Examining options on a restaurant loan? Due to the current credit crisis you might want to take a look at the SBA programs first, as they are currently the most reliable programs. Not only do they have the highest probability of closing, they also boast some of the lowest rates, highest leverage, and longest fixed rate financing around for restaurants.

Rates right now, for restaurants, are in the 6%’s to low 7% depending on the particulars of the deal. Combine that with 90% to 85% financing, meaning you only have to come out of pocket 10 to 15%, it’s easy to see the benefits of these programs. Compare that to traditional bank financing, rates are about the same, but you would have to come out of pocket 30 -40% down. On refinances loan to values are also very conservative with banks at 60 – 65%. While with the SBA you can go up to 80% on restaurants refinances.

In terms of fixed rates it depends on the structure of the loan. With the SBA 504 you can easily get 10 year fixed, 25 year amortization loans. With the SBA 7a most are floating though we have a program that is fixed for 5 years and amortized over 25 years. Again, as a comparison most bank financing would not exceed 3 -5 years fixed and will often not have amortization schedules beyond 20 years.

In fact, if your loan amount is less than $2,000,000 you may find that the 7a has more benefits for you than the 504. Like the ability to roll in working capital, rehab capital for the subject property and debt consolidation for business expenses. Also, the 7a offers some of the most lenient underwriting in the commercial mortgage industry. For example credit scores can be as low as 500. Also, debt coverage ratio can be as low as 1.1, which in a cash business like restaurants can be the difference between a canceled or closed loan.

Also as far as proving the cash flow of the business, you are allowed to use business projections as well… This is a huge point. Say your historical financials (tax returns) don’t provide enough cash flow to cover the proposed mortgage. With 99% of lenders out there you would be dead in the water. However with the 7a you can use projections to cover the difference.

This leads to an important point. The SBA programs can provide a lot of flexibility but keep in mind that not all lenders are the same. So, if you have been turned down by a bank that offers SBA loans, it does not mean that you are ineligible for SBA financing, it just means that that bank didn’t like your transaction. At the end of the day the bank is still on the hook for the loan and banks appetite for deals and guidelines vary widely. And the way that banks structure the loans vary as well. For example 99% of banks offer the 7a as a floating rate. We however have access to a 5 year fixed 7a program.

Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He specializes in Commercial Real Estate Loans between $400,000 – $5,000,000. Offers unique loan programs such as Commercial Second Mortgages, Commercial 30 Year Fixed and 90% non SBA financing, Commercial Equity Lines. 248 885-8797 or at restaurant funding

What do people expect in a restaurant? Good food and drinks, excellent service, comfortable ambiance, friendly staff and a place where they can unwind and have a good time. If you’re in the restaurant business, you need to have know all these things, and more important implement them. A restaurant business plan will detail and outline all these things for you. It lays down the objectives that your business needs to take, and recourse of action should you need it in certain situations.

You need not spend tons of money on getting professionals to do a business plan for you, nor do you need to spend your precious time on formulating a business plan. You can now take heed of free restaurant business plan, and develop from there. These plans could be basic, or could be more intensive. Some of them list ways and means of dealing with competition. Where can you get these plans? The Internet is a good place to search for these. You’ll find a myriad of different types and outlines of plans and you can make use of these. If you use these business plans, it does not mean that you have to follow them to the tee, you can edit and rework them to suit your requirements. You can also add, delete some of the objectives which may not be applicable to your restaurant business.

Now days, many restaurants are teaming up with other services to offer a unique service to customers. It could be a mix of a restaurant and a spa, or a restaurant offering business services such as Internet, fax services and so on. Such unique services attract more people. People don’t have the time, and hence they appreciate such services.

Make use of a free restaurant business plan that can be easily got and watch your business turn around and become successful.

Russell Clark owns and operates the popular website BusinessPlans-Advice.com

So here’s a head start on crafting your restaurant business sample-

In general there are five things that all restaurant business plans should have. They are Executive Summary, Market Research, History and Position to Date, Operations and Business Strategy.

Speaking about executive summary it should address some vital issues like mission and objective of the company, description of the company, products and services offered, finance requirements as well as financial forecasts. An executive summary is often regarded as the foundation of any business. All the information that you will provide in the plan will be like a guiding path as to what your restaurant will do and how they will do it.

History and position to date is the second vital thing in a business plan sample. This part of the business plan will take you a step further in running your restaurant business. Here you require to include some vital things- such as, the key personnel and the management team of your business, history of your restaurant and also the structure of your restaurant business.

Market research is the most important part of the business plan sample. Efficient market research will only depict how much successful your restaurant business is going to be in the long run. A market research should be inclusive of the following factors – social and economic factors, long-term opportunities, competitive environment, customer description, geographic area, market definition, competitive analysis, market opportunities, competitive advantages and also potential future competition.

The answers that you would get to these things should be analyzed carefully. The information received through market research is invaluable for the success of any business.

Business strategy is another important component of a restaurant business plan sample. Here you should exactly explain how you plan to attract customers to your restaurant. You not only require to attract but also to retain that attraction so as the customers can keep coming back to your restaurant. Thus the topics that should be addressed in this part of the plan are advertising and promotion, incentives or special offers to customers, marketing and sales and commission.

After this comes the fifth most important part of a restaurant business plan sample is Operations. Here you need to explain clearly as to how you will run your business on a daily basis. This part should include things like number of employees you have, type of employees, the daily menu, particular food on a particular day and more. Basically this part of the restaurant business plan should address the daily operations of your restaurant business.

Garen Garson is a restaurateur with a passion for Restaurant Business done right. -check out his HUB pages on restaurant business along with an article on restaurant business plan software and much, much more, including a new one on Restaurant Business Plans

Now almost all of these creative options have frozen up and or are simply gone. What’s left are traditional loans. Primarily SBA commercial loans and a few, scattered, and only for very strong borrowers, conventional commercial mortgages. With these types of options, restaurant owners are going to have to start planning for the future and be more conscious of playing the traditional game. In other words, you’ve got to show some income! If you don’t show any income on your tax returns you’re not going to get a loan.

If for example you know you have a loan ballooning soon or if you’re in the process of expanding locations you’ve got to tell your CPA now to start showing some income. Yes you might increase the amount of tax you will have to pay but the alternative could be much more expensive.

We get calls all the time from borrowers that have had a restaurant loan balloon, and have now simply not been able to secure a new loan. They go to multiple banks and lenders and all say the same thing “you don’t prove that you make any money, sorry”. Their existing lender starts the foreclosure process and the borrower continues to shop with no luck. The existing bank hikes up their rates in an effort to further “motivate” them to find another bank and to cover their risk. It goes on and on and gets uglier for all involved.

Bottom line, despite restaurant owners enjoying cash related business; you’re going to have to start playing the game to secure traditional SBA loans and conventional financing. In addition most banks will want to see a debt coverage ratio of a 1.3 on restaurant loans, so you’ll have to show a decent amount of cash flow.

Click here to see current commercial loan rates Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Check it out commercial mortgage loans http://cfa-commercial.com/

Interest rates for restaurant loans are currently in the mid 6%’s to mid 7%’s depending on the particulars of the transaction. Combine that with 85% financing on purchases AND 85% financing on refinances and it is easy to see why the SBA has had such a huge impact on American Small Businesses.

Compare that to traditional bank financing, rates are about the same, but you would have to come out of pocket 30-40% of the purchase price. Refinance financing is more limited and harder to close and loan to values are normally capped at 50-60% as well. Again with the SBA programs you can go up to 85% loan to value on refinances on restaurant loans.

The SBA programs have received a lot of criticism over the years, some of it warranted, some of it not. One of the biggest complaints is the time frame and bureaucratic process. A key to avoiding the long delays is to work only with PLP lenders. If you do not your loan will have to be underwritten and approved twice, once by the funding bank and secondly by the SBA. If you work with a PLP lender the loan will only have to be underwritten once, and you will avoid at least one month of delays. It is common to close SBA loans in 60 days which is right in line with all commercial loans.

Another major criticism is that the fees are excessive. The SBA 7a loan normally has a 2.75% front end “SBA Guarantee Fee” and the 504 has a 2.5% fee for its half of the loan. However it is important to realize that not all lenders and the way they structure deals are the same. For example we work with a bank that will absorb/pays for this fee for the borrower. So the borrower gets all of the benefits of a long term fixed rate loan with zero fees.

In terms of fixed rates it depends on how the loan is structured. With the SBA 504 you can easily get 7 to 10 year fixed rates, with 25 year amortization schedules. With the SBA 7a most are floating, however it can be offered as a 3, 5 and though rare, 10 year fixed rates. We are currently working with two banks that offer the 7a as a 5 year fixed loan for restaurants. Again, as a comparison most bank financing will not exceed 3 -5 years, and the amortization schedules rarely exceed 20 years with loan to value restrictions at 50 060%.

The SBA programs can provide a lot of flexibility compared to conventional bank financing. Again, keep in mind that not all lenders/banks that use the SBA guarantee are the same. So, if you have been turned down by a bank that offers SBA loans, it does not mean that you are ineligible for SBA financing, it may just mean that the actual funding bank, didn’t like your deal. The SBA is not the lender, they are guaranteeing the loan for the funding bank in case of borrower default. At the end of the day the bank is still on the hook for the loan and banks appetite for deals and guidelines vary widely. And the way that banks structure the loans vary as well. Again, for example 99% of banks offer the 7a as a floating rate, we however have access to a 5 year fixed, 7a program.

Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He specializes in Commercial Real Estate Loans between $400,000 – $5,000,000. Offers unique loan programs such as Commercial Second Mortgages, Commercial 30 Year Fixed and 90% non SBA financing, Commercial Equity Lines. 248 885-8797. In addition, they have opened up a commercial mortgage broker STORE offering training books, legal docs, spreadsheets etc that brokers need. Prices start at only $4.95! Check it out restaurant loans and commercial real estate loans http://www.cfa-commercial.com/