The Common Enemy of Small Business Owners
A major roadblock for small business owners is working capital.
But, before you get into the nitty-gritty of securing funds, you need to narrow down precisely what you plan to do with your influx of cash. Ask yourself the following questions.
- Need to renovate or expand your premises?
- Hire more employees?
- Need new equipment?
- Plan to launch or revamp a marketing campaign?
- Want to revamp your menu?
Talk to your partners and staff members, being sure to think both short-term and long-term. Be sure to consider every aspect so you can head in the right direction as you research your loan options.
Types of Loans
As you begin to narrow down your funding options, you’ll quickly realize that not all loan programs are the same. Each has unique purposes and benefits.
- Small Business Loans: Small business loans are a popular choice, in part because they can be tailored to meet your needs – depending on where you operate your business, your credit rating and other factors. The qualification process can be a bit complex, but the repayment terms are predictable (no surprises!).
- Revenue-Based Financing: This option enables you to borrow against money that is owed from product already sold (such as a contract extended to a distributor or reseller) or against future earnings based on a fixed percentage of sales. Depending on your situation, this option could be ideal because the qualification process is based on your cash flow. It’s also a quick process that requires very little paper work, which means you’ll have cash in hand when you need it — not months down the road.
- Equipment Loans: If a pricey appliance breaks down in your restaurant, it may feel like the end of the world. An equipment loan lets you replace or upgrade equipment without a down payment. It also means you can keep your other lines of credit open.
What to Look for in a Loan Company
Often, banks offer a one-size-fits-all approach. But in a unique industry like the restaurant business, that’s not always practical. Here are a few characteristics that top-notch loan companies may offer:
- Experience With Small Businesses: The right company will treat you like an individual with unique needs. Look for a lender that is willing to examine your organization’s potential for improvement, assess which funding tool will meet your needs and tailor a solution that’s right for you.
- Minimal Collateral Requirements: As a restaurant owner, you’ve already beaten the odds by making it through the startup phase — and you may not have a lot of collateral lying around. Look for a company that is flexible about requiring personal collateral and equity, or it may be a non-starter.
- No Sneaky Fine Print: Don’t get caught off guard. Before you make final decisions, read the fine print carefully and always ask about fees, interest rates, prepayment penalties and other important details. A good company will place the utmost value on transparency, fairness and integrity.
With the roadblocks to working capital removed, you can do precisely what you need to do. If your line is out the door every Friday night, you could add a bar, allowing your valued patrons to wait inside. This will help in boosting their enjoyment (as well as your profits). Or, you could increase your menu options with specialty coffee beverages, allowing for upsells throughout the day and after dinner. Just imagine the possibilities.