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Restaurant Business Loan
Ease the financial strain and find the right loan for your restaurant by comparing offers with Savvy.
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Why should I take out a business loan to help my restaurant?
There are many reasons why a restaurant loan might be one of the best options for your business when it comes to seeking out additional funds. Because they’re designed to be versatile and essentially able to be used across any business area you may need (and are no different from how a standard business loan works), restauranteurs can make use of them for a range of purposes, including:
- Boosting your restaurant’s cashflow
- Funding the expansion, renovation and fitting out of your restaurant
- Purchasing necessary equipment or machinery
- Buying a new POS system or paying to fix or upgrade your current one
- Helping cover the cost of maintaining your lease, including rent, utilities and other regular costs
- Financing bulk inventory and stock to sell
- Covering staff salaries and helping to pay for further training
- Subsidising or entirely covering the cost of conducting marketing campaigns, either online, on television or anywhere else
- Allowing you to stagger the repayments of your purchases
What types of business finance can I choose from?
Fortunately, you aren’t short on options when it comes to the type of finance you can choose for investing in your business. These include:
Unsecured business loan
One of the most common types of business finance, unsecured business loans are perhaps the most accessible for small and large businesses alike. These allow you to access funds without the need for a valuable asset to serve as security which many small businesses seeking finance simply don’t have. Unsecured loans range from as little as $5,000 up to $500,000 and come with fast and simple application processes.
Secured business loan
If you own an asset such as property or valuable equipment, you can instead use this to secure your restaurant loan. If you’re looking to buy a specific business asset, such as an oven or freezer, this is known as equipment finance. By providing the asset as collateral, your potential borrowing range could be greatly expanded to upwards of $1 million in some cases, in addition to reducing your interest rate. The asset acting as collateral plays no role during your repayments and is only required as a last resort if you fall behind.
Business line of credit
Perhaps the most flexible type of business loan, a line of credit allows you to be approved up to a certain limit and withdraw funds whenever you wish. Many businesses prefer these for their flexibility and the fact that you aren’t simply receiving a lump sum with repayments beginning soon afterwards. You’ll only pay interest on the outstanding balance, albeit at a higher rate than standard loans in some cases.
Business overdraft
An overdraft facility functions similarly to a line of credit, allowing you to withdraw funds from your account beyond $0. However, what sets them apart is the fact that they come without set repayments, only requiring you to repay interest on the outstanding balance (which is usually higher, like that of a line of credit). Because they can be open indefinitely, you can have one running in the background as a safety net for your restaurant.
Types of business loan
The most common type of business finance, unsecured loans enable businesses to access the funds they need without attaching an asset to the loan as security. Some lenders may allow you to borrow up to $500,000 and, because there's no collateral, offer same-day approval.
If your business already owns valuable assets, such as property or expensive equipment, you may choose a secured business loan instead. These loans may increase your borrowing power beyond what an unsecured loan can offer and, crucially, typically come with lower interest rates.
Business loans don't always have to be worth hundreds of thousands. If you're operating a small business and need a boost to help you keep on top of your expenses or expand your company, you may be able to take out a loan starting from as little as $5,000 and unlock further capital.
Just because you don't have all the required documents for a standard business loan doesn't mean you're out of options. Low doc finance enables you to use alternative documentation, such as other business financials, in the application process to access the funds you need.
A commercial line of credit allows you to draw from your loan account whenever your business needs access to their funds, instead of managing a lump sum and repaying it like a regular loan. This can add flexibility to your finance arrangement, providing money when you need it.
Invoice finance presents another option to business operators looking to free up cash through outstanding invoices yet to be paid by their customers. Your invoice finance can either be invoice discounting or factoring, which present different options when it comes to your invoices.
A common reason for seeking out a loan is to purchase commercial equipment. You can do this either with an unsecured arrangement or one with the equipment itself as collateral, with the latter potentially increasing your borrowing power and lowering your interest rate.
With this finance, when your business purchases product, your supplier provides an invoice which you send to your financier and pledge to repay by a set date. From there, your supplier sells the invoice to your financier at a discounted rate, while you repay the full amount to your financier.
Under an inventory finance agreement, your lender pays your supplier directly for inventory, which allows it to be signed off and sent to you. From there, you can pay off your debt within a pre-determined period to your lender, which may be longer than the regular debtor period.
An overdraft facility is attached to an existing financial account belonging to your business, such as a transaction or savings account, and enables you to borrow up to a set limit after the account’s balance reaches zero. These overdrafts are repaid with interest, but only on what you use.
You may simply be in a position where your business needs a boost to its cash flow. If this is the case, there’s a range of stop-gap solutions which may be suitable for your situation, from standard unsecured loans to specialist cash flow loans, invoice finance or even an overdraft.
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How to apply for your restaurant business loan
Map out what you need your loan for
Before you commence the application process, it’s crucial to work out exactly what you need your loan for. What are all the costs you need covered? Will there be any room to move on their prices? By listing everything you plan on paying for with your loan, you can come up with an accurate loan amount and avoid applying for more or less than you need.
You won’t want to find yourself caught short or paying more for the loan than you need to.
Compare your options with Savvy
It’s also important to survey the market for as many offers as you can before committing to one. Whether you’re seeking out a small business loan for your restaurant or a line of credit, you should always give yourself the best chance of finding the most affordable and best-suited deal for your restaurant.
Savvy makes it simple for you to find it by breaking down offers from our partnered lenders so you can compare them side-by-side.
Gather your documents
You should always look to get all your documents ready before submitting your loan application, as this will save you from going back and forth with your lender to seal your approval. The documents you’ll need include:
- ABN/ACN and GST registration
- Business bank statements
- Outline of monthly rent costs
- Driver’s licence
- Business financials (such as a business plan, tax returns, balance sheets and more) for larger loans typically over $250,000
Submit your application and receive your outcome
Once you’ve done all of these, you can fill out your lender’s application form and send it off, alongside your documents, to await processing and approval. You can receive your outcome, whether that be an approval or not, within hours of applying.
Sign off and have your funds transferred
If successful, your lender will send you a final loan contract to sign and return to them, which you can do electronically. Once they’ve received this and everything else is ticked off, they’ll advance the requested funds directly into your business’ bank account, at which point you can use them however you wish.
Frequently asked restaurant business financing questions
This depends on the type of loan you’re after. Unsecured loans generally offer available terms between three months and five years, while larger secured financing can be repaid over up to ten years in some cases. If you decide to go with a line of credit or overdraft, however, there likely won’t be a set end date, as you can keep it open and running as long as it’s viable.
Yes – one of the many purposes for restaurant business financing is to enable owners to purchase an existing restaurant. There are many benefits for doing so, such as having internal processes and structures in place and potentially existing brand recognition. It’s easiest to do so if you’re already running a business, but if not, lenders will look to areas such as your credit score and whether you have any transferrable skills (such as working as a restaurant manager). They’ll also require at least two years of financials for you, your restaurant and the one you’re looking to buy before approving your loan.
Yes – there are specialist lenders in the market who offer startup business loans for restaurants with less than six months of trading under their belts (which is the usual cut-off). However, these loans will be more closely scrutinised, as they’re seen as being riskier than those for businesses which have been running for some time. As a result, your borrowing range will be limited and your interest rate will be higher. Your lender may also require you to have run a business in the past.
The main cost to consider when determining what you can afford is interest. Depending on the size of your loan and your term, this could cost you anywhere from hundreds of dollars to tens of thousands overall. On top of this, your lender may charge an application fee, which could cost up to 3% of your total loan amount. You may be charged a fee for drawing down on your line of credit also, while paying out your loan early can sometimes incur charges.
Fortunately, unsecured small business loans are incredibly fast to process, with turnaround times between application submission and approval being as fast as the same day in some cases. This is because these loans are online and utilise efficient processes to maximise the speed of approval.
Overdrafts can either be secured or unsecured. Like loans, providing security gives you access to a greater amount of money, which you may need depending on your situation.
Helpful business loan guides
Still looking for the right finance for your business?
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