Obtaining and Using a Restaurant Business Loan

Obtaining and Using a Restaurant Business Loan
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Restaurants and foodservice businesses are among the most popular franchises, start-ups, and new small businesses year after year.

It’s no surprise – many people have dreams of one day opening up a restaurant featuring their favorite cuisine, a food truck, bakery, or similar business.

Despite the many upsides and the potential for both profit and fulfillment, running a restaurant or foodservice business can be difficult, with many challenges along the way.

One such challenge is securing sufficient funding for working capital needs, purchases, equipment upgrades, staff, renovations, and more. That’s where restaurant business loans can come into play.

Restaurant business loans are simply small business loans that are aimed at restaurants and the foodservice industry.

restaurants and the foodservice industry

Small business loans for restaurants and other food-based businesses can make a huge difference in the ability of small business owners to respond to changes in market conditions, emerging business needs, and to better capitalize on opportunities for growth or profit, without worrying about disrupting the careful revenue and expense balance inherent to an ordinary budget.

At the same time, for businesses that may be struggling with ordinary cash flow and expenses, a restaurant business loan may provide the kind of safety net that you need to focus on the day-to-day operations rather than constantly worrying over financial books.

Regardless of what the case may be, there’s no doubt that restaurant loans are a critical part of running a food-based small business. Restaurant owners, however, may not always be financial experts – or even enjoy the finance side of the job. 

Many restaurant and foodservice businesses may outsource some of their accounting to third parties or third party firms. 

Still, with the intent of managing your business most effectively, it’s helpful if you, as a restaurant or food business owner, understand the different types of small business loans and restaurant funding options that exist, and how they compare. 

That’s really the only way you can make the best decisions about what kind of funding is best for your business, and, as the boss, you’re the one who is going to be making the final decision.

So, to that end, let’s take a look at some of the details surrounding obtaining and using a restaurant business loan!

Financing Needs for Restaurants and Foodservice Businesses

Quite often, regular revenue may not be sufficient for a restaurant owner to have a working capital buffer for non-recurring expenses. 

Having to repair an appliance, buy replacement or new equipment, undertake marketing efforts or promotions, hire additional or seasonal staff, and so on, without having access to loans or credit, can be virtually impossible, since so many restaurants run lean on profits, at least at some point in the year. 

Financing need for restaurants and foodservice business

There’s no harm or shame in seeking small business funding for these kinds of expenses or needs.

In addition, as we briefly discussed above, businesses struggling with maintaining sufficient cash on hand to pay employees, utilities/regular expenses, and food suppliers may benefit from a restaurant business loan (or other restaurant funding option) to provide precious working capital. 

Both of these purposes can be served well with a restaurant loan, and one, the other, or both may be relevant for any given foodservice or restaurant business – even those doing extremely well with high occupancy, large check averages, and fast table turns. 

It is worth pointing out, however, that most restaurant business loans are not meant as venture capital, start-up, or franchise fee funding.

restaurant business loans with bizfly funding

They are usually offered only for businesses that are already established, with minimum monthly revenue, time in business, and minimum credit score requirements. 

These requirements vary from lender to lender, but in most cases, a small business loan for a restaurant or foodservice business is distinctly different from a start-up, VC, or franchise opening loan. 

Restaurant Funding Options

When it comes to working capital or project-specific funding needs, there are several options that lenders may offer which will work well. Most commonly, restaurant business loans take the form of small business loans, with a relatively long (a few years’ time) term. 

These loans are discussed in more detail in the next section. They are far from the only option, however.

Restaurant Funding Options

Some of the other restaurant funding options that are available (depending on the characteristics and qualification requirements of the business and lender) include:

  • Short-term small business loans, which are similar to regular small business loans, but offer a much shorter loan term and faster repayment schedule
  • Merchant cash advances, providing up-front cash in exchange for a portion of future credit/debit card sales, at a discount
  • A business line of credit, which provides a revolving credit facility against which business owners can borrow, re-borrow, re-pay, and continue to use, similar to a credit card account
  • Specialized business loans for women-owned businesses, that increase access to funding for a demographic that has historically been discriminated against
  • Debt consolidation loans, which don’t provide funding so much as help you manage existing debt, spending less and simplifying your debt repayment
  • Small business loans for bad credit customers or those with a limited credit history, with relaxed requirements for credit score, revenue, and time in business, allowing even those businesses with bad credit to get access to restaurant loans

Small Business Loans for Restaurants and Foodservice Businesses

By far, the most common restaurant funding option for foodservice and restaurant businesses is the small business loan – usually, unsecured small business loans.

Small Business Loans for Restaurants and Foodservice Businesses

These loans usually have the following characteristics:

  • No collateral is required for an unsecured small business loan, reducing the risk that the loan poses for the small business.
  • Funding is provided as a lump-sum up front at the time of taking out a restaurant business loan, and it is then repaid over time with interest, usually in equal payments over the term of the loan, most often monthly.
  • Most commonly, the loan term of a small business loan is a few years to several years, sometimes as high as 10 years or so on the upper end.
  • Interest rates can be varied or fixed, and vary by lender and loan agreement/qualification criteria.
  • Typically, unsecured small business loans for restaurants and foodservice businesses are easiest to obtain from a private, non-bank lender, and may or may not be offered by banks.

Banks are far more likely to only offer secured small business loans, which require collateral. 

They also usually have more complex or hard-to-meet qualification requirements, whereas private lenders serve a wider variety of customers, with lower credit score, less revenue, and less time-in-business requirements for their small business loans.

  • The amount you can borrow will vary from lender to lender, but most private lenders offering small business loans have upper limits of several hundreds of thousands of dollars or even $1 million or more.

Small business loans are generally unrestricted in their use, meaning business owners can have free reign on what project or expense(s) they utilize the funding for, and what their spending priorities and amounts may be. 

Because of the lack of collateral requirements, predictable repayment pattern, and longer (and less risky) loan terms, many business owners in the restaurant and foodservice industry find unsecured small business loans for restaurants as the ideal restaurant funding option. 

Small Business Loans for Restaurants and Foodservice Businesses from BizFly Funding

We hope our guide has given you a bit more understanding of small business loans for restaurants and foodservice businesses

If you need more information, or are in search of small business funding, then we urge you to consider BizFly Funding as your lender. BizFly Funding is one of the leading private, non-bank lenders in the US. 

They deal exclusively in unsecured small business funding, and have served the needs of more than 130 different business sectors – including restaurant and foodservice. 

With a full range of small business loans and restaurant funding options, excellent customer service, fast application and approval, funding in as little as 1 business day, easily-met qualification requirements, and loans of up to $1 million, BizFly Funding is a valued partner for any small business owner operating in the foodservice space.

To learn more, or start the application and pre-approval process, visit BizFly Funding online at https://bizflyfunding.com.

Frequently Asked Questions about Small Business Loans

Unsecured small business loans, along with other unsecured restaurant funding options, do not require collateral, assets, or monetary down payment to obtain.

However, they do require a minimum monthly revenue, a minimum number of months in business, and a minimum credit score in most cases. 

If your restaurant or foodservice business has trouble meeting any of those requirements, then you may be in need of venture capital, an equity partner or investor, or a start-up loan, all of which are different than the kind of restaurant loans available from both banks and private lenders. 

Every lender has different minimum requirements in order to qualify for a small business loan. Banks often have collateral requirements, and only offer secured small business loans and credit products. 

Private lenders, on the other hand, usually offer unsecured products, with no collateral requirements. 

In both cases, other minimum requirements often include a certain minimum credit score, minimum time in business, and minimum monthly or annual revenue. 

On the whole, private lenders usually have requirements that are much easier to meet in this regard than banks and traditional financial institutions. 

That’s why many small business owners find it easier to qualify for restaurant business loans at private lenders. 

A business loan is a well-established way to secure working capital or specific funding for your small business needs. It is not, however, the only way. 

As we highlighted in our guide above, there are several alternatives to traditional, long-term loans, including short-term loans, lines of credit, merchant cash advances, and more. 

Not every lender may offer all of these options, and the qualification requirements will differ for each product, each borrower, and each lender. 

The important thing to remember when taking on business debt is not to over-extend yourself, and take on more than you can reasonably stand to repay in the allotted loan term. 

That will help you to get the cash you need, while avoiding falling into a cycle of mounting debt. 

Secured loans require collateral, whereas unsecured loans do not. The term references whether or not the debt itself is “secured” by the lender – that they have a guarantee of repayment, even if you default on the loan or go out of business.

Collateral – often worth several times the value of the loan – is required in order to ensure that the lender will be repaid what they are owed, no matter what happens to your business. 

This lowers the risk for the lender, and thus they offer somewhat lower interest rates. 

However, it dramatically increases the risk for borrowers, and therefore unsecured small business loans, rather than secured ones, are usually favored by the majority of small business owners.  

Restaurant loans are not, in and of themselves, a separate small business funding product. 

Rather, when the term restaurant loans or restaurant business loans is used, it simply refers to ordinary small business loans for restaurants and foodservice customers or that market sector.

In point of fact, these loans do not differ in their structure or the way they work based on the borrowing business’ market sector. 

However, restaurant funding options are in high demand, and so you’ll often find articles and guides (like this one) dedicated specifically to that topic. 

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