Do you dream of having your own restaurant and run it successfully? Have you burnt your midnight oil thinking about getting the perfect start to your aspirations or did you spend your life honing skills as a top-notch chef? But, you lack the required financing sources to create dreams into reality. If you completely relate to these situations and finding adequate funds for your restaurant is a stumbling block in your ladder to success then here is a magical financing guide that can help you fund your restaurant.
Ways to Fund your Restaurant
- Rely on Investors
The first option to set foot into the entrepreneur world with your restaurant would be to make an investor invest in your business. Investors are basically people having surplus money that are willing to invest in an amazing business idea which they believe would flourish. However, the sole purpose of investing is not just to gauge that the business idea is amazing but would fetch them returns. In this case, they would set a percentage of interest on the principal amount allocated. At times, these investors can ask for some share in the business which means who would have to give some shares in return of seed capital (initial funding).
Another thing to keep in mind is that investors always look forward to getting returns from the business, therefore, a timeline has to be set before availing funds. Create a business plan which outlines how the investor would be paid back and in what duration. Try and stick to this plan.
2) Grants/loan from Friends and Family
Other than investors, friends, and family are the biggest source of financial help as they know you and believe in your aspirations. They can completely vouch for the business plan would consider giving a helping hand. In such a scenario, providing loan or grant would help you start your business. However, try to keep things on paper so as to avoid ruining the relationships.
3) SBA Loans
Small business administration loans are one of the best ways to financing your business. As against other types of loans, SBA is guaranteed by a federal agency which allows lenders to offer flexible repayment terms and low-interest rate to the borrower. Another key advantage of this loan is that it can be taken even if the borrower has a default to its credit and does not have collateral. However, the big downside of the loan is that it is hard to get as it is given only to eligible borrowers.
Some of the SBA loans available are-:
- Loan 7a,
- 504 loan program
- Microloans
- SBA disaster loans
4) Bank loans
Most entrepreneurs resort to loans through local banks, however, this way of financing could be fraught with challenges. Banks are not very encouraging when it comes to funding a restaurant due to a high failure rate of budding restaurants. Other than this, lack of awareness and knowledge about the type of loan to be sought also is a major impediment. In this regard, understand the type of loans and their conditions needs to be studied before filling for one.
Here is a financing guide to the type of loans for a restaurant.
- Line of Credit
- Inventory loans
- Working capital loans
- Merchant cash advance
5) Credit Union Loans
Credit union loans are another type of loans that can be availed to fund your restaurant. These loans charge interest on the balance amount of loan which saves a lot of costs. SO in case, the principal amount is paid off earlier than the stipulated date, then payment of interest can be avoided.
6) Crowdfunding
Crowdfunding is a modern way of funding under which small amounts of the fund is raised through a large number of individuals. There are a lot of crowdfunding agencies like Kickstarter, foodstart that sponsor funds for your business through their tie-ups with a group of people.
7) Savings
The best way to start your business is to get money without being in debt. Right?
This is possible if you have been prudent enough in saving money either as fixed returns or in the bank. This would be the right time to encash all that is available with you and out in as capital for your restaurant.
The Bottomline
Though funding a restaurant might overwhelm an aspiring entrepreneur but other vital stats have to be considered before digging deep into it. Vitalities with respect to the location of the restaurant, kind of crowd that the restaurant would draw and a menu that would be aligned with their needs have to be considered. Researchers have concluded that about 60% of the startups fail not because of lack of continued funding support but because other key parameters like menu, drinks, activities, upholstery of the restaurant and regular maintenance are not taken care of. A proper mix of the same with complete restaurant management is required to succeed in the pursuit.
