How To Get A Restaurant Business Loan
In order for you to get approved for a restaurant business loan, you will need to provide sufficient details and documentation to a lender that there is a higher chance to repay the debt on schedule then for you to default.
This can be done through the proper use of a business plan, equity structuring and credit information that you can provide to the lender.
Follow this guide to secure the best restaurant business loan and you will be rewarded with lower rates on your financing when you are ready to apply for a restaurant business loan to start your new business in the restaurant industry.
Step 1: Write a Proper Business Plan
Restaurants are a high risk business, therefore you need to have a sound business plan in place to provide to a lender. A great start is to include the primary items used in any business plan to give your loan application the greatest chance of approval.
Those items include the purpose of your restaurant, doing market research into the need for your type of restaurant, cost projections to starting your business and profit projections over time. Opening and running a restaurant is much harder than it seems.
Include information on your knowledge in the restaurant or hospitality industry in order to show the lender you can make successful run a restaurant.
Even if you have never owned a restaurant, display your general business and financial knowledge. Hiring a restaurant consultant and ensuring you hire experienced management and staff will be key in this step as well.
Step 2: Needed Equity
You will need to come up with a down payment for your restaurant business loan. This down payment should be 10% of the total cost of your new restaurant.
Since restaurants are considered a high risk business, a lender may ask for you to come up with a larger down payment. Right now a 50% down payment is very common across most lenders.
If you do not have this cash, you will need to bring on investors or partners who can as this will make it much easier for you to get approved for your restaurant business loan.
Step 3: Your Creditworthiness
You must have great personal credit to obtain any restaurant business loan when you first start a new restaurant as a business. It will be beneficial if you have owned a business in the past that has an excellent credit rating.
If you do not have business credit, you may need to come up with collateral on your new restaurant business loan. Be careful of placing personal collateral on your loan. If your restaurant fails, it is important to keep possession of your personal assets.
This is why having a past business that is successful with good credit will help in getting you approved for your loan.
Step 4: The Right Expectations
The most important thing to remember when applying for a restaurant business loan is your expectations. Most new restaurant owners do not fully understand how long it may take for the business to generate consistent income and become profitable.
Accepting a loan that requires high payments early on can hurt the business’s ability to grow, expand and become profitable.
Look for a loan deal that gives you the flexibility you need to get the restaurant up and running along with profitable prior to owing the lender for the loan taken out to start the new restaurant.
Running a restaurant is very difficult and can take years to become profitable in most cases. Knowing how to find the right loan for your restaurant is going to be extremely important.
Peach Capital Funding is here to help you through this important step of finding the right restaurant business loan and we want to help you open your restaurant and become profitable as quickly as possible.