Loan To Buy Existing Restaurant
One of the most popular loans for restaurateurs is the SBA 7(a) loan. The SBA 7(a) is a commercial loan and is meant to help small businesses with expenses like real estate, working capital, or equipment. Like all loan programs, there are requisites that restaurants must meet to be considered eligible.
loan to buy existing restaurant
The straightforward requirements for the SBA 7(a) loan make it a great starting point to get funding for your restaurant. Plus, the low interest rates and relatively fast approval process make it a prime option for restaurant owners.
Repairing existing capital. This could include new point-of-sale systems or software upgrades to existing ones, commercial vehicle repairs, or any other operating equipment that needs updating.
Loan rates for the SBA 7(a) depend on the loan size, the individual borrower, and the lender. Certain terms, like maturity, have a standard maximum or minimum. Take a look at the following chart for specifics of the SBA 7(a) loan rates.
Banks, credit unions, savings and loan companies, and specialized lenders can all operate as SBA 7(a) lenders. Some lenders are considered SBA Preferred Lenders, which means they have a reputation for helping business owners get the loan they need in a timely and efficient manner.
Certain banks are considered SBA Preferred Lenders, and have proven track records of providing small businesses with SBA-backed loans. There are other factors that could improve your chances when speaking with a lender.
Good bookkeeping, understanding your creditworthiness, and a solid business plan can all help you when applying for your loan. But, as with any loan, a borrower must meet certain standards to qualify:
At SBA7a.Loans, we live and breathe the SBA 7(a) loan process. We match business owners like you with the best lender for your situation, even if it means that we have to look outside of the SBA 7(a) platform. We serve our customers by 1) offering a free educational portal, and 2) leveraging our lender-matching service to help you on your way to success. We have a deep love of American small businesses, and we believe it shows in our customer-first attitude.
SBA 7(a) loans are the most popular type of SBA loan and are available for up to $5 million. They are best for larger, more established restaurants who need lower-cost commercial real estate financing.
The SBA 7(a) loan is a great option for restaurant owners because of its straightforward requirements and relatively fast approval process. The turnaround time for the SBA 7(a) loan is typically 2-3 weeks, depending on the lender. The SBA Express loan is another option that has a 36-hour turnaround, but it comes with higher maximum interest rates, lower SBA guarantees, and greater authority in the hands of the lender.
Additionally, certain banks are considered SBA Preferred Lenders, and have proven track records of providing small businesses with SBA-backed loans. There are other factors that could improve your chances when speaking with a lender.
All users should perform their own due diligence and research. Nothing on this website is an offer or a solicitation for a loan. This website does not endorse or charge you for any service or product. None of the information on this site constitutes legal advice. We are not affiliated with the Small Business Administration (SBA). If you need to visit the SBA directly please click here: sba.gov
3. SBA-backed and third party loans. Though the availability of bank loans to finance business purchases is improving, many banks remain leery of funding business purchases, especially if the buyer is unproven as an entrepreneur and/or in the industry of interest. So when commercial financing is difficult for prospective business owners to secure, buyers often rely on third-party loans and SBA-backed loans to fund the down payment or some other portion of the sale.
4. Family and friends. Asking family and friends for loans is one of the most common ways to finance a small business purchase. Despite this, many people remain hesitant to borrow money from friends and family for fear of straining personal relationships. By making it a point to stay true to the deal under all circumstances and borrow only from individuals who are in a position to lend, this can serve as one of the most effective ways to fund a business. Also, make sure to have a well-thought-out game plan before approaching family members or friends. Regretfully, business success is not a sure thing, but by professionally approaching family and friends, and communicating frequently on the progress of the business, the chances of maintaining good relationships are significantly higher.
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Restaurant financing refers to any form of outside funding that business owners secure to support a range of business needs. This could be a bank loan, funds from family and friends, investors or other lending sources.
Not only will this document help you strategize your way towards paying down your loan and creating an economically viable restaurant but, in many cases, a written business plan is required when applying for funds. Get ahead of the curve and make this your first step before you even seek financing.
Expansion is another common reason why owners explore their restaurant financing options. Many entrepreneurs have bold plans to grow from a single location into either a chain of city-wide or regional restaurants. Doing so comes with costs related to sourcing new commercial spaces, handling renovations or even constructing a new building.
Understandably, not every restaurant owner has the time or occasionally the credit history to secure funding from a brick-and-mortar lender. In these situations, loans for restaurants can be pursued with a number of alternative lenders. Here are some points you might want to consider when looking into an alternative loan option.
Businesses usually seek out lines of credit through their bank. Many alternative lenders are now offering this option too. In short, a business line of credit allows restaurants to access a set additional amount of funds each, as and when needed.
It makes sense then. This is why many business owners choose to ask parents, siblings, partners and friends for financing. They can help chefs and restaurant-owners get working capital through a loan without a credit check. Just remember: mixing professional and personal relationships can become complicated.
2. Create a Business PlanOnce you determine if you are eligible for SBA financing, the next step is to create a business plan for a lender. A business plan is critical because it provides a strategic framework for how your business will operate. Taking the time to do research forces you to focus on areas of your restaurant operations that you may have otherwise overlooked.
A good business plan contains information on market research, your sales strategy, background on you and your restaurant, the amount of financing you need, how you will spend that financing, and three years of financial projections for the restaurant. We have more detailed information on how to create a business plan, along with a template to assist you.
Lenders may have additional requirements during their underwriting process. For instance, if you are using part of the loan proceeds to purchase restaurant equipment, your lender will likely ask for a description of that equipment.
There are two advantages to working with an SBA preferred lender. First, approval and funding may be quicker because the SBA delegates more authority to a preferred lender. The result is less back-and-forth between the SBA and the lender. Second, preferred lenders have processed a large number of SBA loans and better understand what the SBA is looking for in a loan application.
One of the lenders we recommend is SmartBiz, as they help simplify the complicated SBA loan process for you and help you get funded quickly. Qualified borrowers can get an SBA Express loan of up to $350,000, with fast approval in as soon as 30 days.
There are several options available should you not qualify for an SBA loan. Some of these options will have easier qualifying standards but come with higher interest rates. Some of the most common options include:
Some types of restaurant loans are suited for startups and brand-new eateries; others are geared toward business owners that have at least one to two years of operating history under their belts.
Understanding how to get funding for a restaurant with a loan is also useful when you want to give the interior or exterior of your restaurant, cafe, or bistro a fresh look. A restaurant business loan can help with everything from basic updates such as painting or new drapes to more time- and cash-intensive projects, like adding an outdoor patio or a banquet room.
Term loans may or may not require collateral and can have fixed or variable interest rates. Repayment terms can be as short as three months or stretch up to five years. The loan amount you can borrow typically ranges from $25,000 up to $500,000, although some online lenders may go as low as $5,000 and as high as $1 million.
Working capital loans are a flexible financing option for restaurant owners who are able to quickly repay a loan. These loans are designed for short-term needs, such as paying suppliers or vendors or meeting payroll. Depending on the lender, you may be able to borrow up to $500,000 in working capital, but these loans may carry higher interest rates or fees compared to other restaurant loans.
A business line of credit could be a good restaurant financing option if you have more than one capital need to meet. Instead of a lump sum of funding, a line of credit is a revolving line that you can draw against over time, as long as you have available credit. 041b061a72