How Restaurant Owners Get Working Capital

Whether your dream is to open a luxurious lunch bistro or a casual family restaurant, you will need financing to get your idea off the ground. This financing helps you to keep your business in operation for the first year as you gain customers. You can get this working capital in a number of ways.


Business Working Capital Loans


Most banks don’t factor in the day-to-day operations costs that restaurants have during their first year, which means a traditional bank loan probably won’t give you enough capital to operate successfully. Instead, aim to get a specific business working capital loan to help you as you build up your customer base during the first year or two. These loans are available for the short term or long term, so it is easier to base your payments on your own needs. They do not require you to pledge your personal assets as collateral and are often an option for people who have low credit scores.


Before you even open your restaurant, you should budget for your needs for the first year. Your basic business plan will of course factor in the cost of a building, appliances, dishes, furniture and decor, but you also need to think about the money you’ll need to pay in salaries, utilities, supplies and advertising during the first year. Factoring these into your initial loan application will help to ensure you have enough money to survive. The application process is usually simple and the lender can give you a decision about your application in as few as 24 hours.


Merchant Cash Advances


Many restauranteurs choose to use merchant cash advances to keep their business running. A merchant cash advance loan is based on your restaurant’s credit and debit card sales volumes each day. The more you make, the more you pay back. On the other hand, if you have a low cash day or several in a row, you will pay less toward your loan on those days. These advances offer and easy approval process that is beneficial for those with bad credit. Because you only pay a set percentage based on your receipts, you won’t be required to pay a minimum monthly payment. You also are not restricted in how you can use the money. However, it’s important to note that these types of loans usually have higher fees and will reduce your cash flow as you pay the loan daily.


Knowing exactly how much working capital you’ll need for your business to survive the first year and beyond is the difference between a successful restaurant and one that closes within a few months. Proper use of the money further ensures your success.


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