Restaurant Loans: What Financing Options Do Restaurant Owners Have?

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Tuesday, May 30th, 2017

Restaurant owners know that it’s only a matter of time before they need additional cash to take care of emergency repairs, hire new staff, purchase equipment and inventory, run advertising and promotional campaigns, and the list goes on. As such, it’s not a question of if they’ll need restaurant loans, but when, how fast, and how much.

Here is an overview of five restaurant loans that can make the difference between struggling to survive, and elevating to the next level:

  • Conventional Bank Loans

Conventional bank loans offer relatively lower interest rates and total cost of borrowing compared to the other restaurant loans (aside from SBA loans). However, getting a conventional bank loan is extremely difficult on the post-Great Recession landscape. Virtually flawless credit is required, along with two (or sometimes more) years of business history. The application process is complex and time consuming, all loans usually have to be secured by collateral, and there are early repayment penalties. For all of these reasons, conventional bank loans aren’t in the mix of available or desirable restaurant loans for many borrowers.

  • Small Business Administration (SBA) Loans

The good news is that if you obtain an SBA loan (which are facilitated by banks), you’ll typically enjoy a relatively low interest rate and a fairly long repayment period compared to a conventional bank loan. The bad news – as you may already discovered if you’ve already explored SBA restaurant loans – is that competition is fierce, the application is complicated, and it can take several months for an application to snake its way through a very bureaucratic process. As such, if funds are needed urgently (i.e. within the next six months), the SBA likely isn’t a viable source of restaurant loans.

  • Merchant Cash Advances

Technically, merchant cash advances aren’t restaurant loans — they’re an advance against future revenues. Here’s how they work: funding is provided to restaurant owners, and a small percentage is automatically paid back at the end of each day, based on that day’s credit card transactions. When sales are strong, a little more is paid back towards the loan. When sales are sluggish, there’s more cash-on-hand to cover shortfalls and make investments in revenue-generating projects and programs (e.g. advertising, promotions, extended hours, etc.). Unlike an SBA loan, applying for a merchant cash advance is rapid and streamlined, excellent credit isn’t mandatory, and there’s no collateral.

  • Working Capital Loans

Working capital loans are straightforward loans that are paid back via a fixed amount each week, month (or other frequency as mutually agreed upon by the lender and borrower). They’re typically for longer-term financing needs, although shorter-term restaurant loans are possible. Like merchant cash advances, the application process is streamlined, impaired credit or even a past discharged bankruptcy is typically not a deal-breaker, and there’s no collateral.

  • Business Lines of Credit

A business line of credit is ideal for restaurant owners who want immediate and ongoing access to cash. As such, it’s advisable and beneficial to apply before a spending need arises. Unlike other types of restaurant loans, you only pay for what you use.

Learn More

At National Business Capital, we proudly provide restaurant owners of all sizes across the country with restaurant loans – including merchant cash advances, working capital loans, and business lines of credit – that keep their business strong, and on-track for growth and success.
If you’re looking for a restaurant loan, fill out our two-minute application or contact our team today for your no-obligation consultation. Discover why we’re the funding partner that restaurant owners choose, trust and recommend!

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