When you’re a restaurant owner or manager, you have a constantly growing list of renovations, improvements, and other changes that you would like to see come to life. Some of these renovations might be necessary or and some may be due to emergencies, but others are lower on the list of importance.
Either way, carrying out any of these improvements will likely take a lot of time and will definitely come with a hefty price tag. When the average restaurant’s margins are only 3-5%, turning your ideas into a reality can seem far-fetched.
You’re constantly forced to decide what you need and what you can live without. With so little available for emergencies and other necessary renovations, how can restaurant owners manage? After the financial crisis in 2008, life was tough for small businesses. However, online lending has since become an avenue for small businesses to get the funding they need.
Let’s take a look at five great ways to get the money you need.
01 Small Business Association (SBA) Loan
Whether you’re hoping to grow your business or recover from a recent disaster, the SBA has a federal lending program designed just for you. While this could be the option for your restaurant, it should be noted that an SBA loan is not a sure thing. These loans are in high demand and almost 50% of SBA loans are not approved. The approval rate for restaurants is growing, however, which is a great sign.
02 Term Loan
Term loans can be repaid through fixed payments over a period of 1 to 10 years. As the name implies, the term is fixed, but the interest rate can rise and fall with the market. If the market rate rises, restaurants must account for that payment increase. One thing to be wary of is the personal guaranty that may come with a term loan; issues with payments could hurt your credit score.
03 Merchant Cash Advance (MCA)
If your business has been performing well and you can convince other companies of your value, an MCA could be a great opportunity. A company that is confident in your business’ future can advance you money and purchase your future revenue at a discount. For example, a company might purchase $24,000 worth of future credit for $20,000 today.
MCAs do not require a personal guarantee, won’t impact your credit score, and don’t require collateral. However, it’s important to choose a partner wisely as there are some predatory businesses who do this.
04 Personal Credit Card
This might be a larger risk, but it is a viable option for restaurant owners. If you find yourself between a rock and a hard place, consider using your own credit card to take care of the cost. You, of course, must pay off the balance and any interest. The risk here is that, if your restaurant goes under, you’re still on the hook for this expense and your credit can be severely limited.
If you want to be careful about avoiding debt, selling equity in your business is a possibility. This can be tough for many business owners, especially since it brings another opinion to the table and cuts into profits. However, it can be better than the risk of going into debt and long-term business partners can be very beneficial.
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