In neighborhoods throughout Cincinnati, restaurants are popping up to serve delicious treats of all kinds to hungry customers. Still, the sad fact is that the restaurant industry is full of cautionary tales about brilliant openings followed by rapid closures. The most common reason is that restaurants, more so than many types of small businesses, require significant startup capital and sustained working capital in order to ride out the first year or more of ups and downs. Unfortunately, local banks and other traditional lenders rarely see restaurants as a good risk, due to the many variables that can dramatically affect success. Lending marketplaces like Lendio, provide several options that can help you fund specific equipment purchases, even out cash flow, and make smart decisions about when to scale up.
4 Types of Loans for Restaurant Owners
Startup Loans for Restaurants
With a credit score of 680 or higher and, possibly, a little collateral, you may be able to borrow as much as $750,000 in revolving credit.
Equipment Financing for Restaurants
When you need a specific piece of equipment—like a convection oven—that’s too expensive to buy with cash, this may be a good option. It’s a little more secure than other types of loans, because the equipment you purchase should help you grow your revenues quickly. Loans are available for $5,000-5,000,000, with terms from one to five years and interest rates starting at 7.5%.
Business Term Loans for Restaurants
The most familiar type of loan, this gives you access to $5,000-2,000,000 for up to five years, with interest rates starting at 6%. While you can use this kind of loan for equipment, you can also use it to fund operations or hire staff.
Business Line of Credit for Restaurants
If you have a credit score of at least 560, you can get a business line of credit from your Cincinnati Lendio office so you can access the working capital you need to handle the unexpected challenges inherent in starting up in a service industry. With this option, you control when you use the funds and you don’t pay interest on the unused portion of the line of credit. With rates starting at 8% and lines available from $1,000-500,000, this provides versatile financing that you can throttle as needed.
What You Need to Know Before You Apply
- Know Your Business – The key to a successful restaurant loan application is to know your business and know how the capital will help you grow and accomplish your goals.
- Know How You’ll Use the Funds – Be strategic about how you’ll use the funds. Take the time to make a plan for how you’ll pay them back and don’t borrow more than you need.
- Know Your Financials – Take a deep look into your finances. Look at your profit and loss. Be sure you can afford the payments on whatever funds you borrow, for the full term of the loan. Know what you’ll do if something goes wrong while you’re still paying off the loan—what is your backup plan?
- Know What Your Business Will Look Like After You Get the Funds – Make sure you’re applying the funds where they’ll have the most impact on your revenue—whether that’s new additions to the menu, new waitstaff to keep orders flowing, new waffle irons, or additional kitchen staff to support extended hours.
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