Small business loans to improve restaurants


If you’re a business owner in the hospitality industry, you know how important it is for your restaurant to be on the cutting edge in order to thrive. Whether you’re opening a new restaurant, starting a new location, or renovating an existing one, a restaurant improvement loan and other financing options can help.

Some funding options include:

  • Traditional bank loans
  • Business Credit Line
  • equipment rental
  • Commercial real estate loans
  • Merchant cash advance
  • Small Business Administration (SBA) loans

This article explains your financing options and how they can help your restaurant operation.

Why would anyone need a restaurant improvement loan?

As a restaurant owner, the most important thing is to keep your restaurant open and profitable. So it’s good to understand why you need a restaurant improvement loan for your business. Here are four reasons why:

1. Buy inventory

A restaurant improvement loan can help you avoid breaking the bank on everything from bar stools, tables and chairs to other much-needed restaurant equipment. With a loan, small business owners can focus on creating the best environment for their customers that suits their business needs. In addition, inventory can extend to kitchen appliances such as ovens, food prep counters, or food processors, which are very expensive and are not something you want to pay for out of personal funds or bet on your personal credit.

2. Renovations

Another reason you may need a restaurant improvement loan is to renovate your restaurant. Renovations can include:

  • Lay new flooring
  • Update seats
  • Modernization of the bathrooms
  • Install new lightbulbs
  • Paintwork inside and out

There are many reasons you might want to renovate and update your restaurant, especially in a generation of social media where people value aesthetics. A restaurant improvement loan can get you that much closer to your goal of having a restaurant with rave reviews.

3. Implement new technology

Technology is constantly evolving. So, whether you need an updated point of sale (POS) system or are bringing mobile technology and online ordering to your restaurant business, you may need additional funds. Local businesses are constantly evolving how they serve their customers. Therefore, when scaling, it can help to find a lender who can provide you with the financing needed to develop your restaurant.

4. Marketing and Advertising

Restaurant improvements can also include how you get the message across to your customers. Marketing and advertising are important tools for retaining returning customers, attracting new customers, and maintaining the profitability of your business. However, marketing and advertising online or elsewhere can be very expensive, and financing options that increase cash flow can help you acquire the right amount of marketing needed to keep your business running.

Types of Restaurant Loans

Here are the types of restaurant loans to consider:

equipment loan

Equipment financing is specifically tailored to get you the new equipment or upgraded equipment your restaurant business needs. You have the option of obtaining the necessary financing to either purchase or lease the equipment. Alternatively, you can opt for a sale and leaseback arrangement, where you sell the equipment to a rental company for cash and then rent the equipment back from the rental company. You have the option of returning the device at the end of the term or buying it from the lender.

working capital loan

A working capital loan is money you borrow to keep your business running on a daily basis. Working capital loans cover a company’s short-term needs and expenses rather than investments or assets held for a longer period of time. It’s a small business loan that can come in handy when your business runs into financial difficulties. With this type of corporate financing, the focus is not on long-term investments but on short-term financial goals.

Merchant cash advance

Compared to other forms of financing, such as traditional bank loans, merchant cash advances offer a unique opportunity for small businesses. The owners of a business receive financing in the form of a lump sum upfront from a merchant cash advance provider. The owners then pay back the advance with a percentage of the company’s future sales. An MCA can be an alternative for businesses that have a high volume of credit card sales, have urgent capital needs, or may not be eligible for a traditional loan.

bank loan

Other financing options, such as credit cards, payday loans, or short-term loans from Internet lenders, often carry higher interest rates than traditional bank loans. In addition, you can improve your company’s creditworthiness if the lender discloses payments to credit reporting agencies if you make your payments on time.

If you have questions about your loan or other financial products that could benefit your business, you can contact a professional banker or loan officer at a local branch of many banks for assistance. This service is offered by many banks.

When to apply for restaurant improvement funding

A business plan can help you see the longevity of your business growth, especially when it comes to financing. Knowing when to apply for restaurant improvement financing can have a positive impact on your working capital and can also help with equipment purchases, renovations, and more.

Here are key times in your business when you should consider applying for restaurant improvement financing:

  • Open new location
  • slow season
  • If your credit is good
  • If you need more inventory
  • afford additional equipment
  • Make much-needed renovations

Based on your seniority or the volume of business your restaurant has, this may determine when you need to apply for funding. Ultimately, needing it and not having the extra funds is worse than having them and being willing to make the necessary changes so your business can grow and thrive.

This will improve your chances of getting funding approval

Improving your financing opportunities has many facets, but it is absolutely necessary and feasible. Whether you’re a new business or you have bad credit, you still have options. How to improve your chances of approved start-up financing:

  • Build your business credit score. If you are looking for financing for any loan amount, it is good to have established credit for your business. As a borrower, you don’t want to risk sacrificing your personal credit, so setting up an EIN instead of a social security number will help your application process through your company name alone. Nav offers a tool here to help you better understand your business creditworthiness.
  • Increase your income. One of the best ways for lenders to have confidence in your ability to repay a loan is to submit your financial statements. With lower income, you may be able to get loan options with higher interest rates or just short-term loans that require quicker repayment terms.
  • Bring a co-signer. Depending on the type of loan, if your credit rating is not the best, bringing in a trusted co-signer with better credit and income can also improve your chances of approval. A co-signer of your loan application could also be someone associated with your restaurant business, as they share the same responsibility for paying off the loan.

Best loans for restaurant improvements

If you’ve already started looking for a loan, you know that there are a seemingly endless number of lines of credit and small business loans available from banks and online lenders. As new ventures are perceived as riskier, the options available to them will be more limited. However, check out the loan offerings that Nav makes available to all small businesses.

Ultimately, whatever loan product, small business loan, or any other type of financing you choose for your restaurant business, Nav is here to help. Through Nav’s resources and loan matching tool, you can obtain the business financing that best suits your business needs. From setting up business credit to offering a comprehensive list of business credit cards to ensure you get the best restaurant financing options, the choice is yours.

This article was originally written on June 6, 2022.

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