The Fastest Way to Get a Restaurant Loan

January 12, 2024

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For small business owners, particularly in the bustling restaurant industry, obtaining fast and efficient financing is crucial. Whether it’s for opening a new location, renovating your existing space, or simply managing day-to-day cash flow, securing the right kind of funding can make all the difference. This guide is designed to help restaurant owners navigate the complex world of restaurant loans and financing options.

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Restaurant Business Loans

A restaurant loan is a specific type of business loan catered to the unique needs of restaurateurs. It provides the working capital needed for various purposes, from buying kitchen equipment to covering operational expenses. Unlike general business loans, restaurant loans often consider the specific challenges and dynamics of the restaurant business.

Loan Options for Restaurant Owners

Restaurant owners have various loan options, including SBA loans, equipment financing, and working capital loans. Each comes with its own set of terms and conditions, such as loan amounts, interest rates, and repayment terms. Understanding these can help in selecting the right loan for your business needs.

SBA 7(a) Loans

The 7(a) loan program by the Small Business Administration (SBA) is one of the most popular financing options for small businesses. These loans offer competitive interest rates and longer repayment terms, making them ideal for new restaurant startups or expanding existing businesses. However, the drawback is that this type of financing can be tedious in the amount of paperwork like business plans, tax documents, balance sheets and more to secure approval. Plus, the time from applying to receiving funds can over be weeks or months.

Interest Rates and Loan Terms

Interest rates on restaurant loans can vary widely based on the lender, your credit score, and the type of loan. It’s essential to compare different loan products and understand the repayment terms to ensure they align with your business’s cash flow.

Merchant Cash Advances: A Preferable Alternative

For many restaurant owners, bank loans are a challenge to obtain, so instead they turn to merchant cash advances (MCAs). MCAs offer a more flexible and faster funding option compared to loans or lines of credit. In fact, unlike a loan where you pay interest, MCAs provide immediate working capital based on future revenue with a factor rate. The beauty in this is that your MCA provider essentially acts as a partner and want you to succeed. If your revenue dips, so do your payments as your payment is based on a share of your revenue allowing you to still maintain enough cash for operational needs.

Advantages of Merchant Cash Advances

  • Speed: MCAs are fast. Approval is usually within 2 hours, and funds can hit your account in a single business day, making them ideal for urgent funding needs.

  • Flexibility: Repayment is typically a percentage of daily revenue, which aligns well with the fluctuating income of restaurants.

  • Bad Credit: MCAs are a lifeline for business owners with prior defaults or a low credit score who can’t qualify for a small business loan.

  • Versatile: Spend the money how you best see fit. So if you need to upgrade restaurant equipment, do it! Or your want to complete renovations then that’s cool too. You can decide how to spend this type of business financing.

  • New Businesses: While you will need to show 3-4 months of recent business bank statements, there are no other requirements like years in business that many loans require.

Securing Restaurant Funding

When it comes to financing your restaurant, consider the following steps:

Assess Your Needs

Determine the amount you need to borrow and what you need the funding for. This could be for opening a new restaurant location, purchasing new equipment like ovens, or even for short-term needs like covering payroll.

Prepare Your Documents

Having your financial statements, bank statements, and tax returns ready can expedite the loan application process. Lenders and providers will assess these documents to determine your eligibility and creditworthiness.

Choose the Right Financing Option

Compare different financing options and lenders, including online lenders and banks. Look at the interest rates, loan terms, and eligibility requirements of each option. Remember, while note a loan, a merchant cash advance might be a more suitable option for immediate and flexible funding needs.

Restaurant Financing Options: What to Consider

  • Credit Score: Your credit history can significantly impact your eligibility for certain loans. However, for MCAs, the focus is more on your business’s sales performance.

  • Repayment Terms: Understand the repayment structure, whether it’s fixed monthly payments for a loan or a percentage of sales for an MCA.

  • Funding Speed: If you need funding quickly, merchant cash advances are often the fastest way to get it.

Conclusion: Making the Right Choice for Your Restaurant

Securing financing for your restaurant business requires careful consideration of your needs, understanding of different loan products, and choosing a lender or financing provider that aligns with your business goals. With the right approach, you can ensure your restaurant thrives and grows in today’s competitive market.

*Repayment in this context describes the process of repurchasing a merchant cash advance. It does not describe the process of repaying a loan. MCAs are legally distinct from loan products.

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