Previously, restaurant owners secured their business loans from banks and institutional lenders since there were the only options available. However, in the current time, the majority of restaurant owners fail to qualify for a bank loan for some reason. Note that because there are many variations of restaurant funding alternatives, there is also a broad variety of lending criteria that suits each and every type of financing. Once it comes to restaurant funding, restaurant owners encounter several decisions concerning which creditors to choose and which loan product to secure.
Which loan product is perfect for your business restaurant?
Numerous restaurant financing and loan programs are being used to fund any restaurant. Traditionally, restaurants have accepted relatively competitive loan rates and terms with the rate of interest ranging between 5 percent and 8 percent. Also, there are other quick loan products such as merchant cash advance, cash flow loan and income-based financing. Note that these types of funding have much higher effective rates of interest, but require less documentation and collateral.
Fully amortizing up to a period of 5 years, term loans are idyllic for restaurant owners who have large sole purchases or need to refinance old debt. Restaurant owners can also use this type of loan to finance marketing efforts, establish new locations, or buy new equipment. Fortunately, you can do all this while improving your business credit. Besides, you can get the term loans with three days after your application is approved.
Assets-based lines of credit
As a restaurant owner, you have the freedom to use asset-based lines of credit for a selection of restaurant business uses. Bear in mind that asset based funding for restaurants is basically term loans obtained by assets like accounts receivable, or real estate.
Unsecured business lines of credit
Unsecured credit is a type of a loan or line of credit where is no collateral needed to secure the loan. Even though this form of financing is suitable for a restaurant, the majority of lenders consider it as risky. For you to qualify for this type of funding, both your personal financial strength and the cash flow of your business must be strong.
Income based loans
An income based funding might be your restaurant’s lifeblood, and it can also offer numerous financial benefits to your business. During the growing process of your business, the chances are that you will be required to inject some funds to enhance its growth. At many times, bank loans tend to be too restrictive, time-consuming and hard to obtain these days. In this scenario, an income based financing might be an excellent solution.
Merchant cash advance
A merchant cash advance can offer restaurant owners with an upfront fixed amount of money in as quickly as one day. The merchant cash advance loan provided is based upon a portion of the business credit card receivables. The company will repay the advance amount, plus a percentage of their credit and debit card receivables.