Like most local business proprietors, most restaurant owners do not have the overall amount of money readily available to expand or to even operate their own business. Nevertheless, this should not squash all of your hopes and dreams of ever expanding and taking it to the next level.
Finding the ideal business finance product is an important choice. Whether you are just open a few months, or have a few years under your belt, there are numerous funding options being offered in the marketplace. Here are the most popular types.
SBA Loan (Small Business Administration)
Restaurant financing backed by the Small Business Administration is one way to fund a dining establishment. SBA supported loans are exceedingly hard to get. If you are one of the lucky ones that actually gets approved, your personal assurance and even collateral will certainly be needed to back the funding. You might find that when your own individual funds are on the line, the stress might make it harder for you to succeed. As part of their guidelines, SBA lending institutions pursue all available individual assets from the buyer as security. This equates to you being directly at risk for the success of your dining establishment. Also, if the worst case scenario happens and your restaurant closes, you may find it difficult to obtain future financing.
A business line of credit is an excellent tool that is designed to meet the specific needs of your business. One of its best features is that you only pay for what you use. Even if you do not have an immediate need for funding, a line of credit is always smart to have for emergencies or for when an incredible opportunity arises. Restaurant owners have been taking advantage of business lines of credit for discounts on bulk purchasing, short-term cash flow, fast access to working capital, bridging of slow account receivables, exciting opportunities with a small window and to pay their taxes in a timely fashion.
Restaurant owners can lease or finance the necessary equipment to run their establishment. Leasing offers affordable monthly payments through customized terms specific to your business. There are typically comprehensive packages offered, ranging from 12- to 60-month terms, which offer a solution to any type of restaurant owner. This type of financing or leasing usually has great tax benefits as well.
Unlike traditional banks, unsecured small business loans come with no restrictions on how the funds are used. So many restaurant owners have used this financing option as it is fast and an effective answer to their financial needs. Small business financing approvals are NOT based on your personal credit, time in business or if you are showing a loss. This product is very popular among business owners with good credit, and even those who have issues with their credit. You can usually acquire this type of financing even if you have open tax liens with no payment plans in place. Restaurant owners have chosen small business loans to grow their business at a faster pace. The product requires a lot less documentation than a conventional bank loan.
A merchant cash advance is not a loan; it is the purchase of future credit card receivables. Although this type of financing has been known to be pricey it is important to seek out the few providers in the industry who offer more competitive pricing. A business cash advance features a re-payment fluctuation based on your business and is the perfect solution if you don’t want to be tied to a set monthly payment. Business owners enjoy the program because not only is there is no set payment, but it also doesn’t require a personal guarantee.