Restaurant Business Loans are a Key Ingredient to Success

Stand Out in a Crowded Market with Restaurant Financing

Owning a restaurant is rewarding in many ways – professionally, personally, and financially. Additionally, restaurants help fuel the US economy, as the number of people working within the restaurant industry is expected to exceed 16 million by 2026. But the industry is competitive, with high turnover rates. This makes accessing working capital more of a challenge. Restaurant business loans help prop up eating establishments as they fight to succeed in a cyclical industry. With help from a restaurant business operating loan, managers can pay off essential equipment over time. They may even leverage a restaurant startup business loan to supplement cash flow in times of rapid expansion.

Restaurant Business Financing Uses

From handing out paychecks to a large staff to dealing with seasonal income and food costs, it’s widely known that being in the restaurant industry isn’t cheap. Restaurant business loans can help owners make targeted investments in their food service establishment. Whether you use one to pay off expensive-but-vital equipment over time, or just to pad working capital and even out financial imbalances, a restaurant small business loan should be structured according to your individual needs.

Restaurant business loans are often used to accomplish financial goals including, but not limited to:

• Paying for major renovations
• Upgrading or repairing equipment
• Marketing and advertising
• Meeting seasonal needs

Why Use Restaurant Business Loans?

The food service industry is highly competitive. Diners have an unlimited number of options for where to spend their money on food. Meanwhile, establishments are constantly competing with one another for a leg up. Owning a successful restaurant comes down to finding a balance between offering high-quality food and a unique dining experience. But catering to both of those needs and keeping your cash flow positive can be difficult.

Profit margins in the food service sector range considerably from place to place. Even within the category of fast food chains, margins might vary from a high point of 20 percent to barely more than zero. Meanwhile, full-service or “fast-casual” restaurants tend to make just 6 percent more than they spend in an average year. According to a survey from RestaurantOwner.com, almost half of restaurant owners surveyed reported between 2 and 9 percent net income in 2017. Meanwhile, 21 percent either broke even for the year or reported a net loss.

When profit margins are low, investment in the business can suffer. A lack of profit makes it harder to pay for fundamental repairs and purchases, that could translate to higher sales. Even with a steady stream of cash flow, small restaurants can quickly become bogged down in a monthly struggle for survival.

Loans for Commercial Cooking Equipment and Remodeling

Many people take for granted just how expensive it is to own a restaurant. Professional-grade cookware, like ovens and stovetops, can come with considerable costs that easily reach into the tens of thousands of dollars. Not only do restaurant businesses require specialized equipment that is expensive, it will inevitably need to be repaired, replaced, or upgraded. Plus updating furnishings and decor for the front-of-house, like the dining room or bar area, will require major renovation financing that is costly. All in all, the total cost of equipment and furnishing in a newly opened restaurant may range from $75,000 to more than $350,000.

A restaurant business loan can provide supplementary working capital to help cover initial startup costs and purchases, unforeseen repairs, and additional equipment to meet increased demand.

On the thin margins under which restaurants usually operate, there’s no room for long-term debt or restaurant business loans with faulty terms. Instead, owners should seek restaurant equipment financing that lets them take out small, targeted investments. These can then be funneled directly into needed repairs or replacements. Whether the funds are used for front-of-house furnishings or kitchen essentials, these short-term loans present less risk to the business.