The Truth About Restaurant Financing With Less Than Perfect Credit
October 4, 2018 by BlueSky Capital Funding
The Truth About Restaurant Financing With Less Than Perfect Credit
If you were dream of purchasing or opening a restaurant has been derailed a little bit because your credit is less than picture-perfect, you are going to want to pay close attention to all of the inside information we highlight below.
While plenty of traditional lenders are going to tell you that it’s impossible to get bad credit business loans or restaurants, nothing could be further from the truth. Especially if you’re willing to look at more nontraditional lending opportunities that let you startup your new restaurant with a little headache and hassle – even if credit is anything but perfect.
To learn the truth about getting restaurant loans, no matter what your credit score or credit history might be, take advantage of all the inside information we highlight for you below.
Let’s dive right in!
Start off with traditional lenders first, just to cover all of your bases
Even though we just said that your best options for restaurant loans with anything but perfect credit are going to be outside of your traditional lending to these, that doesn’t mean you shouldn’t try to see if your local bank or the bank that you’ve been doing business with for years might be willing to extend you a long depending on the relationship you established.
Credit unions in particular are a lot friendlier towards these kinds of business loan, even if your credit history is spotty. You will obviously have to go through the traditional loan application process, verify all kinds of information, and jump through plenty of hoops – and still might be told no – but the process is worthwhile, if for no other reason to make sure you have all of your bases covered.
It is important that you going to this process understanding that restaurant loans in particular are some of the most risky loans you could be looking to take out.
Banks and traditional lenders understand the extreme volatility that exists in the restaurant world better than almost anyone, outside of the entrepreneurs that take this risk when setting up a new restaurant to begin with.
They also understand how complex the supply chain can be, how high overhead can get, how tenuous profit margins can be, and even just a little bit of business mismanagement can tank an otherwise successful restaurant faster than anyone would have thought possible.
Still, you may be able to take advantage of bad credit business loans for restaurants with your local banking institution. It is worth going through the process just to get a feel for the traditional financing route, and you might be surprised at the inside information you are able to pick up along the way even if your restaurant loan is not approved.
Take a look at Small Business Administration loan opportunities
The US government has a variety of different programs available for entrepreneurs to take advantage of, program that can give you the kind of financing you’re looking for to open your new restaurant – even if your credit score leaves a little bit to be desired.
These kinds of lending opportunities are a lot easier to take advantage of than many people think. The process can be a little bit long and drawn out (like everything else when you’re talking about working with the government), but you may be surprised at just how easy it is in the long run to leverage these kinds of financing options.
It’s worthwhile looking into all of the different rules, criteria, and selection process details that the SBA has published online. You will be able to move through this process pretty quickly once you dive headfirst into everything, and while much of it can be tackled online it’s not a bad idea to reach out to someone at the SBA directly over the phone to expedite things even more so.
Some will find that the SBA isn’t willing to extend financing to a restaurant opportunity, others will find that they are bad credit hinders the progress a little bit, and others still will find that the SBA is willing to extend some financing – but not all.
Any entrepreneur will tell you that ANY financing will help fit all of the different business puzzle pieces together better, and you won’t hurt your chances of opening up the restaurant of your dreams by pursuing an SBA lending opportunity.
It’s well worth looking into.
Equipment loan opportunities might be right for you
Purchasing an already existing restaurant will inevitably involve purchasing the equipment needed to run that restaurant, too – and you might be able to leverage that existing equipment and those existing assets into some of the best options for restaurant loans available.
Refurbishing a restaurant with brand-new equipment can set you back literally hundreds of thousands of dollars immediately, something that may be impossible to pull off if you already have less than perfect credit and are struggling to put together the financing necessary to just purchase the restaurant itself.
Equipment financing allows you to finance upwards of 100% of the value of your restaurant equipment, giving you instant cash and capital that you will be able to use to purchase build, or grow your new restaurant operation think of this as sort of a reverse mortgage type of opportunity in the form of restaurant loans.
You’ll be able to get the cash and capital you need to open or maintain your operation while using quality equipment to produce a picture-perfect dining experience.
Best of all, you’ll be using the assets that you already own (or are about to own) to act as collateral for the bad credit business loans for restaurants that you are taking out. This opens up a whole world of financing options that simply wouldn’t have existed without any collateral being put up in the first place.
Capital is the name of the game when you are running a new restaurant. You’ll want to secure as much money as you can to keep cash flow positive, and these kinds of equipment loans will go a long way towards helping you do exactly that!
Working capital loans may be a route you want to look at, too
Working capital loans are a bit of a “one size fits all” kind of lending opportunity, but they can work really well for business owners looking to maximize their lending options without having to have perfect credit along the way.
Essentially short term loans that help you cover all of your expenses and keep your restaurant open and running no matter what, these loans will really make sure cash flow isn’t ever a problem.
No traditional lenders are moving towards this kinds of bad credit loans more and more each day. They have tight repayment periods for sure, but as long as you have customers coming in the door and cash coming into the business, they are a great way to cycle money through your operation.
Probably best used in conjunction with some of the other best options for restaurant loans, these kinds of loans will keep your doors open, your kitchen running, your staff paid, and your lights on. Other lending options can handle the rest of the heavy lifting for you – but these will take a lot of weight off your shoulders, that’s for sure!
Consider inventory financing options
According to the 2015 restaurant industry forecast, the biggest challenge that these kinds of businesses faced on a day to day basis (and continue to face today, and likely always will face) is the ability to keep their food costs under control while maintaining the kind of inventory necessary for regular operation.
More experienced business owners and restaurant entrepreneurs are going to understand how to keep food costs low, but first timers will almost always hit a wall at some point. They realize they are throwing away a lot of money each day in wasted food, and then they have no idea how to financing the food they need to keep themselves open for business.
It’s a tricky tight rope to walk, that’s for sure. But if you’re going to be successful in this business, it’s a tight rope that you have to be able to navigate without trouble.
Inventory financing options can be represented by all kinds of different restaurant loans – short term loans, medium term loans, lines of credit, etc – but they all give you a chance to breathe a little bit while you build your business.
These loans are always for the express purpose of ordering inventory and keeping your operation going, helping to bring in cash and making your business a success. They can and should be taken advantage of with other forms of bad credit business loans for restaurants, too.
Talk to your vendors about lines of credit
The vendors that you work with are used to helping their restaurant customers and clients with financing, and almost always understand just how rocky this business can get.
No vendor is going to be interested in running a full blown charity, but you should have no trouble at all talking to the business partners you’ll depend on every day to help you grow your business with lines of credit.
These lines of credit are some of the best options for restaurant loans, mostly because they are coming directly from the businesses you work with. There are no middle men involved, there are no hoops to jump through, and you’re getting financing from companies that understand your unique business issues that only people in the restaurant world could ever comprehend.
Different operations will have different kinds of lines of credit you can take advantage of, so you’ll want to speak with each vendor to see what you can put together. Not all of them will be able to offer you the same terms as all the others, but with a bit of friendly back and forth and some negotiation, you shouldn’t have trouble getting a favorable deal.
Remember this – your vendors want you to succeed as much as you do. They are going to be making money when you are making money, and the last thing they want to see is one of their clients fall by the wayside. That’s an income stream they won’t ever see again. It’s in their best interests to help you as much as possible!
How to find restaurant financing with bad credit
At the end of the day, any of the options we highlight above will go a long way towards helping you build and grow a restaurant business, or help you secure the funding you need to buy or start your own shop.
In America, it’s possible to bootstrap a business in ways that just isn’t possible anywhere else.
No matter how dark things might look, or how tough you might think getting a restaurant loan with bad credit is going to be, there is ALWAYS someone out there willing to extend that helping hand.
This is a wonderful time to build a business, especially in the restaurant world.
People are getting more and more serious about the food they eat, and want to enjoy everything that this new culinary revolution can prepare. You’ll find plenty of options available for financing you never knew existed, all designed to help you get up and running.
You should looking into ALL of the options we highlighted above, but don’t let that be the end of your search. Figuring out how to find restaurant financing with bad credit might feel like a grind at times, but as long as you’re putting in the work you’ll find a way to break through.
Lenders are out there. They want to help you chase your financial dreams, building the restaurant and business that could change your life and your communities. You owe it to yourself and the people that depend on your to push forward, chasing down different financing options, and making this happen.
Use the inside info above and you’ll have no trouble learning how to find restaurant financing with bad credit ever again!