Owning and running a restaurant is a dream for a lot of people. However, most of these dreams don’t become a reality due to a lack of funding, and most business owners don’t quite know how to go about applying for a business loan. If you are an entrepreneur thinking about opening your own burger joint, or you already operate an established fine-dining restaurant, you still might need to borrow money to help expand, grow, or start your small business.
If you haven’t already considered getting a small business loan, you might now be wondering if it’s even a good idea. The good news is, the food service industry is growing! According to Restaurants Canada Blog, “Commercial foodservice sales are forecast to reach $75 billion next year — a 4.4 percent increase over 2018.” These are promising numbers, indicative of the growth the restaurant industry has experienced in recent years. But did you know that most restaurants usually fail within their first year? Why is that? To put it simply, this is because operating a restaurant has a lot of expenses, including buying equipment, buying supplies, paying staff, paying your lease, advertising, etc. If you don’t have enough working capital to run your business, or experience periods of low operating cash flow, you might be faced with the reality of having to consider shutting down your business because you simply can’t afford it anymore.
If this sounds like a situation you’ve been in or might be facing soon, don’t worry, there are ways to keep your business success. This is where a small business loan comes into play. Not only will it prevent your restaurant from shutting down due to a lack of available capital, but it will also give you the money you need to expand and grow your small business for the future!
What is a small business loan?
A small business loan is a sum of capital that you borrow from a bank or alternative lender in order to finance costs related to running and growing your business. After receiving the lump sum of funds, you begin repaying the loan over a fixed period of time. These loans can have either fixed or variable interest rates, as well as different types of fees associated with them, like early repayment or origination fees.
Keep in mind that there are many types of small business loans out there, so it’s best to estimate how much you need, do your research, speak to advisors, then simply fill out this application form to find out if you qualify for a small business loan.
Why restaurant owners need a small business loan?
There are many reasons why a restaurant would need a small business loan. Every business is unique and their needs are also unique, but there are still some common reasons for needing a loan to grow your restaurant.
If you are just opening up a restaurant, you might be looking for working capital to pay for equipment, lease expenses, and to hire staff. If you already have a well-established restaurant, you might need a small business loan to cover a slow season or pay for new equipment.
Here are some of the most common ways restaurant owners use a small business loan:
- New dining decor and furniture
- Renovating the kitchen, office, storage, bathrooms or dining area
- Renewing permit or license to serve alcohol
- Restaurant supplies
- Table accessories
- Quality kitchen equipment
- New staff and uniforms
- Advertising and marketing
- Sound system to play music or hire a band
There are many benefits to obtaining a small business loan for a restaurant. If you are just starting your restaurant, you will need investors, which means they will also have a share of your business. But if you apply for a small business loan, you could maintain a bigger ownership share of your restaurant, because you won’t have to give up equity in order to obtain capital to start the business.
Another benefit is that you will start building your business credit. This is essential because if you ever require additional funding in the future, you’ll have an easier time obtaining it because of your strong business credit score. If you already have a restaurant and are thinking of opening a second location, you’ll need some capital to do so. Borrowing a small amount and paying it back could prove that you’re creditworthy. Then you will be able to borrow more in the future without any hassle.
Find the best option
The decision to get a small business loan for your restaurant will depend on what stage of business you are at right now, what you need the loan for, and your current personal financial situations. If you want to use the loan for expansion or other purchases, make sure you have a good business credit score, and can afford to pay back the loan on time. If you are unsure about your business’ financial health or what your business needs are, it’s wise to consult with a business advisor before making a decision.
Want to talk to a small business advisor? Apply for a loan today!