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What is the Best Type of Loan to Get for a Restaurant

Running a restaurant, cafe or bar requires significant investment.

If your restaurant needs a loan, your first problem is knowing where to start. Traditional banks, merchant cash advances, and financial tech companies abound, all with their own benefits, barriers, and repayment structures.

Securing a loan for your restaurant can be critical to its success. A loan could mean the difference between adding extra staff to handle an influx of customers or providing a mediocre customer experience. Operating with a restaurant loan under your belt can alleviate some of the stress that comes with owning a restaurant, at least for a little while.

The most important thing to remember about securing a restaurant loan is that you shouldn’t feel backed into a corner if you’re denied a traditional bank loan – there are plenty of alternatives to investigate before you throw in the towel.

This article will shed some light on the requirements for getting a loan, the application process, and common errors restaurateurs make when sourcing money from lenders. First, let’s start with the basics.


How can a business loan help my restaurant, bar or cafe?

A business loan can help your bar or restaurant at every stage, whether you’re a brand new business or a long-established one. A loan can help you with the following:


Why might a restaurant need a business loan?

A restaurant business might need to take out a loan for many reasons. Foremost is the initial costs. Various pieces of equipment needed for the operation such as ovens, grills, POS systems and cash registers have to be purchased. Similar to that is the deposit for lease contracts or the purchase of a building itself for the future restaurant’s site.

Once the restaurant becomes operational, there are daily expenses that need to be paid whether or not the restaurant gets its customers, such as employee salaries, the cost of utilities, and the cost of the food to be served daily restaurant finance.


What types of business loans are available for restaurants owners?

A restaurant owner has to have a clear understanding of these expenditures because the kind of loan to be taken depends largely on what the loan is for and how long the company has been operating.

Generally, there are two types of loans depending on the providers. The first type is the traditional loan, which is provided by credit companies and banks. This includes term loans, lines of credit, equipment credit, and credit card loans.

The other type is the alternative loan, which is provided by financing companies and cash advance businesses. This includes the merchant cash advance and the unsecured business loan.


Small Business Funding Options

Today, there are over twenty types of unsecured business loan funding options to small business owners. Some funders offer small businesses alternative and accessible funding options. The combination of unsecured business loan funding options and alternative and accessible funding options has led to many opportunities that are tailored to solutions that help small businesses take a positive financial step into their future.

Some of these funding options for small businesses are through short-term business loans offered by stellar fin-tech lenders. Many of these three to twelve-month short-term loans are flexible and accessible to business owners through a streamlined internal application process. There are also a variety of Australian private angel investors, lenders, and government programs that offer grants.



Pros and Cons of Business Loan Types

Innovative financing methods such as the merchant cash advance and unsecured business loans are better alternatives. Merchant cash advance is a credit facility where loan payments are deducted daily as a percentage of daily credit card sales. An unsecured business loan is similar to the merchant cash advance except that it deducts from the business’ bank account daily. Both options offer a faster way of getting a working capital to fund immediate needs such as employee salaries, utilities and payment for stocks, inventory, and food items.

The upside to this is that it does not burden a merchant to produce a fixed amount of cash every month, as opposed to term loans with fixed interest and part of the principal amount. Instead, deductions are made only as a percentage of the actual sales, which lessens the risk of depleting the cash on hand of the business. This facility goes hand in hand with your business cash-flow.  Approval normally takes only a few days and is almost always guaranteed, making it a reliable source of cash.


How do I select a loan provider that understands the needs of hospitality?

Given the variety of loans available, it is important that the business owner considers the reputation of the institution to partner with. It has to be one with a good number of years in the industry with enough experience to know just what the debtors need. It has to be a company that understands the challenges that business owners face and responds by giving them the more flexible and efficient ways to repay the funds received.

It has to be a company that balances its interests with those of the business owners and communicates them effectively, with different communication channels that cater to questions and inquiries. A company that allows business owners to learn as much as they need or want to is exceptional because it lowers the risk for both sides.


How should I use my loan wisely?

It is important that loans are used for expenditures that have been carefully considered and added to the financial plan. Loans are obligations that have to be paid quickly, and this is only possible if the owner has already accounted for the expense long before the loan is taken out.

The key is always planning. A financial and operational plan that lays out the cash requirements for several years gives the owner leeway to execute the plan and keep a good credit history and credit relationship with its lenders. This means that the business owner must carefully map out its big purchases such as additional equipment and plans of branching out. As with anything, success and security both begin with foresight.


How To Get a Small Business Loan

Before or after you explore funding options through grants, investors, and outside-the-box funding outreach programs, it’s important you know how to get a small business loan. If you want a flexible small business loan, the unsecured financing option may be best. You can apply for however much you need and most loans range from $5,000 to $300,000 and many have same-day approval.

Many times you can get the funds within twenty-four hours, and your repayment schedule is based on your business cash flow and what works best for you in most cases. One of the best things about the flexible small business loan with unsecured financing is you can complete the small business loan application quickly and easily. The loan application has no application fee, has no obligation and you can find out how much business loan funding your business qualifies for.

When you can find a small business loan solution that fits your business objectives and parameters, you need to use their business loan experts to help explain how their flexible loan works, and if you need additional assets to be approved. You need to feel there is a connection to them because its that connection you’ll be dealing with and growing your business around during the next few months. It’s your connection to them and meeting your loan obligation payments and their connection to you in helping you find a way to market your business to success that becomes your greatest asset.

Or call 1300 760 930 to speak with one of our friendly Lending Consultants now.


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