Opening a restaurant is a large financial undertaking. Besides the cost of a commercial lease and restaurant insurance, you will need money for licensing fees, employee salaries and insurance, kitchen equipment, and food stock, among other necessities before opening. All of these things come with a hefty price tag. A startup loan will help you get on your way to success, but you should know your options before applying for any.
Three of the most common types of restaurant startup loans are:
1. Commercial Loans
A traditional loan from a bank is a good option, bearing any time restraints on your end. These loans have a lower interest rate than many others, which will drive down the total cost of your monthly payments. You can choose from a variety of loan terms (somewhere between short and long), depending on your needs. The downside to a commercial loan is you need to offer the financial institution collateral of some kind.
2. Lines of Credit
When owning a restaurant, your spending needs will fluctuate month to month. A business line of credit will give you spending flexibility based on the total amount you are approved to borrow. The best part of these credit cards is you will only be charged interest on what you spend per month, not the total allowed amount.
3. Small Business Loan
The US Small Business Administration offers loans to various startup businesses. These loans are basically funding partnerships between a business and SBA lending partners. For a new restaurant, an SBA loan could be one of the easier loans to get approved. Your credit score doesn’t need to be very high, the interest rates are low, and you will not need to put down a large down payment for the loan.
In order to apply for any of these business loans, you will need to gather a plethora of financial information to show whatever institution you hope to work with. Some examples are:
- Personal financial statements.
- Business financial statements (if any at the time of applying.)
- Tax returns.
- Credit scores.
- A detailed business plan highlighting expected net profit over time. You should also include a detailed plan outlining your goals and what you would do in the event of profit losses.
Opening a new restaurant takes a lot of hard work and a lot of patience. Applying for a startup loan can help you get your feet on the ground and get your restaurant open to serve customers.