3 Ways to Secure Restaurant Financing

You loved cooking so much you ponied up money for culinary school and got to a place where you’re ready to start your own restaurant. You have a menu and some prime locations in mind, and now all you need is funding. But how do you find small business loans and other financing options for your restaurant?

Start with a Plan

Did you know there are 1 million restaurants in the United States, according to the National Restaurant Association? The industry is in a positive growth period, but there’s also more competition than ever before. Before you seek financing, you need a business plan to convince lenders you’re a good risk.

Some important points to cover in your business plan:

  • How much you need to open the restaurant
  • Other funding sources you’re using
  • Intended use of loan funds
  • Business structure
  • Income and expense projections
  • Unique selling proposition
  • Thorough explanation of the restaurant, from the menu to the decor

Traditional Loans

Small business loans, such as those offered through the Small Business Administration, work in a similar fashion to a personal installment loan. You go to a bank and apply for a business loan, providing documentation on your restaurant, information about your current business capital, and other qualification information. If you qualify for the loan, the bank issues you an installment loan for your funding. The SBA program offers micro loans of up to $50,000 and business loans of more than $1 million. These loans are repaid on a monthly basis.

Alternative Lenders

One of the biggest drawbacks to traditional loans are the stringent qualifications. The bank may not approve you, even if you have a great plan and an upward trajectory. Small business capital can be found through alternative sources, such as online lending platforms, which rely on a wide-ranging combination of data to determine the viability of your restaurant (reviews, geographic comparables, etc.).

No matter which funding sources you choose for your restaurant, knowing what’s available helps you make an informed decision before you sign on the dotted line.