Opening a restaurant is a dream for many of us. However, it is a chilling fact that more than 80% restaurants close within 1 year of opening and a key reason associated with such a high closure rate is the inability of restaurant owners to arrange for the working capital to run the restaurant. Arranging the loans for restaurant has been a challenge for most of the restaurant owners as the traditional lenders ask for collaterals and most of the restaurants run on a leased or rented premise, also the requirement for multiple years of income tax returns is another spoiler.
We analyze several options for the restaurant owners to avail the loans for restaurant in form for secured and unsecured business loans, here are the 8 different ways to procures restaurant financing and loans:
1. Term Loan
Restaurants need to invest to attract more customers and maintain their average customer charges. The typical investments of a restaurant are investing in a cloud kitchen and setting up a delivery ecosystem, modernizing the kitchen and buying modern equipments to serve world class food, re-designing menu and hiring consultants to get the best infrastructure for themselves. All these are investments for long term and a restaurant needs these long term loans or the term loans to invest in the above mentioned use cases and they will pay using regular installments to the lenders for these term loans for restaurants.
2. Working Capital Loan
The requirement for a working capital loan is perhaps even more critical for a restaurant than a term loan, as managing working capital is about running the day to day business and a badly managed working capital management means it becomes impossible to run a restaurant business. A lot of times restaurants run a seasonal business or even a weekend or weekday business depending upon the client base it serves and the type of food it offers. However, even during the lean period it has to continue providing salaries to its employees and maintain the food and other inventories to serve the customers those are coming in. All this needs a working capital loan, which is essentially a short term and preferably a type of unsecured business loans
3. Invoice Discounting
Are you a restaurant that runs a catering business and are a regular supplier to a large corporate or even supply food to a large company? Well, you may be eligible for a unique type of unsecured business loans which is known as Invoice Discounting. Under Invoice Discounting, the restaurant needs to submit the invoice being raise to the large corporate to the lender and the lender provides loans for restaurants basis this invoice up to 80-90% of the invoice value and this amount can be repaid as and when the client pays to the restaurant.
4. Merchant Cash Advance
Merchant Cash Advance or the MCA is a unique product offered specially by the digital lenders line Indifi who offer special products as loans for restaurants. Under MCA the restaurants are evaluated for their credit worthiness on the basis of their transactions against the card swipe machines or the payment wallets, unlike the traditional lenders who evaluate them on the basis of collaterals etc. MCA is directly connected with their business truncations and the lenders like Indifi also offers flexible repayment options that are linked directly to the transactions.
5. Unsecured Loan
The coming of age of the digital lenders has been a huge boon for the restaurants as they now offer unsecured business loans for the restaurant. These loans are based on their business transactions and not on collaterals for guarantors as is the case with the traditional lenders. An unsecured business loan helps fill the aspirations of all types of restaurant – small, big, rented and owned. The digital lenders like Indifi offer several types of unsecured business loans like working capital, term loans and credit limits
6. Secured Loan
A secured loan is the most traditional form of the loans for restaurants, this is mostly offered by the traditional lenders against the home or restaurant premises papers. A secured loan though gets marginally better interest rate than an unsecured business loan. However, it is only available to those who have owned property and also it takes a lot of time which may be even weeks or months which eventually defeats the entire purpose of opting for a business loan.
7. Restaurant Business Loan
The digital lenders like Indifi offer restaurant business loans which are based on their business transactions and unlike the traditional lenders, these loans are based on their transactions with the food delivery apps or the card swipe machine transactions, offering a loan which is connected with the business and even the repayments are flexible and linked with the earnings
8. Credit Limit
A Credit limit is like a credit card for business, once a lender approves a credit limit for a restaurant the restaurant may use the amount as and when they need and pay back as and when they can. They only need to pay interest on the number of days they use the specific amount. The digital lenders like Indifi offer unsecured credit limit as the loans for restaurants.