After an unprecedented year of economic hardship, many restaurant owners are making a comeback in 2022. The economy is beginning to thrive post-COVID-19, and restaurant owners have an excellent chance to recover their losses with a suitable small business loan. However, due to the volatile nature of restaurants and their tendency to not survive the first two years of business, most traditional lenders are hesitant to finance restaurant owners when they need the funds the most. In fact, the primary reason many restaurants don’t thrive is the lack of restaurant loans to get the ball rolling.
Fortunately, with the right loan lender, you can get the restaurant loan you need to start financing your business in 2022. This article will cover restaurant loan options for your business and the steps to take to get your funds as soon as possible.
What Small Business Loans Can I Use to Finance My Restaurant?
There are several options to consider when looking at small business loans for your restaurant. However, because of the unpredictable nature of the restaurant business, most traditional lenders are too risk-averse to help one of the most critical sectors of the economy. Fortunately, with the right small business loan lender certified by the SBA, you can get access to the funds you need right away. Below are the most popular restaurant loans for your small business.
The SBA offers competitive lending options for businesses in need. While not a direct lender, the SBA is teamed up with a network of loan lenders and helps mitigate risk to the lender by covering collateral costs. Because of this coverage, SBA restaurant loans are highly advantageous and sought after. While challenging to apply for, these are the gold-standard small business loan options.
Merchant Cash Advances
Many businesses, especially restaurants, have asymmetrical sales and don’t have adequate funds when they require them most. Merchant cash advances (MCA) leverage this asymmetry by giving you a lump sum that you pay off through future sales.
Equipment financing is a specific loan that allows you to purchase a piece or set of equipment with a loan to be paid off over a fixed period. The equipment is collateral for the loan, making it low-risk for the lender with competitive rates.
Business Line of Credit
Like a credit card, a business line of credit is a pool of funds you can draw from at any time, and you only pay interest on funds you use. This option is excellent if you need quick funds to cover costs, invest, or even pay off other loans.
Short-Term Business Loans
Short-term loans are the standard option for most businesses that require a bit of liquidity to boost their business. While interest rates are high and you must make daily or weekly payments, this option is still desired for short-term projects or to get through a slow season.
For What Can My Restaurant Loan be used?
One of the most essential aspects of restaurant loans is their specificity. Because of the risk associated with restaurant funding, lenders want to ensure that funds are used adequately and appropriately. In some situations, the SBA will offer payback protection to those who use their funds according to the loan guidelines.
Depending on the loan, there will be specific requirements for how you spend your funds. For example, if your equipment is financed, that funding will go towards a particular piece of equipment that acts as collateral as you pay off the loan. However, before you apply, it’s good to know how and why you are allocating your funds to pick the best small business loan for you. Here is an overview of funding options with various restaurant loans.
- Open a new restaurant or restaurant location
- Invest in new equipment or furniture
- Cover payroll costs
- Cover overhead costs and utilities
- Carry out maintenance or upgrades on existing materials
- Purchase raw materials
- Pay off debt or mortgages on your restaurant
Steps to Apply for a Restaurant Loan
You can get started once you’ve reviewed your restaurant loan options and decided how you want to use your funds. When applying for loans, it’s crucial to know why you are taking the loan with plans for how to use the funds. Because of the paperwork involved, especially with SBA loans, preparation is the most critical step when applying for restaurant loans in 2022. When ready to apply, follow these steps for the best success.
1. Determine a Timeline and Budget for Your Small Business
Before applying, you must have a timeline and budget for how you plan to use the funds. This step helps keep you on track while providing an actionable plan for the lender, mitigating risk to them.
Depending on the loan, it’s crucial to know how you will repay the funds and how often. For example, if you apply for a merchant cash advance during a slow season to cover costs, be prepared to pay back those funds during the next busy season.
2. Discover Applicable Loan Lenders Near You
Once you have a plan, it’s time to find suitable lenders. The most standard option is a traditional bank loan. While banks offer competitive loan options, they generally see small businesses, especially restaurants, as too risky to invest in. Most of the time, they will pass on restaurant loans and let small companies struggle unless they have a perfect track record.
However, online loan lenders such as BitX Funding are another option that prioritizes small businesses. Rather than just numbers, they see the people behind the company and are willing to offer financial assistance to those who need it. Further, online loan lenders working with the SBA can help set you up with the best restaurant loan options. However, online lenders still base their decisions on risk and your track record, so be sure to meet each loan’s requirements before applying.
3. Gather Documentation
Lenders require documentation and records of your business to ensure that they make a good investment. These documents allow lenders to analyze the risk involved and the terms to apply to the loan. The most important documents include:
- Business and personal credit scores
- Social security number
- Business licenses
- Employee identification numbers
- Bank and financial statements
- Tax returns
- A business plan
- Proof of collateral
4. Submit Your Restaurant Loan Application
Once you have all your documents in order, it’s time to submit your application. Because most documentation is digital these days, the loan process should be smooth and efficient. However, with some SBA loans, the documentation, and application process can be extended as they qualify for your loan. Fortunately, with help from online lenders such as BitX Funding, you can get assistance with the application and get certain loans within days.
Once you’ve submitted and been approved for your loan, it’s time to put your capital to work.
Get Started on a Restaurant Loan Today with BitX Funding
While the previous year strained our economy, 2022 offers a turnaround from which everyone can benefit. As an essential business, restaurants took some of the most significant economic fallout from the pandemic.
Fortunately, with the economy turning around, restaurants are poised for success with the right small business loan. For assistance with loan options and the application process for your restaurant loan, BitX Funding is your solution.
For more information on restaurant loans, contact BitX Funding by phone or email, or fill out the form below.