For you to obtain a restaurant business loan, you must convince your potential lender that you can repay the loan on time. You can achieve this with the help of a proper business plan, credit information and equity structuring. Follow these straightforward guidelines to obtain a loan suitable for your restaurant, and you will be awarded lowest rates on your financing.
Prepare a good business plan
Even though restaurants are not traditional offices, technically they are a business in nature. Just because you have ventured in the entertainment industry does not imply that you are not allowed to apply for sound business funding. It does not also mean that you do not have the business sense of forming a business plan. For you to give your loan application the greatest chance of approval, you need to include the primary components used in any business. The components may comprise a business purpose, market research into the need for your new business venture, cost, and profit projections. Note that running a restaurant is not as easy as it might appear. On top of that, you need to include some information on your expertise in this field so that you can show your creditor you can make a profit. Even if you have never operated a restaurant, just try to display the general business and financial acumen. If you do not have the professionalism required, you can hire a consultant or staff member to help you.
Gather equity
You will be required to give out a down payment for your restaurant loan. Typically, this amount should at least 10 percent of that total cost of your new venture. Just because restaurant business is considered as one of the risky ventures, a creditor might ask for a much higher sum as a down payment. In most cases, these lenders will ask for 50 percent down payments. If you are unable to raise the required down payment personally, you will be needed to bring on investors or partners who can.
Prove your creditworthiness
For you to secure a business loan, you must be personally creditworthy. On top of that, it will be helpful if you have operated business that has an excellent credit rating in the past. For instance, if you have previously been a successful caterer and would love to operate a restaurant business, the healthy credit of your catering business can assist you in building your credit worthiness in the eyes of your creditor. If you do not have a business credit, you might need to give collateral on your loan. Be cautious of giving out your personal property as collateral on your loan. If your company collapses, it is vital to retain your personal properties in case of a loan default.
Manage expectations
Note that your expectations are the most important factor to ponder when applying for a business loan. The majority of new restaurant owners do not fully understand the period in which a business might take to generate consistent profits. Note that signing for a financial deal that requires higher payment early on can significantly hamper the restaurant’s ability to expand, grow and prosper. Choose a contract that will give you the flexibility you need to expand and grow your business.