The food industry is a top choice for many entrepreneurs. It is an exciting, ever-evolving field that lets entrepreneurs maximise their skills, meet people, and learn new things. However, starting a food business – be it a restaurant or a cafe – requires some significant amount of funds. If you are looking to finance your dream business, here are some sources you should consider tapping.
Personal Funds and Assets
A new restaurant can set you back by about $50,000 at the minimum. If you have cash, then this venture should be easy to finance. That much cash will be able to help you start a small restaurant or a simple cafe. However, if cash is an issue, you may use your assets such as your house, car, or some other property.
Another source you might want to tap is a personal loan from friends or family members. Smaller amounts can be helpful in purchasing an existing business, such as a startup or one that is about to close, or to purchase equipment.
Traditional lenders such as banks can offer to finance a new business venture through a commercial loan. This is a great option for entrepreneurs with excellent credit scores. The approval process usually takes about six months and the lender may require a collateral but commercial loans usually have lower interest rates. Entrepreneurs could also potentially borrow a bigger loan amount.
Another option to finance a restaurant venture is a small business loan. SBAs are offered by banks in partnership with the United States Small Business Loan agency. The SBA offers Guaranteed Loan Programs that fit ventures such as cafes and restaurants. Borrowers with borderline credit scores are usually refused a loan but have a better chance of getting approval from an SBA. It does, however, require a collateral.
Business Line of Credit
A business line of credit is a good option for individuals with good credit. This type of loan is different from other loans, in that the borrower is granted a certain loan amount. He can then borrow from this amount each time he needs funds. The advantage to this type of loan is that the borrower only has to pay the interest on the amount of money that was borrowed. He also decides on the amount and the frequency with which he withdraws the funds as long as he does not exceed the approved credit limit. A business line of credit can range from $5,000 to as much as $150,000 depending on the borrower’s credit standing and other qualifications set by the lender.
Angel investors are wealthy individuals who finance a business venture or idea in exchange for equity in the business in the form of ownership share. Angel investors may offer cash to launch the business or help through other means, such as providing space or equipment. Entrepreneurs do have to prepare a business plan and pitch the idea to convince these investors to take part in the business.