3 Costly Misconceptions About Restaurant Loans

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Friday, September 1st, 2017

Successful restaurant owners need to be experts in many areas, including one that they may not have anticipated: capital management.

Indeed, while managing cash flow and covering finance gaps is important in all industries and sectors, for restaurant owners it is often the difference between being in the black or red — and in the long-run, between thriving and shutting down.

Yet at the same time, there are some enduring myths about restaurant loans that prevent many owners from getting the critical cash infusion they need to cover expenses, take advantage of profitable opportunities, and keep their business stable throughout the year. Here are three costly misconceptions about restaurant loans:

  • You need to have exceptional credit.

This really only applies if you want to obtain restaurant loans from a bank as banks insist on exceptional personal and business credit.

At National Business Capital, we don’t view credit scores as the “end all and be all” of a restaurant owner’s stability, financial competence and overall capacity to be a successful partner. That’s why our approval rate is around 90 percent, compared to big banks that hover around 20 percent (and most of these do not go to restaurant owners, as banks often deem the industry too risky and volatile).  

  • You need to have a long credit history and be cashflow positive.

Banks typically demand two (but sometimes more) years of credit history, along with verified evidence that a loan applicant is cash flow positive. In other words: banks typically lend to businesses that are already making money, since it further reduces their risk exposure and virtually guarantees a significant profit.

At National Business Capital, we understand that many restaurant owners who cannot get funding before their second birthday will never reach that milestone. That is why we only look for six months of credit history, and it is not necessary for loan applicants to be cashflow positive. We are not as interested in what a restaurant owner has done in the distant past as we are focused on what they are poised to do in the future.

  • You need to pledge collateral to secure a loan.

Once again: this requirement applies to restaurant loans from banks (and of course, credit union loans as well).  Not only do banks insist on sufficient collateral, but they make loan applicants pay for the asset valuation up front.

At National Business Capital, many of our funding solutions for restaurant owners — including working capital loans, merchant cash advances, and business lines of credit — do not require collateral. What’s more, this dramatically speeds up the assessment and approval process.

The Bottom Line

Running a successful restaurant is not just profitable, but it also gives you the opportunity to create quality jobs, build loyal relationships with customers, and establish yourself as an important part of the community. But to achieve all the above, you need rapid access to sufficient funding — because it’s not a question of whether the need for more capital will arise, but when and how much.

To get the affordable, low-administration restaurant loan you need, contact the National Business Capital team today or fill out our two-minute application. Because we work with restaurant owners so often, we have special best practices in place that we can customize to your needs.

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Our approval process takes less than 24 hours.

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