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Credit cards, loans and more: Tips to finance your restaurant

3 min read

Restaurant and Foodservice

This Spotlight on Business Credit Cards is brought to you by American Express OPEN, the leading issuer of small-business credit cards and charge cards in the U.S. OPEN offers business owners products and services to help them run and grow their businesses.

It’s no secret that bank financing remains tight, which means restaurant operators may have to think outside traditional lines when it comes to managing finances and securing capital.

Financing a new restaurant starts with evaluating your plans and calculating how much you’ll need for to get up and running, everything from construction or renovation costs to your first grocery order.

If you’re opening a franchise, the franchisor might be a resource. Some have been offering incentives including discounts on franchise fees, and recently, Wingstop announced that it has secured $15 million for franchisee loans under a partnership with Franchise America Finance and Bancorp. Formed last year, FAF takes a collaborative approach to helping restaurants and other franchise companies find the right fit when it comes to financing.

If you’re the proprietor of an established restaurant and lucky enough to be running the operation on cash flow, more power to you. If you’re reading this, it may be more likely that you’re in a situation similar to that of Santiago Espinal, who had to borrow from friends to replenish his restaurant’s larder after unexpectedly losing power for a week after Hurricane Irene last summer.

Other factors to consider:

  • Friends and family can be a key source when your restaurant is need of smaller loans, as can personal and small-business credit cards and your own personal savings.
  • You may also want to consider adding partners or investors who trade their cash for an ownership interest instead of making a loan. Experts advise checking ahead of time with your accountant to gauge potential tax implications and consulting an attorney to make sure partnership agreements comply with federal, state and local laws.
  • Even if your eatery qualifies for a conventional business loan, that’s probably not the answer when unexpected costs come up and you need money fast. If your oven breaks and you need the cash to fix or replace it, you don’t have the time to wait for loan approval.  Small-business credit cards are one possible solution, especially if your cash needs are relatively small and you’ll be able to pay the bill out of cash flow when it comes.
  • Merchant account financing is another way to go. These loans provide cash advances against future credit card sales, and typically come with much faster approval times.
  • The website offers more non-traditional financing ideas.

Determining if you really need more cash

The Small Business Administration offers a list of things to consider when you’re seeking financing to improve or expand your restaurant business, starting with determining whether you really need new cash or if there’s a way to cut costs to free up expansion funding from cash flow.

In addition to finding money, successful restaurateurs effectively manage the cash that comes in with tools including monthly profit and loss statements and weekly cost-of-sales reports that show where your money is going and can show you areas where you might be able to cut costs, conserve cash and boost the bottom line. The National Restaurant Association offers some tips.