Start a Restaurant

Restaurant financing has always been a need best suited to certain financial companies that are well-versed in understanding the type of risk profile a restaurant loan represents. However the economy has completely changed this landscape, and many restaurants are now on a “black list” with business lenders to the downturn and retail slump. If you are a business owner looking for financing, there are a three things you need to know.

• Equipment Loans- This type of loan is available through various commercial loan brokers and some commercial mortgage companies and allows a loan to be made against your existing equipment that you may own as a part of doing business such as kitchen equipment, furniture, etc. Remember though, a lien will be placed against this property until the loan is paid off.
• Commercial Mortgage-If you own the building that you currently do business out of this may be a good option for you, especially if the balance on your existing mortgage is low, or the building is free and clear. Even with tough credit, you may be able to get a substantial loan against the property at fairly reasonable rates, especially compared to other available sources.
• Merchant Cash Advance- This “advance” is pitched primarily to restaurant owners and is secured against their future credit card receipts, even if credit is difficult. The advantage here is that normally this type of “cash advance” can be funded quickly, usually within 7 days. The disadvantages are many, including high factor, or interest rates, high fees and the requirement to change merchant credit card processors as a condition of receiving the loan. Because it is an “advance” against receivables and not technically a loan, regulations may allow rates as high as 50% or more on a short term basis.
• Credit Card Receivable Financing – This is also a quick funding, low documentation loan with factor rates that are 50-80% less than a merchant cash advance with no upfront fees or requirements to switch processors. Because it is a true loan and not an advance, a business will not be subjected to rates that are higher than state usury laws allow. Loan amounts are up to $500,000, even with credit scores as low as 550.

There are options out there for restaurant financing, and some of them can be relatively affordable. The best option is always going to be your local SBA backed loan. However, the reality of today’s environment is that not many of these types of low-rate government backed loans are actually getting approved. That is why it is important to carefully consider your options before moving forward.

Author: Neal Coxworth
Article Source: EzineArticles.com
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