Running a restaurant is a delicate balancing act. Between the high overhead costs, paying for fresh produce, repairing equipment, training staff and payroll it feels like money is flying out of your restaurant’s doors.
Not having healthy cash flow puts many restaurant owners in a predicament where they struggle just to stay afloat, let alone grow. This is why additional financing is such a welcome tool for restaurant owners. Extra capital buys you time, stability and helps you prepare for the next expansion or slow season.
What a Restaurant Can Do with a Loan
As a restaurant owner, you know that all it takes to shut down the entire restaurant is one small malfunction. Picture it: a flooded bathroom or an industrial freezer breaks and thousands of dollars worth of food is ruined, then you have to pay for the freezer itself on top of that. Sometimes there’s not a nice, neat way to budget for these things. Financing offers more flexibility for events that were not accounted for. Unexpected costs can wreak havoc on a business’s cash flow.
You also rely on many different machines to keep your business running smoothly. From industrial refrigerators and ice machines to delivery trucks and the wood-fired pizza oven, updating equipment can be costly. Investing in higher quality equipment that lasts a long time is a smart move that could even save you money on repairs.
Making sure you have enough cash on hand for your inventory purchases is a significant part of running a restaurant. After all, most restaurants restock their shelves daily. And keeping your inventory stocked goes way beyond buying fresh ingredients for your menu. Drinks, cooking oils, spices, napkins, glassware, dishes, cleaning supplies, decor for the tables, your inventory comes in many shapes and sizes.
Depending on the restaurant, you might also need to account for additional inventory at specific times of the year. For example, you might have a busier summer season or run a farm-to-table restaurant and have to purchase more seasonal produce at certain times. Whatever your inventory needs look like, financing can be a great option.
In today’s world, technology can seriously amp up efficiency in the restaurant industry. Investing in cutting edge technology, like point of sale systems to streamline transactions and make loyalty reward programs easier or new CRM and payroll software for online payroll to improve the back-end processes can be pivotal for a restaurant. If you need hardware like iPads or computers, equipment financing is a solid option to consider. And for software, look into a working capital loan to help finance the technology you need.
Upgrades and updates to your restaurant can not only attract more customers but can save you money, too. For example, switching to energy-efficient lighting can save you money on recurring expenses. Or perhaps you want to give your storefront more curb appeal, add an additional bathroom or redesign the dining room to seat more customers. You can use business term loans to help finance renovations. Keep in mind that remodels can get costly and the cost increases if construction forces you to temporarily close down shop.
Taking your restaurant to the next level with the right move can be a step in the right direction for your restaurant’s success. Maybe you find a larger space to accommodate more diners or you want to relocate to an area that’s more bustling and gets more foot traffic. Unfortunately, changing locations is an expensive endeavor. It’s costly to move a restaurant and then there’s the missed business during the transition. Having a loan to aid in the transition could make the move more manageable.
A successful restaurant might warrant a second location in an effort to grow the business. However, this requires you to rent space, invest in equipment and supplies, double your inventory, hire and train new staff and so on. When costs start to pile up like this, it can put a strain on cash flow and eat into profits. To help take some of the pressure off, a term loan is an excellent option.
Advertising and marketing is the lifeline that most restaurants need to survive. It’s pretty rare for a restaurant to survive and thrive on word of mouth alone. Placing flyers, advertising online, leasing billboards, maintaining a well-designed website and participating in neighborhood events will attract the customers and revenue to your restaurant. Having a business line of credit can help you supplement some of the costs of marketing and aid in supporting the long-term growth of your business.
Financing Options
If you need to finance equipment costs, equipment financing is an option that can cover as much as 100% of the cost of new equipment through a loan or a lease. A loan means once you pay off the cost of the equipment plus interest, the equipment is yours. With a lease, you make monthly rental payments.
If you’re a restaurant owner who needs financing flexibility, a business line of credit is a great option. A business line of credit is a revolving source of funds that you can use for short-term or recurring business expenses like utility bills, payroll taxes and marketing expenses. You get a set amount of capital that you can use over and over again as you pay it off. Average APRs for a business line of credit range between 8% to 80% and vary depending on the lender.
If you need funds specifically to finance your restaurant inventory, inventory financing is an option that lets you leverage your restaurant’s inventory as collateral. Inventory financing typically is offered as a short-term loan or a business line of credit. Just keep in mind that while short-term loans are easier to qualify for, they usually have higher interest rates.
Working capital loans are one of the best types of loans you can get for your restaurant. Working capital loans are meant to help free up cash flow, but do your homework before applying because merchant cash advances in particular can have high interest rates and hidden fees.
Having the right resources is crucial to succeeding in the restaurant business. Financing options can help provide restaurants with those resources and, ultimately, set them up for success.
About Delancey Street
Delancey Street is a premier, and award winning, business debt settlement company that helps business owners nationwide. Our goal is simple: help you escape debt in a safe and legal manner. Based out of New York, we can help in 49 of 50 states. We tell you how it is; because your business and future is on the line.
