Many would-be restaurateurs today find that getting a business loan isn't as easy as it used to be. After the recession, many banks and other traditional financiers cut down on lending to budding entrepreneurs, NerdWallet reported.
To obtain the necessary funds, prospective restaurant owners turned to alternate strategies. Asking friends and family for the cash to get started is one option, though this is often a route that puts undue stress on important relationships.
Another method is simple persistence with traditional routes. The biggest drawbacks here are that, first, there's no guarantee you'll be successful in getting a loan; and second, the lending process has greatly slowed down in recent years.
"I think the fastest SBA loan I've ever been able to secure for a client took eight months, and that can really screw up your timetable," Ed Doherty, co-founder, and partner of a consulting company called One Degree, told NerdWallet.
One beneficial means to acquire the financing you need to open your future restaurant is through an alternative lender. One of the biggest advantages of this route is the quick turnaround time - alternative lenders understand the time-sensitive funding needs of small business owners. Another benefit is the relatively easy application process and the fact that not-so-great credit isn't a deal breaker.
If you're planning out your next restaurant and are contemplating how to obtain funding, an alternative lender could be your best solution. But before you begin asking for cash, be sure you have a few things in order:
1. Start with a plan
Having a plan in your head isn't really a plan at all. Your business plan needs to be strategically written out with specific details about how you will achieve success. Without this, the lender will only have a vague idea of how you might be able to pay back the loan over time. For most creditors, an unclear picture of potential future success isn't a strong enough foundation for a loan, The Simple Dollar pointed out.
Before approaching a lender to inquire about a loan, be sure to have a strong, detailed and convincing business plan that you can use to demonstrate your capability to pay back the loan.
2. Get everything in order
Being able to show your lender where your restaurant will be, what the theme is and the menu are all great ways to demonstrate how prepared you are. And the more prepared you are, the more confident the lender will be in giving you funding. The Balance pointed out that location plays a crucial role in the success of a restaurant. If it's hard to get to, or extremely hidden, few patrons are likely to pass through your doors.
3. Invest in yourself
While an alternative lender may be willing to help out with the funding of your new restaurant, it's unlikely that it will want to pay for the entire investment. You need to devote some of your own money into your venture as well. This shows the lender that you're dedicated to your goals, and it helps you to begin strategically thinking about smart ways to spend your money.