Many passionate entrepreneurs looking to venture into a restaurant, cafe, or a food chain in India. With the industry witnessing double-digit growth almost every year, it is also one of the most rewarding ventures.
With the increasing competition, it is also very important for a restaurant to stay ahead of the curve. Hiring specialized staff, expansion, reaching newer markets, marketing, and renovation are some of the ways that can help restaurant businesses succeed.
All these activities to grow your business would require funding. Fortunately, there are now business loans exclusively designed for restaurants to keep up with their specific business needs.
Here are some factors that can affect your loan application for a food venture:
1. Collateral For Loans
For traditional business loans, one need assets that can be kept as collateral or security against the loan amount. However, there are now unsecured business loans available for restaurants which do not require any collateral. Such loans can be ideal for restaurant owners with limited or no collateral.
Digital lenders, on the other hand look at business transactions instead of collateral. Hence, these may be a good funding option for restaurateurs.
2. Start-up or Business experience
The duration for which the restaurant has been operational is also an important factor for the lenders. Lenders look at the operations history of the borrowers to calculate the risks involved in loan.
3. Purpose of loan
The lender would like to know the purpose for which you’ll be using the loan. Before you even start looking for a lender for your business loan, ensure that you have a clear idea of how you’ll be using the money. Is it for expansion, working capital or for buying new machinery? A clear purpose helps the lender evaluate your loan application better and also increases your chances of getting your loan approved.
4. Financial records
Lenders would also go through the financial history of your restaurant before approving the loan. Apart from this, they will also check your financial health to be sure whether or not you’ll be able to repay the loan.
Make sure that you maintain business and personal financial track record and file all your taxes, if you want a business loan in the future.
5. Have a business plan
A sound business plan is a prerequisite for applying for business loans. This helps the lender gauge the future plans and expected cash flows of the restaurant business and evaluate the risks involved. A sound business plan can also help negotiate for better interest rates.
Keep these handy tips in mind, while looking for the right business loan for a restaurant.Taking the right steps to get a business loan for a restaurant can increase the chances of getting the loan application approved.