Restaurant Funding: All About Restaurant Startup Loans

Now a days only few people can finance a restaurant out of the pocket. But new restaurants are opening everyday.every now and then we can see a new restaurant with new deals in order to attract the customes so how are they able to arrange such a huge amount of money in such a short period of time?

Where does this money comes from? Some restaurateurs use their own funds that they have generated by selling everything, while others look for some business partener to invest. There is also another category of people who obtain their funding through restaurant loans which actually is an excellent option and a pretty good platform to start your restaurant. If you too are eager to start your own venture in form of a casual diner or elegant and ethinic restaurant, here are some restaurant loan options thatyou can consider while starting new restaurant.

Types of restaurant loans

While choosing any restaurant loan option, there are many factors that we consider like interest rate, down payment and last but not the least collateral requirements. Below are some most popular loan options that you can consider.

1.Traditional Commercial Loan

If you want to apply for a loan directly through a bank, you must have a high credit score. You need to wait upto six months or more for approval. Once approved you would have to pay the monthly payments of lower interest ie. 6-8%. You have two options in this short term loan and long term loan. Usually people apply for short term loan only as long term loan isnt ideal for someone who is just starting his venture.other name for it is term loan. While taking this loan you must remember that it also requires collateral security like your home, vehicle or business asset.

2. Business Line of Credit

A line of credit is like a credit card. There is a certain amount for which you get approved so you only pay for what you use. Say if you get approve for say rs 100000 line of credit and you use only rs 20000 from it in first month for renovations then your monthly payment is only based on what you have drawn ie, rs 20000. As you pay the balance down, you have more credit to draw forr future expenses. This inturn is a flexible way for borrowing money

3 Equipment Loans

If you own a restaurant you must be knowing how expensive it gets! While starting a new restaurant you need fund to acquire new equipments like industrial oven, new stovetop etc. If you dont have enough money to pay for these eqipments and you arent able to generate funds for finanacing it, don't get disheartenend this is where equipment loans and equipment financing comes. It gives you a great option that you can finanace upto 100% value of your new equipments with the help of equipment loan. Major advantage of this type of loan option is that in this you don't even need to give your personal asset as a collateral security, equipments themselves becomes and act like a collateral security. So now you don't have to worry just focus on what you want and achieve big in your life!

4 Working Capital Loan

This type of loan is availed by the firms to cover their daily operations expenses. This inturn helps the business to focus only on their growth and generation of funds. These kind of loans are not used for buying the long term assets but they are used to cover the wages and accounts payables. The short term needs of the company can be covered with the help of working capital loans. General duration of this type of loan is from 6 months to 12 months while the interest rates varies from 11% to 16%.

While this was all about loans. You also need to know what kind of costs do they actually cover. So here is the list of costs for which the loans are taken:

A. Commercial Lease

It is an agreement between the land lord and the business outlining the terms and conditions of the property rental. It is the cost per month paid for the location where you have set up your restaurant.

B. Restaurant Insurance

This is actaully a coverage that protects your restaurant from any kind of losses that may occur during the normal course of business. Be it property damage due to natuaral calmities , accidents and injuries, crime or even worker's compensation. This is the most important cost for which the loan is taken

C. License Fees

License fee grants you the right to operate the business in the city. When you file your license application, the city planning or zoning department will check to make sure your area is zoned for the purpose you want to use it for. This is an important measure that needs to be taken while starting a new restaurant

D. Renovations Costs

When you feel that the time has come that you now need to expand your restaurant or you need a coat of paint or replacing an old machinery with a big and a brand new one then renovation costs comes into the frame. For this you can take loan or use your personal funds that you have generated by selling your product.


So it depends on you how much funds you need , what kind of restaurant are looking to open , you are opening on small scale or on large scale or you yourself have enough capital to start. All these factors will ultimtely decide which loan option would you go for. Consider and choose what suits you best. Don't be afraid to start something new. Taking risk will ultimately deliever you the more profits and revenues. With sheer hardwork and proper concept you too can also achieve the funding.

Dream big and achieve big!

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