If you open a restaurant, it’s important to note that you’ll be competing with hundreds more out there. With that, you have to gain a competitive advantage. To do that, you’ll need financing. If you’re a start-up, a restaurant business startup cost loan will help you put your marketing plans into action.
Qualifying for a bank loan can be difficult for new businesses. Since the recession back in 2008, banks have become stricter when it comes to lending to small businesses. For start-ups, their chances for approval could even be lower. However, that doesn’t mean that they can’t get a loan for their restaurant.
Alternative lenders are more lenient when it comes to lending to small businesses. As long as they’re assured that the business can make repayments, they will be willing to lend money to the business. The only downside is, alternative loans tend to be more expensive than bank loans.
Still, it’s possible to enjoy better loan terms and low-interest rates from alternative lenders. Here are some tips on how you can do it:
1. Check Your Credit Score
Your credit history is one of the things that lenders will check when you apply for financing. This will serve as their basis on whether they will approve you for a loan or not. If you have a low credit score, chances are, you’ll also have lower chances of getting approved for financing.
However, credit bureaus can also make mistakes sometimes. If you see a mistake in your credit report, like a payment that wasn’t reflected, call the bureau immediately. When you’ve corrected the mistake and your credit score still stands low, you may want to consider delaying your loan application. In the meantime, focus on improving your credit score. This will help you land better loan terms and lower interest rates in the future. Once your credit score reaches a good point, you can resume with your application process.
2. Get Your Documents Ready
When you’re applying for a loan, you can expect the lenders to ask you for documentation. Pro tip: get your documents ready before heading to the financing company to submit your application. This will make the process easier and this may help fast-track loan approval.
Typically, you’ll need to prepare the following documents when applying for a loan:
- Balance Sheets
- Business Tax Returns
- Business Permit
- Personal and Business Bank Statements
- Business Plan
- Income Statements
- Proof of Identification
- Financial Projections
Depending on the type of loan you’re applying for, the lenders may ask you for more paperwork as a support document. Some lenders may also require you to submit only a few of what’s listed above.
3. Compare Rates from Different Lenders
Again, alternative lenders may charge higher fees compared to banks. However, you may also be able to find a lender that will offer reasonable rates – one, that your company can afford. The key here is to shop around. Don’t get carried away with the need to obtain business financing that you’ll apply for the first financing that comes your way.
Before finalizing your application, be sure to read the fine print of the loan terms. Go through the contract carefully. This way, you won’t get caught off guard with additional charges in the future.
4. Write a Good Business Plan
A well-written business plan can make the difference between loan rejection and approval. However, it’s often one of the documents often overlooked by business owners when applying for financing. What they don’t know is that it can have a big impact on improving their chances of approval. Restaurant businesses that their strategies have better chances of landing loans with favorable terms.
When you write your business loan, be sure to include the most important elements. These are:
- Executive Summary
- Market Analysis
- Operations Plan
- Financial Projections
- The Management Team
- Marketing Strategies
- Sales and Products Description
- Financing Plans
Although financing companies will focus on the financing side, they will also take a look at how you’ll manage your business. From there, they will assess whether your company has potential or not.
5. Honesty is the Best Policy
Be honest as to why you’re planning to take out a loan. As you fill out your application form, be sure to provide honest answers. The lenders have their way of knowing things. If they find out you’re lying about something; this can hurt your chances for approval.
Also, give an honest approximation of how much money you would like to borrow. Provide supporting documents like your business plan. If you put an unrealistic amount, the lenders will think twice about granting you the financing.
Do You Need a Restaurant Business Startup Cost Loan?
Taking the necessary steps for obtaining a restaurant business startup cost loan can do wonders for your restaurant. For one, you won’t have to worry about facing financial issues as you run your business. Aside from that, you’ll have access to the resources that will help your restaurant gain a competitive advantage.
Whether you’re applying for a loan from a bank or alternative lenders, these tips will help make the process easier. With the right funding, you’ll boost your sales and eventually, grow your business. So be sure to keep these things in mind to increase your chances of loan approval in the future.