of them are also on television. If you are not in a rush, it is worth trying your luck in all directions.
The good news is that grants often come with proper business education. You will learn a lot about the restaurant business and what it takes to be an entrepreneur.
Moreover, there are networking opportunities, so you can learn from others, make connections, etc. The bad news is that such grants are difficult to get in.
Traditional banks
Classic banks are a bit difficult to deal with because they tend to give money after you have opened the business – plus, restaurants are considered high-risk businesses.
You may have to prove a good cash flow before getting the loan. You will need a good amount of assets, a solid down payment, a good credit score, and proven experience.
Getting the loan is not that easy because you will also need to develop all sorts of technical details – your business plan, for example.
You might be asked for collateral, too, not to mention personal financial statements, spreadsheets with projections, equity investment papers, partnerships, licenses, registrations, and contracts.
Conclusion
Bottom line, getting a loan for your restaurant is hard but not impossible. There are a few good options out there – some of them are more difficult than others.
The good news is that patience and persistence will work in your favor. Try to do as much as possible with what you have, so you can prove your skills and experience before asking for money.
It makes no difference if you ask friends or a bank – people need to see results before putting their money in.
Featured Photo by Bundo Kim on Unsplash
