The best types of restaurant loans and financing options
Fri | November 2022
Running a restaurant requires ongoing business investment to keep up with trends and look for ways to attract and retain clients. It also means dealing with supply chain disruptions, rising food prices, and staff challenges. The reality is that the restaurant industry has been adapting to the new normal for the past two years, where several common challenges are hitting restaurant operators across the industry, making them have to adjust and be resilient to stay in business.
Throughout 2022, more than 50% of quick-service and fast-casual operators identified labor recruitment and retention as the most difficult challenge. Faced with this challenge, restaurant operators must offer high salaries and greater employee benefits to retain the best talent. Likewise, they have required a constant investment in technology and marketing campaigns to provide a high-quality service and position themselves in a highly competitive industry. All of this requires investment, as you may already know, so if you're looking for a restaurant loan or business financing to remain competitive, you've come to the right place.
This article will discuss the top restaurant business loans and financing options available if you cannot obtain a conventional loan. We want to show you the choices you can use to get the funds you need and bring your restaurant to the next level!
What is restaurant financing?
Restaurant financing is your business's financial assistance to launch, grow, support, or renovate. This way, restaurant owners would have a way to put money toward realizing their short- and long-term objectives. Restaurant operators frequently employ outside funding for reasons such as the following:
Investing in new equipment
Renovating your space
Accommodating more customers
Improving the interior design of your restaurant
Opening a second location
Funding operational costs
Creating an emergency fund
Getting a business loan is no easy task for any small business owner, but it's even more challenging when looking for restaurant financing. Luckily, a variety of small business funders can provide restaurant financing for business owners who need them. In the following section, we will review some of the top restaurant types of financing.
The top 6 restaurant loans and financing options
There are various forms of financing and types of loans for restaurants. In the following sections, we will explore six restaurant loans and financing choices for your business.
Working capital loans
A working capital loan is the sort of finance a business, such as your restaurant, can use to pay for ongoing costs, including timely bill payment, debt repayment, inventory replenishment, and payroll. Traditional banks, credit unions, and online funders frequently offer working capital loans.
Inventory finance is designed to be a source of funding for restaurants that enables you to take out a short- or medium-term loan to buy the inventory you require when you need it. The valuable part is that the inventory serves as the loan's collateral. The downside, though, is that compared to other loans, funding for inventory may have higher interest rates.
Business lines of credit
A business line of credit can help restaurant owners maintain regular access to working capital or money to deal with fluctuations in expenses and earnings during low seasons.
But there are specific differences between credit lines and regular loans. For instance, when using a line of credit, you frequently receive lesser sums of money yet are exempt from disclosing your intended use. Want to learn more about the differences between a business line of credit and a regular loan?
Merchant cash advances
Cash advances are a fantastic loan substitute. A merchant cash advance is an advance on your restaurant's anticipated future profits, and it has benefits and drawbacks that differ from conventional loans. Let's say an advance is given to your company and promptly transferred into your bank account. The payback depends on how well your restaurant does; it's often a percentage of sales for a specific time frame. Due to this flexibility, managing payments during sluggish business cycles is made simpler. If you want to read more, you can read our blog on how a merchant cash advance works.
Crowdfunding is the newest and trendiest restaurant financing option on this list. When a new company or, in your case, restaurant launches, its owners can raise money by pitching their service to the public in exchange for a perk like an invitation to the soft launch, a complimentary meal, or a monthly reservation guarantee. Popular crowdfunding websites include Gofundme, Indiegogo, and Patreon.
Take into consideration that crowdfunding has become oversaturated with similar and similar products. To succeed in crowdfunding, you must ask yourself, "Is my idea truly original, or is my project exciting enough?"
Numerous banks, internet funders, and other financial institutions supported by the U.S. Small Business Administration (SBA) offer loans. Depending on the type, loan amounts might range from $30,000 to $5 million, and interest rates could change depending on the funder and loan type. Minority-owned businesses and start-ups in disadvantaged areas typically receive SBA loans, which is essential for you to consider. Take into consideration that borrowers typically must make a down payment, and collateral could be required.
Get your funds for your restaurant with One Park Financial!
Running a restaurant brings many challenges that can make or break the future of your establishment. But you don't have to let these challenges get you down; they can help you grow a stronger tomorrow! How?
We can help your dreams become a reality. The finance options offered by One Park Financial are appropriate for enthusiastic business owners who don't have perfect credit but have successful ventures. If your company has been operating for at least three months and brings in a minimum of $7,500 per month, you can determine if you pre-qualify for one of our fast-working capital programs.
Disclaimer: The content of this post has been prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. Consult with your tax, legal, and accounting advisor before engaging in any transaction.