Start a Restaurant

Sometimes the most difficult part of running your own business is attaining financing to maintain and sustain steady growth. This is even true when you are looking for restaurant finance. There is a misconception that restaurants are more apt to fail than any other type of work; a 10% success rate is often quoted.

The truth is that at the five-year mark restaurants have 40% success rates, virtually matching to most other types of businesses. Nevertheless, it can be hard to acquire financing, especially from mainstream sources such as the local bank lender.

Restaurant loans can also be acquired from credit card processing vendors as a factoring agreement. These vendors give funding arrangements that range from a few 1,000 dollars all the way to 250,000 dollars if needed. The business owner is basically selling their future Visa/MasterCard receivables at a discount in order to get the funds they need right now.

The business cash advance is repaid through a credit card receivables based contract. A percentage of credit card receipts are paid back based on a “Daily Capture Rate” that is worked out prior to acquiring the cash which means that during a bad business stretch of time the advance can still be paid without facing delinquency fees.

When you operate a restaurant it can be hard to predict when you will need to have additional funds available. Start up capital can be larger than expected, and the first large mistake can be a “make or break” occurrence. Even if the business owner has excellent credit, it can take a long period of time for a bank loan to be approved; in the meantime, business continues to hurt.

Credit Card Factoring options provide a much needed, quick solution for restaurants in need of cash. Neither collateral nor years of documentation are necessary to be considered for restaurant loans when you work with a proven financing company.

Author: Daniel Samoohi
Article Source: EzineArticles.com
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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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Individuals looking for restaurant investment are usually referring to restaurant investors. Since most individuals looking to start a new restaurant business do not have the financial means to do so, investors can contribute large sums of capital to get the business started. Silent investors do not contribute to the business’ financial decisions, but they may ask for a certain percentage of the revenue. Investors can also be partners, meaning they do play a role in the business’s financial decisions along with obtaining a portion of the profits. When looking to find restaurant investors, many financial websites provide forums or directories that allow individuals to connect to potential investors.

Most partner investors are experienced in the restaurant business. Therefore, they can provide vital information and advice regarding the new business, along with other financial services. Some investors may have experience in accounting, planning, and obtaining funds.

When deciding on a partner investor, it’s best to make sure the owner and the investor agree with the business plans before they are written out and before any funds are invested. While an investor or two can provide the capital and expertise needed to start a new restaurant, too many investors can lead to strong differences in opinion of how the business should be run. If partners cannot agree or compromise on a business plan, it’s best to find a new investor.

Many individuals also look to friends and family members who have the means of financing a new business. These people can provide the same knowledge and capital as other investors, but they can also bring about the same problems.

Find restaurant lender generally refers to a business owner researching and comparing different loan providers in order to purchase a new restaurant. While commercial banks, the Small Business Administration, and independent financial companies usually do not provide loans for the specific use of purchasing a restaurant, they do offer general-purpose loans that can be used for nearly any business expense or activity. However, many companies do specialize in restaurant lending, and they may be able to offer better loan terms.

The best way to find a restaurant lender is to look to the person selling the restaurant. Many times, the seller is willing to finance the purchase, especially if the business is profitable. Before settling on this type of financing, it’s best to go to a lawyer to write out a formal contract that lists all terms and agreements. Most other lenders require contracts, so asking the seller to do this is not unusual. When buying a franchise, individuals can look to the franchiser for restaurant financing. A loan from a franchiser can be different than borrowing from an independent seller, as the franchise may already have set loan terms.

Another way to find a restaurant lender is to conduct online research. Many non-traditional lenders deal exclusively with restaurant loans. Their websites give detailed information on loans, such as requirements and typical loan amounts, interest rates, and repayment plans. Some of these lenders also offer ways to find restaurants available for sale.

Author: Brynn Harveys
Article Source: EzineArticles.com
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Up until recently restaurant financing, was burdensome and very limiting. Not only are there only a few lenders interested in restaurant financing, refinancing for this type of business is very difficult to obtain. If you are already in the restaurant business or are planning to open a restaurant, you really do have only a handful of lenders to choose from and even they remain overly cautious with very conservative guidelines.

Thankfully, in the past few years there have been a few more lenders decide to offer restaurant financing, and a few more options. For example, no you can look at stated income loans or loans that are amortized over 30 years. The main reason for the conservative lending patterns is that the restaurant industry has almost twice as many bankruptcies as any other industry. Plus this industry has a lot of seller financing which makes it riskier and more complicated for financial institutes.

When a restaurant loan is underwritten, it focuses more on the debt coverage ratios, loan to value ratios, your credit worthiness, and other more traditional requirements. The debt coverage ratio is the most important and is usually quite conservative around 1:1.3 meaning that for every $1.30 of net income the mortgage payment can’t be over $1.00.

Stated income loans are relatively new for restaurant financing, and they’ve come to be because of the cash nature of the restaurant business. It’s an excellent option for you if your net income isn’t enough for a traditional loan.

The restrictions on most loan to value ratios usually tops out at 60% except in some high leverage loans where it might be as high as 90%. All of these numbers really are dependent on both the lender and your personal situation. Restaurant financing is one type of lending that doesn’t have a cut and dry set of requirements. Your personal credit score will almost always come into play with restaurant financing, with a credit score of 640 being about the lowest credit score that lenders will look at.

Restaurant financing may be a little more difficult than other types of business financing, but you should never let that stand in your way. Online lenders are much more flexible than traditional lending institutes like the banks, so do your research, and explore all your options.

Above all, never give up on your dreams. If owning a restaurant is your dream, then keep at it until you find restaurant financing that works for you!

Author: Gordon Petten
Article Source: EzineArticles.com
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Many traditional lenders have unofficially removed bar and restaurant properties from their short list of business loan candidates. Other lenders will restrict their restaurant lending to a handful of restaurant businesses with a long track record. There are two dominant reasons for these actions by traditional lenders:

(1) Bars and restaurants will usually have the highest failure rate among new businesses. Traditional banks have discovered that an infallible strategy for avoiding such business loan failures is to avoid making these kinds of loans in the first place.

(2) Commercial mortgages for bars and restaurants will involve special financing requirements for liquor licenses and items generally categorized as FF&E (furniture, fixtures and equipment). As a result, there will be a perceived intermingling of various assets looked upon as collateral by the traditional banks, and this extra level of complexity discourages many traditional lenders from actively making commercial real estate loans to bar and restaurant owners.

BUSINESS LOAN SOLUTIONS FOR RESTAURANTS AND BARS

(1) I believe that one of the primary underlying reasons for a high failure rate among bars and restaurants is directly due to the commercial borrower being forced into short-term financing when long-term financing is essential to the health of the business investment. Businesses (and especially restaurant and bar properties) should not be financed with short-term funds. It is essential to obtain long-term commercial financing of at least 15-20 years (and longer is even better).

(2) Seller seconds and other variations of subordinate financing should be considered. This will permit the most aggressive commercial financing for bar and restaurant commercial mortgages, up to 90% of the property value. This is important if you are the buyer because it will provide another financial tool to help with financing. It is important to the seller because it might enable someone to buy the property who could not otherwise do so. Subordinate financing (including seller seconds) is not permitted by many/most traditional banks.

(3) For bar and restaurant loans under $1 million, a Stated Income commercial mortgage should be actively considered. This form of commercial financing will not require income tax returns or other income verification. This especially benefits self-employed bar/restaurant borrowers who frequently have income that is erratic and difficult to document properly. Stated Income commercial real estate loans are not provided by many/most traditional banks.

(4) Finally, restaurants and bars will frequently benefit from using credit card receivables to convert future cash flow into immediate working capital via a business cash advance up to $300,000.

Copyright 2005-2006 AEX Commercial Financing Group, LLC. All Rights Reserved.

Author: Stephen Bush
Article Source: EzineArticles.com
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In recent years, businesses needing restaurant loans have been treated as an almost separate, and some may say unequal, category of financing for business loans. Many lenders that understood the special needs of restaurant owners are no longer lending, and other lenders have placed them on a so-called “black list” separate from other small and medium sized businesses because they are considered too risky.

This has left restaurant owners in a real predicament as they fight to regain much of the working capital that they lost in the economic downturn. Even healthy establishments have seen their lines cut due the banking collapse, and this has forced restaurant owners to seek out other sources of financing such as secured equipment loans, commercial mortgages, etc.

However, these types of loans are different and not really catering to the needs of restaurant owners because of the fact that restaurants need a steady infusion of working capital, even when business is slow, to keep deliveries flowing through their back door. Without it, the business will be forced to close, even if traffic is healthy. Because mortgages and secured business loans take a lot of time to process, underwrite, and decision, they have not been able to fill the financing gap that currently exists.

This has left business owners in the unsavory position of having to accept cash advances from their credit card processing company. These high rate, unregulated advances are quick and feature low documentation. However, they often comes with many strings attached such as the requirement to switch processors, buy equipment and pay large upfront fees. Added to this is the fact that the interest rates on these advances can often exceed 50% and may change at any time during the repayment period

Luckily, a better way has entered the market in the form of a new, regulated business loan called credit card receivable financing, that is as quick and easy as a cash advance without all the disturbing requirements such as buying equipment and switching processors. On top of this, the rates are normally 50-80% lower than a merchant cash advance with no upfront fees.

It’s time the restaurant business owners had a real, cost effective option when it comes to obtaining restaurant loans for their establishments. Today’s economy demands creative solutions to the capital intensive needs of business, and this new option that is on the market that fills a gap that major banks and the SBA have left.

Author: Neal Coxworth
Article Source: EzineArticles.com
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There are many sources in which restaurant owners could turn to in search of restaurant funds. All of these funding methods have both advantages and drawbacks. Therefore, it is up to restaurant owners to evaluate their individual businesses, and determine which funding options best suit them.

Traditional Bank Loan

Explanation

A traditional bank loan is a business loan that a restaurant owner can receive through a bank. The money must be repaid over a certain period of time. Many banks offer business loans to small business owners who meet specific requirements, some of these loans are even backed by the Small Business Administration (SBA).

Benefits

o SBA loans available
o Low interest rates

Pitfalls

o Strict, often hard-to-meet requirements
o Long waiting/processing periods

Restaurant Loan (Merchant Cash Advance)

Explanation

Merchant cash advance providers advance restaurant owners up to $500,000. They utilize credit card factoring, allowing the restaurant owner to repay the advance through a small percentage of his/her business’s future credit card sales.

Benefits

o Up to $500,000 in business funds
o Minimal requirements
o Unsecured
o Excellent credit not required
o Flexible repayment procedure
o Renewable
o 7-10 day funding

Pitfalls

o More expensive than other methods
o Not suitable for restaurant owners who do not process credit card sales

Personal (Family, Friends, Savings, etc.)

Explanation

Money accumulated in savings accounts as well as money borrowed from or donated by friends and family can be used to fund a restaurant.

Benefits

o If taking money from your own savings, it does not have to be paid back
o No stringent requirements

Pitfalls

o May leave you with little to no money for emergencies
o Can potentially ruin and/or strain relationships

If after evaluating your restaurant, you realize that a merchant cash advance is your best option, you can get a free online quote and apply online.

Author: Gaston Castro
Article Source: EzineArticles.com
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There are still viable options for restaurant financing in the market today. Borrowers however should realize and accept that the choices have become more limited, than they where just 6 months ago. For example, most conventional and or conduit type loans for restaurants are now gone.

Instead, borrowers should be focused on portfolio lenders, i.e. banks or lenders that hold the debt on their balance sheet. This is the opposite of what we have seen in the last decade as most restaurant lenders packaged and sold their loans off onto the secondary market and thus rid themselves of the loan in exchange for a split.

Portfolio lenders can be difficult to find though. And they don’t really advertise themselves as such. Borrowers should be prepared to call many banks to find sources that are set up as portfolio lenders and that are willing to consider a special purpose property like a restaurant. Many banks are shying away from this building type. We’re occasional are asked why.

The reason boils down to the difficulty in recollecting the bank’s capital in case of borrower default. When a borrower defaults on a loan, the bank has to go through the foreclosure process, than they have to sell the property on the open market to recoup their capital. Because the building itself was designed as a restaurant it cannot adequately be used for anything other than a restaurant – thus limiting their pool of potential buyers, making it harder to sell.

As far as terms, restaurant loans are almost all now quarterly adjustable. However rates are very strong due to Prime being as low as it is (currently at 4%). We are seeing most restaurant loans in the 6%’s now. Via government sponsored loan programs borrowers can still expect 85% financing on purchases and up to 85% on refinance transactions.

Author: Jeff Rauth
Article Source: EzineArticles.com
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What are restaurant loans? This is a query being circulated amongst restaurant owners and fast food chain franchisers for the past year. To answer this briefly, restaurant loans are business loans that are primarily availed of by restaurant owners. These are loans that have been personalized in order to address to each and every need of such restaurant owners. The amount that you can get will depend upon the type of restaurant or business that you have together with the time frame that the said business has been established, a summary of the annual sales of your restaurant, the total amount that you need and your credit score. You will also be asked if you have already filed for bankruptcy and then your loan can be processed.

Your business may belong to a classification like a bar, lodging, nightclub, restaurant or other classifications. This is crucial information in order for your need for restaurant loans to be processed by the bank or lending firm. Logical dictates that bigger restaurants, bars and nightclubs will necessarily get bigger amount of loans than smaller scaled ones. If you are in deep need of financial assistance due to the effects of the worldwide recession and the global financial crisis then this is the perfect kind of loan for you to avail of! The larger your chain of restaurants are then the larger the amount that you can borrow, it is as easy as that!

The total duration or time frame that the business has been established is also a primary requirement before availing of these restaurant loans. The longer that your business or restaurant has been subsisting then necessarily the larger the amount of loan that you can borrow. This is in correlation with your annual sales that can come in gross or net sales. If your business has been doing well then you can get higher amounts. If your business is on a struggle against the global recession then the amount that can be granted to your will be lessened. An expert with regard to handling loans called a loans expert will be the one to process your request, trying to grant you the total amount that you need in the process.

Your credit score is also one of the primary factors in determining the validity of your restaurant loans application. If you have bad credit score then necessarily you will not be prioritized. If you currently have well to moderate credit scores then you will be put in the priority list. Having well to moderate scores will ensure approval of your loan. All you need to do is to wait for 24 hours for your loan application to be approved and processed by the loans expert. It is a major plus if you have not yet filed for bankruptcy since you will have good scores. Just make sure that you fill up the application form with the correct facts since the loans expert will conduct a credit investigation on your credit standing. It is as easy as that!

Author: Rodney Moss
Article Source: EzineArticles.com
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A small business cash advance can be your restaurant funding solution, when you need quick funding and low documentation requirements.

You as a restaurant owner have at one time or another been faced with applying for a restaurant loan, possibly getting your loan request denied and faced rejection unless you had money to do your own self restaurant financing.

Getting startup capital to open a restaurant is much more challenging then it is for other non food businesses or retail businesses. Banks do not like doing restaurant financing period because of the high failure rate associated with restaurant businesses.

The nice thing with the internet and article directories is that it gives you immediate access to great loan information and options. You can receive great advice to help you with your restaurant business, if you sort out the fluff from the real meaty info with substance. The information is there online for free for you to find and use to your advantage.

How Does The Business Cash Advance Differ From Other Types Of Financing

* It is not a business loan or cannot be called a business loan because there is not an interest rate attached to the loan or a monthly fixed payment you have to pay every month. Since it is not a small business loan it does not get reported by the finance company that provides financing to you. If you ever need a quick easy to apply unsecured business loan or business line of credit that not require you to provide collateral this cash advance product is your solution.

* If you ever need to take out a loan for your restaurant and want to legally keep it 100% totally private, prevent it from showing up in the 3 credit bureaus, prevent other creditors from knowing you applied for financing and received it, the business cash advance or known also as the merchant cash advance is your new solution to how to do it legally any time you need a loan and wish total anonymity.

* Does not affect your credit score since Experian, Transunion, Equifax, do not know when you take out a business cash advance for your business

* You do not have to worry about rigid payments every month like you do with a bank

* Your approval process is in 48hrs not weeks

* You can get funded in about 10-14 days

* You do not have to put up collateral like you do at a bank

* You do not have to provide tax returns

* You do not have to provide financial statements

* No long application like you will get at your local bank

* If you are opening a restaurant and you need more financing certain companies provide financing to new start up restaurant owners who are ready to open in a few days and need extra working capital, this is not even possible with a local banker.

* If you just opened a restaurant and need more cash flow financing to help you make your leasing payments for a few months with your casual dining business, it is possible and not once again with your local banker.

* Payments are made automatically from your credit card merchant account through a percentage of each credit card transaction your business makes, does not require you to remember one more payment you have to make reducing stress and worries about making late payments and paying a penalty.

* It allows you tap into a “Hidden Asset” that your restaurant has… Your local bank does not look at your credit card receivable transactions as an asset and will not lend you money against it. This product If used correctly it can be a very powerful alternative funding source when you need financing that is very quick and easy to get.

* Restaurant owners may be in need of a no hassle – quick money source to working capital financing for supplies, equipment, staff payroll, advertising, when they need it and local banks can not compete or provide quick funding due to long drawn out application process and the business cash advance is a super fast option which is free of heavy documentation requirements and long application process.

How Not Having Or Limiting The Use Of A Merchant Credit Card Account Can Hurt You

If you do not have a merchant account, you are locking yourself out of a very quick money source for any financial need that may arise for you.

Many business owners do not like using their credit card machine because it tracks most of their transactions and would prefer cash transactions since there is not a record of this. You see your credit card machine is a tool a resource to money when you need it quickly.

By not having a credit card machine or by limiting the use of it, you are only hurting yourself when you need this source of financing, since if the transactions are to low you will not qualify for this business cash advance when you need it. Try to get your credit card transaction volume up to a minimum of $3k-$5k per month which means when you need additional quick working capital financing you will be able to get between $2,500 – $6,000 in 10-14 days.

Author: Edwin De Leon
Article Source: EzineArticles.com
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