The Struggle To Find Restaurant Financing
Restaurant financing is one of the hardest, but certainly not the last, hurdles you will have to go through to get your dream off the ground. If you have been following the plan and have your concept and ideas firmly in your head, and you have a solid business plan created you can now start trying to put some financing options together.
Traditional Funding
If you are one of the very few, and have a lot of capital or liquid assets, or have a huge net worth you shouldn’t have any problems, just stroke that check. Unfortunately that is probably not you. If you are like 99.9% of the food and beverage world you are going to have to go out and find money, and a good deal of it. You may be able to go the traditional way of going to the bank and borrowing the money, but keep in mind that banks are not usually very restaurant friendly. You will have to have a great relationship with them, stellar credit, and enough hard assets to cover the nut if you go bottom up. They are always worth a shot though. If nothing else it will give you a nice opportunity to learn the process, and you never know, you may hit them at a good time for lending. Make sure you have your business plan in hand and solid numbers for them. You will also need your current financials, past tax returns, and solid experience on your resume. Restaurant financing with them brings up all kinds of red flags, so be prepared to eliminate their fears. Small Business Administration
There are other ways that you can go if the bank doesn’t turn out positively. The next alternative is to work with the Small Business Administration (SBA). Go to the local office in your city and get involved with them. Traditionally they will work with you, put together a plan, and if they approve your application they will guarantee a large portion of your loan with a banking institution. Keep in mind that this is a slow process, expect it to take 1-3 months if you get started today, but these loans can be great for restaurantures as they are less risky and often come at lower interest rates.
Don't Give Up
Still a no? Well now we will have to follow less traditional ways of restaurant financing. You have your business plan so get it working. Start approaching potential investors. Talk to family and friends. Examine your credit card situation. What can you draw on? There are also a couple of other potential sources that many new restaurant owners overlook. One is money from a company called Cash-Advance-Group (see the referral ad above) which loans you money up front for processing your visa/master card transactions with them, they take a percentage of your transactions on a daily basis until a given amount is paid back. Keep in mind it is good to set these arrangements up, but understand that this is not cheap money. You will need to figure out the effective interest rate of these types of loans (many range around 30% or higher). Get a quote and see where you stand.Another program that can get you some funding is through Rewards Network (Restaurant.com
.) Their program gives you say $50,000 for $100,000 in program credits. The credits are used by members using a credit card that they have attached to their membership. Again, the effective rate is high, but when you consider that your cost of goods is around 30% and they bring in new customers that you may not have attracted in the first place it may not be a bad deal. When looking for restaurant financing you will have to turn over every leaf and explore every option. Write them all down and then start looking for the deal that suits your situation best.
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