Not sure how to obtain the necessary funds for your restaurant dreams? You’ve come to the right place. This article lists different ways you can obtain restaurant financing to launch or expand your culinary venture.
Option 1: A Traditional Bank Loan
For many people, a traditional bank loan is the first restaurant financing option that comes to mind. These do have some advantages; for instance, they may offer lower interest rates than other options. However, the approval process can take up to half a year. Depending on the bank, approval for a traditional loan may also require collateral and a high credit score. If you go this route, be sure to investigate several banks—both large and small—to find the one that is best for your needs.
Option 2: A Business Line of Credit
A business line of credit sets up a reservoir from which the borrower can draw. For instance, if a restaurant has access to a $50,000 line of credit but only needs to withdraw $20,000 for equipment purchase, the restaurant can withdraw that amount and still have $30,000 left in its borrowing pool. With this restaurant financing option, interest rates may be higher when compared to a traditional loan. However, this can be offset by the ability to only withdraw what the restaurant needs, potentially keeping payment amounts lower.
Option 3: An SBA-Backed Loan
The US Small Business Administration (SBA) provides another restaurant financing method. The SBA acts a bridge between lenders and borrowers, using different loan programs to assist businesses financially. For restaurants, their guaranteed loan programs are most relevant. In this setup, the SBA guarantees loans to lessen lenders’ risk when extending financing. This makes borrowers more attractive to lenders. To learn more about such loans, check out the SBA’s page on the topic.
For more information on financing and other business topics, take a look at Affinity Capital Funding’s other blog posts.