How to get finance to start a small restaurant

Do you have a great idea for a restaurant startup, but have no capital? Usually, restaurants have a hard time finding financiers because they are considered risky investments. This, however, should not discourage you from implementing your fantastic small restaurant idea and getting your startup off the ground.

There are many ways to get funding for a restaurant business, regardless of the blemishes on your credit score. What are some of the costs to consider when looking for funds?

Small restaurant start-up costs

How much you need for your restaurant will depend on its nature and the type of equipment that you need. You ought to make sure that the amount you borrow and your personal funds can cover these costs:

  • Commercial lease for the space you rent
  • Renovations
  • Kitchen equipments and closets
  • License fees
  • Operating cost until the restaurant becomes profitable (this can take a few months)
  • Staff wages and benefits
  • Marketing costs (if any)

Based on your financial need, you can seek for:

  1. Equipment financing
  2. Working capital loans
  3. Inventory financing

Opening a small café or dinner will cost you between $50,000 and $75,000, which you can raise in the following ways:

Where to get funds for a small restaurant start-up

Before deciding on where to get financial help, you should consider interest rates, collateral requirements, and down payments, to ensure that you can meet them. Some of the ways to get funding include:

Angel investors

Angel investors are wealthy people who finance a business plan or idea that has value and will give them a return on investment. Traditionally, angel investors gave cash, but nowadays, they can offer you something else other than money. For instance, they can renovate space, and in return, you’ll sign a long-term lease contract as a tenant. That way, they will have a permanent tenant and attract other tenants.

Revolving credit line

Revolving credit lines give borrowers access to funds that they can use at their discretion. These credit lines have maximum credit limits which you can use to purchase any goods. A revolving credit line can help you to expand your working capital, and your loan limit can increase if you make consistent and timely payments. With a revolving line, you only pay for what you use, and once you have paid, it is loaded fully, so you have more for the next time.

Traditional commercial loans

If your credit score is high, get a loan directly from a bank. You might wait for a few months before approval, but you’ll enjoy some perks such as low-interest rates which means monthly payment rates will be low. Go for loans from small lenders as big ones mostly have rigid lending rules.

Small business loans

If there are any government-backed loan programs in your country, you can apply and get money to get your idea off the ground.

Business incubators and accelerators

These can offer money, office space, or mentoring support for your small restaurant. Because they operate on a fixed time frame, they expect rapid development and you should only use them if you are serious about starting your small restaurant.

Avoid asking for funds from friends and family as this might damage your relationship. If you do not want to start with huge debts, you can start small. Start with a catering business or food truck to test-drive your ideas and get the hang of the demands of the industry such as customer service, budgeting, and bookkeeping. Most importantly, do not forget to write a good business plan before opening your restaurant.


Post new comment

The content of this field is kept private and will not be shown publicly.
This question is for preventing automated spam submissions.