The following content is part one of a two-part series guest-authored by Samantha Novick, a content marketing writer covering business and finance for Funding Circle. Consider the following factors when choosing the right financing for your restaurant.
Running a restaurant is expensive. And if you find yourself struggling to stay afloat with a laundry list of essential operational expenses, or you simply need a large sum of capital to scale for growth, it may be worth exploring the world of small restaurant financing. There are a number of general and purpose-specific loan options to help your establishment grow.
Before we get into the nitty-gritty of business funding, you should consider the reasons you need financing, as well as how an injection of capital will boost your bottom line. There are a number of different ways you can use a loan to grow your operation, including:
A clear picture of what you want to accomplish will help you determine what type of loan and payment plan makes the most sense for your business needs.
Once you have your financing reasons nailed down, it’s time to figure out how much money you need to make your vision a reality. Take the time to map out exactly how much your project will cost. Do research online, consult other restaurant owners in your area, ask for quotes from vendors — gather as much information as humanly possible.
While finding out the price of a piece of equipment is likely an easy feat, more complicated projects will require a deeper dive. For example, if you’re considering expanding your restaurant to a new location, it’s not enough to think about the obvious costs, like renovations, kitchen appliances, and the first few months of rent. You also need to account for variable and impending expenses like licenses, permits, and insurance, as well as any leasehold improvements (mechanical, electrical, plumbing) for your space. Will you need a broker to show you locations or a lawyer to review your lease agreement? Have you factored in staff turnover? How much you will need to spend on hiring and training new employees?
You want to have enough funds to complete your project, with a little bit extra to account for inevitable unforeseen expenses.
Now that you have a vision for the application of your funds, here’s a quick primer on some of the most popular business funding options. As you consider financing for your restaurant, popular loans include the following options:
Finding the right financing for your restaurant is no small task. Once you determine your financing needs and explore your options, it's time to prepare for what's next. For details on how to prepare for restaurant financing, check out part two of this post series.