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How to Get a Restaurant Business Loan with Bad Credit

How to Get a Restaurant Business Loan with Bad Credit
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Restaurants and foodservice businesses are extremely cash-intensive. Buying inventory, furniture, and keeping your kitchen equipment in good working order can deplete your reserves.

Obtaining working capital is always hard, especially in a volatile industry like foodservice. It can be made even more difficult when you have bad credit or a limited credit history. Fortunately, that’s starting to change, thanks to alternative lenders who offer business loans with bad credit.

Unlike in years gone by, where the primary source for most restaurant loans was your local bank, alternative online lenders have given business owners choice and created competition. 

They offer far more easily met eligibility requirements for all kinds of small business financing, including small business financing for bad credit customers.

Why Small Business Financing for Bad Credit Customers is Challenging

Traditionally, banks have been highly risk-averse in their lending practices. They see small businesses as risky investments, and so maintain high thresholds for eligibility for many of their small business funding products.

This is doubly problematic for restaurants and foodservice businesses, since they are seen as even more volatile and risky. The net effect is that only businesses with the highest credit scores have traditionally been able to qualify for business loans.

Challenging

Business loans with bad credit have almost been an oxymoron. This scenario only got more common after the financial collapse of the late 2000s. 

Commercial banks were put under tighter scrutiny, and new covenants for capital ratios came into place. This made banks and traditional financial institutions even less disposed to offering bad credit business loans or financing products. 

Yet, businesses of all sizes and industries, including restaurants and foodservice, rely on business loans and other financing options in order to function. 

Obviously, credit scores cannot be the only measure of a business’ potential and risk, and other sources of business loans with bad credit needed to be developed. That’s where alternative, non-bank lenders have stepped in to fill a gap in the market.

Restaurants and Foodservice Businesses Need Capital to Thrive

There’s no denying that restaurants and foodservice businesses have working capital needs, just like any business. They are a bit more unique, however, in that much of the expense and revenue cycle on a restaurant is short-term. 

On everything except equipment and property, expenses generate revenue in short order. This is definitely a good thing, and offsets some of the risk and volatility inherent with restaurants and similar businesses.

Restaurants and Foodservice Businesses Need Capital to Thrive

However, that still doesn’t mean business loans with bad credit are easy to obtain. The nature of restaurant business means that it can be challenging to develop a significant cash reserve. Cash flows in, and cash flows out quite rapidly, and on fairly thin margins. 

One unexpected expense, repair, bill, legal proceeding, or similar can be hard to deal with, and wreak havoc with a business credit score.

This makes it even more difficult to obtain financing, and makes the business less equipped to deal with future surprise expenses or working capital needs. 

It’s a vicious cycle that leads many businesses to fail, in large part due to their bad credit scores and the unavailability of small business financing for bad credit businesses.

Business Loans with Bad Credit from Online Alternative Lenders

That’s where online alternative lenders come into play. Many have developed in the wake of the financial crisis, where credit markets effectively became tighter and even harder for most people to qualify for financing. 

Online lenders offer several benefits over banks and traditional lenders. Crucially, one of these benefits is their willingness to take greater risks in lending, meaning most offer business loans with bad credit.

Business Loans with Bad Credit from Online Alternative Lenders

Several online alternative lenders have a range of different options and products for small business financing with bad credit. 

Restaurants and foodservice businesses with credit scores as low as 500 can still qualify for significant bad credit business loans, up to $1,000,000 in some cases. 

Working capital loans for businesses with bad credit, including long-term loans, merchant cash advances, and other products, can be exactly what restaurants and foodservice businesses need to operate successfully. 

Competition and new opportunities in the market mean that business loans for small businesses with bad credit are now easier to obtain than ever before. 

Reputable online alternative lenders like BizFly Funding make it easy to qualify, provide fast funding, and exceptional customer service. 

While higher risk businesses may pay slightly more in interest rates than their higher credit score counterparts, online alternative lenders offer a valuable lifeline for businesses with bad credit.

Most restaurant and foodservice owners are happy to pay a few percent more in interest if the choice is between that and not getting the working capital or financing they need to not only survive, but thrive.

Business Loans for Small Businesses with Bad Credit from BizFly Funding

To find out more about business loans with bad credit, to review how to qualify for a business loan with bad credit, or to start the loan application process, visit BizFly Funding. 

They’re one of the premiere alternative, non-bank lenders operating in the US today. BizFly Funding focuses exclusively on providing small business funding options, including funding for restaurants and foodservice businesses. 

Small business financing for bad credit customers is one of their specialties, with loans available for businesses with credit scores as low as 500. You can find out more on their website at https://bizflyfunding.com.

Frequently Asked Questions about Business Loans with Bad Credit

The amount of time you have to wait for your business loan funds will vary depending on your chosen lender. 

In the case of banks and traditional financial institutions, business loans with bad credit in particular can take quite a long time to get approved and funded. 

That’s if you can even get approved in the first place, since small business financing for bad credit customers is not high on the list of things banks excel at. 

By contrast, online private lenders like BizFly Funding can provide business loans for bad credit customers that are approved in less than a day, with funding available within 1 business day in almost all cases.

Restaurant and foodservice businesses of all types and sizes can typically access a number of different kinds of loans and credit products. 

That list may be truncated if you are looking for business loans with bad credit.

 Even then, however, there are usually two or three options that most restaurants and foodservice businesses can qualify for on the basis of their credit score. 

In most cases, small business financing for bad credit customers include (in escalating order of difficulty to obtain with a bad credit score):

Most small business loans and funding options, especially from alternative, non-bank lenders, do not come with a requirement that they be used for a specific purpose. 

Unlike mortgages, auto loans, and some kinds of secured small business funding, most unsecured small business funding options can be used as the business owner sees fit. 

Even business loans with bad credit generally do not have restrictions on their intended use. 

This means that business owners can use the funds to pay down debts, make payroll, purchase equipment or inventory, make repairs on their restaurant, undertake marketing campaigns, and more at their own discretion.

Bad credit, a poor credit score, or limited “thin file” credit history has often been an impediment to obtaining business funding. 

This is especially true with banks and traditional lenders, who rely on credit scores as their primary approval metric. 

However, alternative private lenders who operate online have changed this paradigm. Now, it is possible to get business loans with bad credit. Bad credit business loans are available from these lenders for customers with credit scores as low as 500. 

Compare that to the 700+ requirement for most banks, and it’s clear why more and more business owners looking for working capital loans for businesses with bad credit turn to online private lenders.

Bad credit loans are usually quite legitimate, but there are always scammers out there. It’s best to choose a reputable lender for your bad credit business loan or other small business funding needs. 

Reputable lenders will have a clear online presence with transparent details and information on their products. 

Additionally, they’ll have responsive customer service teams that will discuss your need for small business financing with bad credit. 

You can often search online to see if a particular lender appears to be a scam, and read reviews to see other people’s experiences with that lender. 

If you need help, we recommend looking to BizFly Funding for your bad credit business loan needs. 

BizFly Funding is a leader in small business funding in the US, including offering several kinds of business loans with bad credit.

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