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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Restaurant financing was once very difficult to obtain but today there are many options for financing and restaurant loans are offered by various financial institutes as well as traditional banks.

There are many factors that will come into play when looking to obtain financing for your new restaurant. For example, the size of your restaurant, your experience, how much funding you are putting up, and how much funding you need.

Money makes the world go round and it definitely makes your restaurant go round. Whether you are opening your very first restaurant, moving your existing restaurant to a bigger location, remodeling, or adding new a new bar – it matters not, all of it entails restaurant financing, and restaurant loans are much different than regular business loans.

Restaurant loans can be challenging to obtain and frustrating for you. This just isn’t an industry that the banks like, so you need to be ready for rejection to occur. The good news is that there are loans available if you just persevere. Here are some tips to help you get that financing in place.

Explore

Explore various financing options. What works for someone else might not be right for you. So don’t be afraid to spend some time online to find the right loans for you.

Commercial Restaurant Loans

You may have trouble finding conventional restaurant loans, especially if this is a new venture without a proven track record, but it’s still worth a shot. The key is to be able to prove to the bank that you are really low risk. The banks job is to have assets to cover a percentage of the amount of money they lend, so take a little time to understand how this works.

SBA Loans

SBA loans are something that many aren’t familiar with. This is an alternative to the traditional restaurant loans offered by your bank. Through the private sector loans are granted through various lenders and the SBA will guarantee up to 85% of the principal. There are actually more than 500 lenders in Canada that offer SBA loans. If you are turned down on traditional restaurant loans, you may be a candidate for an SBA loan.

Investors

There are many individuals and companies that are interested in investing in new ventures including restaurants. Unlike restaurant loans investors own a portion of the business. You determine the agreement between you and the investor.

Seller Financing

If you are purchasing an existing restaurant many times the seller is willing to finance. Don’t be afraid to ask.

There you have it – restaurant loans are readily available, perhaps just not in the traditional form that we are so used to, but certainly in many other forms.

Author: Gordon Petten
Article Source: EzineArticles.com
Provided by: Canada duty