Part II: How to Choose the Right Financing for Your Restaurant

Revel Blog | Sydney Kida | July 23, 2019 |


The following content is part two 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 on how to choose the right financing for your restaurant. 

How to Prepare for Restaurant Financing

Get your ducks in a row. It helps to have a business plan handy when you're ready to choose the right financing for your restaurant. Make sure to compile the right paperwork, too. While not all lenders require a formal business plan, it is important to be able to articulate why you need funding and how you plan to use the funding. And while some lenders require more documents than others, a good rule of thumb is to have your financial statements, tax returns, and current bank statements for both you and your business.

Check your credit score. For many types of business funding, your personal credit score plays a significant role, and can even make or break your chances for approval. Lenders use this number to evaluate your riskiness as a borrower, and often, to determine the terms of your offer. If you have a higher score, you’re more likely to receive a lower interest rate and more affordable financing. 

Research your options. Lenders consider a number of different factors when evaluating your application. And they all have their own eligibility criteria. Some may require you have at least two years under your belt, while others may let you borrow if you’re just getting your operations off the ground. You’ll want to make sure you meet the criteria, before you waste your time applying. 

It’s also important to make sure the type of financing (and lender) are the right fit to help you achieve your business goals. If your oven broke and you need capital ASAP to fix it, you likely won’t be able to wait around a few weeks, let alone a few months. So, when evaluating your options, here are a few other things you should keep in mind: 

  • Speed of funding
  • Repayment terms
  • Interest rates and fees
  • Personal guarantee or collateral requirements  

Understand APR. 

When evaluating your offers for financing the growth of your restaurant or bar, it can be difficult to make an apples-to-apples comparisons. Merchant cash advances and term loans are two very different products, with very different cost structures. This is why annual percentage rate (APR) is so important when you're trying to choose the right financing. APR tells you the true cost of borrowing money per year (including all fees and charges), and is key to selecting the best offer. 

Whether you own a pizzeria or a Michelin-starred dining establishment, a small business loan could be the solution for taking your culinary operation to the next level. 

Want to learn more about how a term loan can help your restaurant grow? Check out our Guide to Restaurant Financing.