Financing for a restaurant is mandatory and having the right amount of financing for your restaurant is critical. Many new entrepreneurs are not versed in how to raise capital for a restaurant and with a median cost of $275k to 425k needed to open a restaurant depending on whether you are purchasing the building, they need to fully understand the process and how to make it work for them.
It all starts with your putting together a business plan and some financials to determine what you are going to do and how much it will cost to get it done.
Your restaurant business plan is a written document that forces you to think through everything you want to do with your business. You have to think through all of the important parts of your restaurant business including the type of food you will sell, the amount and type of employees you will need to hire, the location of your restaurant, the marketing plan, the profile of the customers you intend to attract and your financial projections for the restaurant. Creating this plan will be a good exercise for new restaurant owners. It is also a document that investors and financing companies will want to see.
There are a range of restaurant financing options available for a restaurant and you might need one or all of them depending upon your situation. There are restaurant equipment loans and capital loans secured to cover the expenses of the business. When you seek financing for your restaurant, you will also need to have certain documentation that banks and other financial institutions will require. You will have to offer a certain profile saying that you are a worthy investment risk. Here are the things you will need to have to attract financing.
Credit Report: Your credit report tells a financier how you have managed money in your life. If has all of the active and recently active credit accounts that you have and it tells when you have done things like missed payments or were late. You want a credit score of more than 650 to be loan worthy and much higher to get a good interest rate for your loan.
Debt to Income Ratio: Each of us has income and debt and financers believe that having a healthy debt to income ratio will help determine if you in fact can repay the loan you seek. All of your expenses are included in your debt and they are weighed against all of the income you make to determine a percentage of your free cash to make loan payments.
Down Payment: You will be required to put down a percentage of the loan amount in advance of receiving the loan this down payment can be anywhere from 3-30% of the total loan amount.
Your restaurant is literally the blood that makes your restaurant come to life, so when you are hiring restaurant employees, you need to choose carefully and make sure you have the highest quality and most skilled people. Those you hire should fit into your company vision and mission and they should excel at service.
When you interview potential staff make sure that you gain a good understanding of why they want to work for you, what is important to them, that their strengths fit your needs and that they have experience in the industry and understand the methods for making a restaurant successful.
Take your time, get the right amount of financing and hire well, and you will surely improve your restaurant’s chances of success.