The 4 Types of Loans for Restaurants that Entrepreneurs ...

Published Nov 06, 21
4 min read

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With little-to-no sales revenue coming in for most foodservice businesses, many have already depleted their reserve funds, or soon will. Existing measures may need to be expanded and new solutions continue to be welcomed to ensure restaurants will have enough working capital to reopen their doors. Due to the perishable nature of their inventories, many suffered unrecoverable losses when physical distancing measures began and will also need support to restock as they reopen.

Whether you run a large restaurant chain, a single cafe, or anything in between, financing is always a challenge in the food business. Not only do you need a large supply of inventory and equipment at all times, but you also must be prepared to address sudden changes that sap your revenue or raise costs.

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Dimension Funding offers working capital at generous rates and with little paperwork, making it easy for you to:No restaurant can afford to wait for more advanced equipment. The latest grills, fryers, stoves, and order devices improve kitchen efficiency, speeding up the cooking process while saving electricity and gas. This means that every second you wait to purchase new devices is wasted money, but how can you make such expensive investments if you don’t have cash on hand? Working capital provides a simple solution to this problem.

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All of these steps require heavy upfront investments, and working capital gives you the money to make such investments. In this way, you can improve your company’s reputation while keeping liabilities and settlements to a minimum. The restaurant industry is subject to constant shifts in demand and costs, some predictable and others sudden.

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Based on his success, I’d gather there is some practical truth to the statement. Surely many big ideas fail for reasons other than capital—whether it’s lack of differentiation, poor execution, work ethic, or something else altogether. Though capital may not be the reason a business fails, a lack of access to capital can make it difficult to grow.

While Shaich puts the failure rate at four out of five restaurants, the National Restaurant Association places it as high as 90 percent for restaurant companies. Most restaurants fail within their first few years, with many failing the second year, after having worked through their start-up capital in year one.

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Capital is critical to a restaurant’s long-term success, whether it’s the local mom and pop restaurant or a franchisee at an established chain. It’s the reality of being in a business where there is little to be capitalized and business can be cumbersome and unpredictable. The restaurant industry is Rapid, Advance’s largest client.

We have restaurant industry clients that come to us for small business loans, merchant cash advances, and line-of-credit products. Working capital has been effectively used to drive success of the business for one Quiznos franchisee. This individual has turned to working capital four times and considers it both the key to his survival and his success.

Perhaps most interesting is this owner’s use of working capital to partially finance and ultimately profitably sell another unit; he even says it’s a strategy he will employ in the future. There are countless examples of restaurant companies that tap the lending market for working capital many times. These are hardly signs of desperate companies; rather, they might be best classified as smart operators and opportunistic entrepreneurs.

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As such, ensuring there is sufficient cash flow streaming in will cover the funding that is flowing out. There are many reasons why income can be a precarious test for restaurant owners. First off, it's extremely costly to own and operate a restaurant, things like workman’s comp and food cost expenses are over the top.

Possibly you have poor payment terms with the suppliers, or maybe the restaurant is located in a vacation spot, so your business is more occasional. Frequently, restaurant owners can advance income by arranging longer installment cycles, yet that is not generally a choice. Fortunately, there are different restaurant finance solutions that can provide necessary cash flow for such things as:Expanding or remodeling your restaurant to bring in more customers, Purchasing new kitchen equipment or a POS system to improve efficiency, Advertising to attract more customers and/or promote special events, Boosting your cash flow to help with unexpected business expenses, There are a few terms that may be associated with restaurant funding or working capital loans, these terms include: working capital for restaurants, merchant cash advance, cash flow for restaurants, merchant loans, cash advance business loans, loans against credit card sales and revenue based loans.

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