Financing Options for Restaurants and Bars
Opening a new restaurant or bar comes with several challenges and obstacles to overcome. Finding financial assistance is one of those challenges that need to be met prior to opening. After all, a new restaurant needs working capital for several business items: inventory, wages, insurance, lease payments, among many others. Before you apply for a loan, make sure you do enough research to figure out which type of business loan is right for you and your business’s needs. Below are five financial options for you to take a closer look at.
1. Term Loans
Bank term loans are one of the most common types of loans that restaurants and bars apply for. A term loan is a set amount of money borrowed with interest that is due in installments over a fixed period of time. The interest rates can be considerably lower than other types of financial assistance depending on the length of the overall term.
2. Asset Based Loans
If your restaurant or bar doesn’t have strong revenue to show a lending institution for the approval process, you can always use other assets as collateral, such as accounts receivables, machinery, or property. Most assets have a specific monetary value. The value can be used to gain approval for asset-based loans or an asset-based line of credit.
3. Lines of Credit
A business line of credit is an easy way to get financial assistance for a new hospitality business. These credit cards have a maximum credit limit that you borrow from, but the flexibility of payment is what makes them worth the application. The amount of money your new restaurant needs to borrow from the line of credit can vary from month to month, so with these credit cards you only pay back what you spend, plus some interest.
4. Cash Advances
A cash advance is basically the sale of future revenue or profit. It is a quick way to receive financial help, but the downside is the limits imposed by the bank or lender. You do not need to have a high credit score to take out a cash advance.
5. Equipment Financing
Lastly, you can directly finance a piece of equipment that your hospitality business needs, instead of taking out a loan for cash. You could also lease equipment if you do not have the liquid cash to purchase it outright.
There are many ways to finance a new restaurant or bar. Do the research and choose the correct one for your business.