If you wish to start a restaurant, you need to get your math right for what you need. A good restaurant is quite demanding, financial-wise. Some investors have the guts to sell all they have so that they can open a restaurant. While others seek investors to chip into their ideas.
Seeking a bank loan is the most common yet apparently quite complicated option for securing small business loans to help your startup restaurant take off.
Here are 5 common ways entrepreneurs fund their restaurant ventures:
- Bank loans are a great option because this type of loan can be unsecured. In short, they do not require collaterals which you can pay back on a fixed payment basis. The bank also determines your credit score before setting up the rates and terms. You can read more about your obligations at Westpac.
- Personal Loans are great for people who are looking for loans to finance their medical bills, business, education, travel, or money needs. It can be secured or unsecured, which you can pay on an instalment basis. Canstar has created a great resource, answering personal loan FAQs.
- Venture Capital is a great option if you would like mentorship along the way. It is a financing technique that investors do to help start-up companies or small businesses thrive financially with long-term growth potential. Find an Australian Venture Capitalist to invest in your new cafe or restaurant.
- Caveat Loans. If you own a real estate property, this could help you access funds very quickly. The Australian business finance company, Max Funding, offers same-day caveat loans. Max Funding describe caveat loans as, “funding from a lender secured against the value of your property’s equity. The loan itself is the money you receive from the lender, and the caveat is what’s lodged on your home’s title of ownership”.
- Government Grants are available to Australian businesses, in the form of financial assistance. However, the subsidy granted is not expected to be paid back. Explore all available business funding opportunities offered by the Australian Government at GrantConnect.
The Figures Broken Down
You must get a clear idea of what your type of restaurant would require. The cost of starting a restaurant varies, depending on the size, location and style of restaurant that you plan to start. You may wish to start a small black-tie dinner or fast food in a busy location. Whichever the case, it is essential and helpful to compute the figures and get a clear idea of how much you need.
Banks and other financial institutions require a lot of information to approve a loan request. Seeking a loan from a bank can be tiring and demanding. You must prepare well. Preparation means that you must be ready with the relevant information that they will need to assess your creditworthiness and whether your venture is worth funding. The personal sources and loan funding should include the following:
- The Fee for the Loan Guarantee
This is the amount that the lender is to be paid by guarantee in case the borrower fails to repay the loan in full.
- The Loan Repayment Amount Plus Interest
You need to consider the interest that the loan attracts as a service for facilitating the loan to your business. Usually, the interest rate is a negotiation between the borrower and the lender. The interest is the amount that the bank charges for the service and forms part of the banks profit from the business of lending.
- The Commercial Lease
The commercial lease is the amount you will spend on footing the bill for renting the space you will be using every month. The amount is part of your business’ recurrent expenditure.
- Insurance for Your Restaurant
Your insurance coverage is what will shield your restaurant business from unexpected losses that could occur in the course of business. Such insurance also includes damage to property, injuries to workers, accidents, compensation to workers and even crime.
- Fees for Licenses
The license and other fees vary significantly; depending on the location. Some of the common licenses for restaurants include food service permits, general business licenses, and liquor licenses.
- Wages for Staff and Their Benefits
The wages for tipped employees varies depending on the location. However, many jurisdictions have set the minimum pay for such employees. The same minimum wage amounts as the ones paid to ordinary workers elsewhere, as stated by the authorities, must be paid to the non-tipped workers of your establishment. However, it is your discretion to decide the wage amounts above these rates.
- Renovation Costs
It is essential to also include the cost of renovation into the budget for your startup restaurant. Your new place may require a total overhaul or just a few light fixes, such as repainting. You should also consider whether the place needs to be fitted with water, gas and electrical lines.
Also, kitchen splashbacks could be a great solution if you are going to renovate the kitchen in your future restaurant.
- Kitchen Equipment
It is essential to make the kitchen equipment a priority item in your negotiation with the bank for a loan. The kitchen equipment takes a significant portion of the amounts required to start your business. It is important to include this so that you do not lose out even if the amount that you apply for is not approved in full.
- The Starting Stock and the Inventory
You should also develop a sample menu and arrive at an estimate of the cost of food. Apart from the food, you should include the cost of dishes, flatware, utensils, linens, and furniture.