Small Business Restaurant Improvements Loans

If you’re a business owner in the restaurant industry, then you understand the importance of your restaurant’s being up-to-date to have success. Whether you’re opening a new restaurant, establishing a new location, or renovating an already existing one, a restaurant improvement loan and other financing options can help.

Some financing options include:

  • Traditional bank loans
  • Business line of credit
  • Equipment loans
  • 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 business.

Why Would Someone Need a Restaurant Improvement Loan?

As restaurant owners, keeping your restaurant open and profitable is the most important thing. So, it’s good to understand why you would 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 barstools, 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 aligns with their business needs. In addition, inventory can span into kitchen equipment like ovens, food prep counters, or food processors, which are very costly and not something you want to pay from personal funds or put on your personal credit score.

2. Renovations

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

  • Installing new flooring
  • Updating seating booths
  • Upgrading the bathrooms
  • Putting in new light fixtures
  • Painting the interior and exterior 

There are many reasons why you’d want to renovate and keep your restaurant looking up-to-date, especially in a generation of social media where people value aesthetics. A restaurant improvement loan can bring you much closer to your goal of having a restaurant with raving reviews.

3. Implement New Technology

Technology is constantly evolving, so whether you need an updated point of sale (POS) system or are infusing your restaurant business with mobile technology and online orders, you may need extra funds. Brick-and-mortar businesses are constantly evolving how they serve their customers, so finding a lender that can equip you with the financing necessary to evolve your restaurant can assist in scaling.

4. Marketing and Advertising

Restaurant improvements can also include how you’re getting the message out to your customers. Marketing and advertising are key tools to keep recurring customers, attract new ones, and sustain the profitability of your business. However, marketing and advertising online or elsewhere can be quite costly and having funding options that increase cash flow can help you acquire the right amount of marketing needed to keep your business buzzing.

Types of Restaurant Business Loans

These types of restaurant business loans are ones you should consider:

Equipment Loans

Equipment financing is specifically tailored to get you the new equipment or updated equipment your restaurant business needs. You have the option of obtaining the necessary financing to either buy or lease the equipment. Alternatively, you may decide to pursue a sale-and-leaseback arrangement, in which you sell the equipment to a lender in exchange for cash and then lease the equipment back from the lender. You have the option of returning the equipment at the end of the term or purchasing it from the lender.

Working Capital Loans

A working capital loan is money you borrow to keep your business running day-to-day. Working capital loans pay for a business’s short-term needs and expenses instead of investments or assets that will be kept for a longer time. It’s a small business loan that might come in handy if your business finds itself in a financial bind. Rather than long-term investments, short-term financial goals are the primary focus of this type of corporate finance.

Merchant Cash Advance

In comparison to other forms of funding, such as conventional bank loans, merchant cash advances provide a unique opportunity for small businesses. The owners of a business obtain funding in the form of a lump sum amount upfront from a supplier of merchant cash advances. The owners then repay the advance using a percentage of the business’s future sales. An MCA may be an alternative for companies that have a high number of sales made using credit cards, have a pressing need for capital, or may not be eligible for a conventional loan.

Bank Loans

Other financing choices, such as credit cards, payday loans, or short-term loans from internet lenders, often carry interest rates that are higher than those offered by traditional bank loans. In addition, if the lender discloses payments made to commercial credit bureaus, you will be able to improve your company’s credit standing if you complete your payments on schedule.

When you have questions concerning your loan or other financial products that might be beneficial to your business, you can turn to a professional banker or loan officer located at a local branch of many banks for assistance. This service is offered by many banks.

When to Apply for Restaurant Improvement Financing

Having a business plan can help you identify the longevity of your business’s growth, especially with financing. Knowing when to apply for restaurant improvement financing can have a positive effect on your working capital and can also assist with equipment purchases, renovations, and more. 

 Here are significant times in your business that you should consider applying for restaurant improvement financing:

  • Opening a new location 
  • Slow season
  • When your credit score is high
  • If you need of more inventory
  • To afford additional equipment
  • Make much-needed renovations

Based on your length of time in business or the volume of business your restaurant does, it can dictate when you need to apply for financing. Ultimately, it’s worse to need it and not have the additional funds than to have them and be prepared to make the necessary changes for your business to grow and be successful.

How to Improve Your Financing Approval Chances

Improving your financing approval chances has many facets but is absolutely essential and doable. Whether you’re a new business or have bad credit, you still have options. Here are ways to improve your chances of getting your startup financing approved:

  • Build up your business credit score. When looking for financing for any loan amount, it’s good to have established credit for your business. As a borrower, you don’t want to run the risk of sacrificing your personal credit, so establishing an EIN versus a social security number will help your application process strictly through your business name. Nav offers a tool to better understand your business credit score here.
  • Increase your income. One of the best ways for lenders to trust that you have the capacity to pay back a loan is by showing your financial statements. With lower revenue, you may be given loan options with higher interest rates or only short-term loans that require quicker repayment terms.
  • Bring in a co-signer. Depending on the type of loan, if your credit is not the best, bringing in a trusted co-signer that has better credit and income can also improve your approval chances. A co-signer on your loan application could also be someone who is connected to your restaurant business because they’ll have an equal responsibility to pay back the loan. 

Best Loans for Restaurant Improvements

If you have already begun your search for a loan, then you are well aware that there are a seemingly endless number of small business lines of credit and loans available from banks and online lenders. Because new businesses are perceived to have a higher level of risk, the opportunities available to them will be more restricted. However, check out the loan offers Nav has available to all small businesses.

Ultimately, whatever loan products, small business loans, 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 receive the business financing that is best for your business needs. From how to establish business credit and offering a comprehensive list of business credit cards to make sure you get the best restaurant financing options, the choice is yours.

This article was originally written on June 6, 2022.

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