People Also Ask:
How Do You Get a Business Loan For a Restaurant?
This depends on where you apply and the product you have in mind. Bank loans tend to carry the highest borrowing amounts, lowest rates, and the most extended terms. However, bank loans are also the most difficult to qualify for. You’ll need excellent credit, perfect cash flow, plenty of money in the bank, at least two years in business, and collateral. The application will also require significant paperwork, and you’ll have to wait several months to receive funding.
Companies like United Capital Source, on the other hand, have access to lenders with much looser requirements and you can get funded in a matter of days. Their products are more expensive than bank loans, but you can borrow up to $10 million. And unlike banks, the size of your requested borrowing amount won’t make you any less likely to get approved. Most of their customers borrow around $25,000.
Is It Hard To Get a Loan For a Restaurant?
Business Term Loans and SBA Loans are the most difficult loans to qualify for, especially if you’re seeking funding from a bank. Restaurants may have an especially difficult time accessing these products due to their tumultuous cash flow and low profit margins. Banks want their borrowers to maintain high bank balances every month. This shows that you’ll have plenty of cash to pay off the debt after covering operational expenses. So, yes, it is indeed hard for restaurants to access Business Term Loans and SBA Loans from banks.
However, if you’re seeking funding through a company like United Capital Source, turbulent cash flow is not a deal-breaker. These companies regularly work with restaurants that experience occasional dips in revenue or lengthy slow periods due to seasonality. You can even get approved for multiple products with poor credit. Thus, it is not hard at all for a restaurant to access products from online or alternative business loan providers.
What Do Restaurants Use Business Loans For?
Restaurants can use business loans for a myriad of purposes. They include:
- Purchasing new equipment
- Unexpected expenses like a required licensing fee
- Adding a new feature like an outdoor bar or delivery service
- Hiring, outfitting, and training new hires
- Covering operational expenses during slow periods
- Adding a second location
- Buying an existing restaurant
- Launching a mass marketing campaign
- Renovating the exterior or interior
- Purchasing extra inventory
Can I Get a Loan To Buy a Restaurant?
Yes, traditional and non-traditional business loan providers can distribute large loans that can be used to buy a franchise, add a second location, or buy an existing business, regardless of industry. However, to qualify for high borrowing amounts and long terms, you must have excellent credit, healthy cash flow, and at least two years in business. You may also have to provide collateral, depending on how well you meet the other requirements.
Why Don’t Banks Lend To Restaurants?
Banks have a reputation for declining loans for restaurants, even if they meet their general requirements. This may be because 80% of privately-owned restaurants fail in their first three to five years of business.
Many restaurants also have low profit margins and are family-owned. Some banks might believe that family members don’t make good business partners since their relationship with you can influence your decisions.
Banks also don’t lend to any business (regardless of industry) with turbulent cash flow. How will you make fixed monthly payments when business slows down?
Thankfully, companies like United Capital Source have no issue with turbulent cash flow. Products like a Merchant Cash Advance, Business Line of Credit, and Revenue-Based Business Loan do not require fixed, monthly payments. You can even use these products to cover operational expenses during temporary slow periods.
Can I Get a Restaurant Business Loan With Bad Credit?
Yes, you can get a Restaurant Business Loan with bad credit. At United Capital Source, borrowers with bad credit can access the following products:
- Business Line of Credit
- Equipment Financing
- Working Capital Loan
- Merchant Cash Advance
- Revenue-Based Business Loans
Most of these products carry shorter terms and are relatively easy to repay. When you have bad credit, you’ll receive shorter terms and higher rates to diminish the risk of default. However, if you have excellent cash flow or can provide collateral, you may be able to access higher borrowing amounts, even with bad credit. For example, the borrowing amount for a Merchant Cash Advance is based on your debit and credit card sales volume. If a lot of your sales come from these payment methods, you may be able to access up to 150% of your monthly debit and credit card sales.