Keeping a busy restaurant running at its full capacity isn’t easy. Dealing with seasonal fluctuations, equipment malfunctions, and other overheads can seem impossible to restaurant owners who are short on cash. Fortunately, there are several financing options that restaurant owners can consider for keeping their business running or for growing it. Let us take a look at those options.
- Commercial Loan
Restaurant owners can apply for a commercial loan through a bank if they have a good credit score. Unfortunately, the approval process can sometimes be slow, time consuming, and paperwork intensive. The good thing about commercial loans is that they come with low interest rates. However, the borrower must provide collateral like their home or vehicle to get the commercial loan from a bank.
- Small Business Loan
If borrowers can’t qualify for a commercial loan, next viable option is the small business loan. Small business loans are backed by the U.S. Small Business Administration (SBA). Borrowers can get a small business loan for their restaurant if they have a high credit score and can provide collateral. Small business loans are only given to restaurants that meet the criteria defined by the Small Business Administration.
- Business Lines of Credit
This is one of the most convenient and fastest financing options for restaurant owners. Borrowers looking for a fast business loan should consider business lines of credit. One of the best features of this financing option is that the borrowers are only required to pay what they use. So, if the borrower is approved for $50,000 line of credit and they only use $10,000, their monthly payment will be based on the $10,000. It can be difficult to qualify for business lines of credit from traditional banks due to their stringent lending criteria, but many alternative lenders have more flexible criteria.
- Equipment Loans
Equipment loans allow restaurant owners to purchase equipment for their restaurant without paying for it completely out of their pocket. Some equipment loans allow borrowers to finance 100 percent of the total value of the equipment. Collateral for the loan is the equipment itself which means that borrowers don’t have to put their personal assets on the line. Equipment loans are a viable option for restaurant owners who require financing to purchase new equipment for their business, but they can only be used for equipment.
- Merchant Cash Advance
Merchant cash advances are at the bottom of the list for a reason – a merchant cash advance is an expensive financing option. With a merchant cash advance, a certain amount of money is advanced by the lender which must be paid by a specific percentage of the borrower’s daily credit card sales. Fees associated with merchant cash advances make it expensive for the borrowers. Therefore, restaurant owners should only consider merchant cash advance if they can’t qualify for other financing options.
There are several options for restaurant owners to finance your business. When you require money to manage your restaurant operations or expand your business, you should carefully consider the loan options discussed above and pick the one that’s right for you.