Gone are the days when the only option restaurateurs had is to ask banks for loans and have their applications rejected more often than not. Currently, there are different alternatives on the market. Depending on the size and stability of your business, you could get the financing you need easily and quickly.
Below are the most common types of loans for restaurants.
Working Capital Loan
You can use this type of loan to boost the cash flow of your business. It’s ideal for routine operational expenses, such as rent payment, debt repayment, or even settling of payrolls. Most lenders will agree to approve the loan without any security attached to it. But you will need to commit to ACH repayment and this means the loan would be automatically repaid using the funds your business generates.
Restaurant equipment is expensive. Even establishments that can make their purchases in cash may find it risky to take a lump sum from their working capital. Typically, your funding will be mapped according to the expected longevity of the equipment you buy. The equipment will consequently serve as security for the loan and will soon pay for itself.
Line Of Credit
This type of financing will give your restaurant access to funds that rise to a predetermined limit. Usually, the interest rates will only apply to the amount of cash you withdraw. You could use your credit to run various errands and deal with emergencies during regular business operations.
These three types of loans are the most sought after by restaurant owners. Other loans include invoice financing and merchant cash advance. Because the decision to get a loan is a big one, you must not make an application unless you are committed to making the payments promptly.