Get Cooking in your Own Kitchen with Restaurant Loans
There are several ways to get into the food business, but regardless of whether you are buying into a franchise or opening a brand new restaurant, loans are a big concern. The cost to open a restaurant is high. You will need to rent or buy a location, buy fixtures and install a full commercial kitchen and walk-in refrigerator. The countertops are usually stainless steel, heavy gauge, and the cooking tops need to accommodate much more than a traditional stove. Plenty of space in the ovens and a prep table are also required. These items often come at a very expensive price, making restaurant loans a necessity for most people
Restaurant loans are essentially small business startup loans. There are unsecured and secured loan options. In most cases, smaller loan amounts qualify for the unsecured loans, while large amounts cause banks to require some form of collateral. Your credit score will impact the final loan agreement you are offered. Excellent credit will help you not only find a loan, but obtain the best possible terms. Additionally, if you have money saved up to invest in the project, banks will look more favorably on your restaurant loans.
Business starts up loans often have a stringent application process. The individual must show that they are able to manage a business. Banks will look at prior work experience and the total business plan to determine viability. It is important to thoroughly research each step of opening a business before going to the bank. You will need to show that you have spent time: finding the best locations, working out deals for the best prices on equipment, contacted contractors for estimates, priced furniture and fixtures, ensured that any licensing is available and much more. The tasks that you will need to perform to obtain restaurant loans may seem endless, but the fact is that most of it is stuff you will need to do to open a business.
Restaurant loans, and any small business startup loans, are difficult to obtain due to the number of businesses that fail within the first five years. Banks are naturally cautious since the default rate on these restaurant loans is enormous. To combat the default rate, many banks simply refuse to issue unsecured restaurant loans for startups. Once the business is established and earning decent revenue that may change. But, for getting the company off the ground some kind of collateral is required. The sheer cost for opening a restaurant plays a part in the need for collateral. Even banks cannot simply write checks for well over a quarter of a million dollars on high risk restaurant loans without something to anchor the loan. Collateral allows the bank to write the loan, even when the collateral amount is much less than the loan amount. As long as a percentage of the loan is backed, it is more likely to be approved. Often a house or property provides the collateral needed to secure restaurant loans and get started with a new business venture.