Operating a thriving restaurant can be a very rewarding, yet difficult, task. Often the biggest challenge is financing, as commercial equipment and supplies, food stock and payroll require up-front capital.
Because small-business lending is notoriously difficult, restaurant owners are often prevented from securing the loans they need. The state of the economy in recent years has increasingly more restaurant owners taking funds out of their own pockets or even taking out expensive alternative loans, putting their financial stability at risk.
Whether you run a fast-casual or full-service restaurant, a small mom-and-pop rib house, a catering truck or your own chain of restaurants, there are now online SBA lenders available to help. SBA loans can provide working capital and offer the lowest single-digit interest rates and best repayment terms. Third parties like SmartBiz can help businesses prequalify for an SBA loan in minutes and then receive their funds in as fast as seven days after completing their application.
However, there are several challenges to securing an SBA loan. Not every small business is eligible, and the process is often very paper-intensive and time-consuming. Here are three tips for restaurant owners spreparing for business loan applications:
1. Organize your documents. Always keep your restaurant’s business records in order. The application process will be more seamless if you work in advance to keep your financial, accounting and tax records up-to-date and accurate. It’s important for restaurants to develop a system, or even use accounting software, to arrange records.
2. Maintain good credit. Be sure to pay your bills on time. When applying for an SBA loan, you’ll have to meet a certain credit criteria, so it’s important to have the best credit possible. Bankruptcies, foreclosures, charge offs and late payments are frowned upon. And while various financial institutions have different credit requirements, good credit is key.
3. Provide proof that you can pay the loan. Banks want to see that you have demonstrated cash flow sufficient to make monthly loan payments, especially if you are an existing restaurant. They typically conduct the process by analyzing and reviewing past tax returns and existing debt. If you are buying a previously owned restaurant, be prepared to provide detail on its past performance. It’s also a good idea to present a financial plan that shows you’ll be able to make monthly loan payments if the loan is approved.
Restaurant and small business financing is constantly evolving with more options becoming available all the time. If you’d like to get an idea of your eligibility, take a peek at www.smartbizloans.com.
Evan Singer is a seasoned executive with broad experience in financial services and consumer industries. He is the general manager for SmartBiz, the small business division at Better Finance, a technology-based finance company.