| The amount that you require in startup capital for your | | | | they can be proud to bring friends and can possibly |
| restaurant business will depend on many factors. | | | | receive special treatment while they dine there. This is |
| These include your concept, scale of operations, | | | | a good selling point. |
| necessary equipment, inventory purchases and the risk | | | | Loans from Banks or Finance Companies |
| that you want to take on in terms of having funds set | | | | Banks and other financial institutions often lend money |
| aside in case things don't go as expected. | | | | to small businesses such as restaurants. At the very |
| Startup costs for a new restaurant can run into six | | | | least it would be wise to establish a line of credit with |
| figure for some operators but can be minimized down | | | | a local bank just in case you needed to access funds |
| to the five figure level for other startups. Either way | | | | at short notice. Lenders will assess the viability of your |
| you will need access to startup funds or your dreams | | | | business model and they will also want you to put up |
| will not get off the ground at all. | | | | some of your personal assets as collateral. Talk to the |
| If anyone is going to take a risk by financially backing | | | | banks that you have a good credit history with first. |
| your restaurant venture then you will have to prove to | | | | Cooperative Landlords |
| them that what you have planned is viable and that | | | | One way to reduce your expenses during the early |
| they will get a return on their investment. Restaurants | | | | days of your restaurant's life is to ask your landlord |
| are known to have a high failure rate so the onus is on | | | | about deferring some of the rent before you sign a |
| you to prove that you are an exception. It is essential | | | | lease. During the crucial first few months your revenue |
| to have a well researched restaurant business plan if | | | | levels may be slow to grow. In the right market you |
| you are serious about convincing others to trust you | | | | may be able to ask for a rent free period. Alternatively |
| with their funds. | | | | you could ask for the first few month's rent to be |
| Always plan for your restaurant funding needs well in | | | | reduced by a certain amount that can be added on to |
| advance as you will undoubtedly encounter long | | | | future rent payments, possibly in the second year of |
| application times or other roadblocks while you wait for | | | | the lease. |
| the cash to appear. | | | | Equipment and Supplies |
| Remember that when you start a restaurant you will | | | | It is likely that a large part of your startup costs will be |
| not only need to meet your startup costs up to the | | | | related to equipment purchases as well as buying initial |
| point where you open your doors for business. You will | | | | supplies. You may be able to get financing on certain |
| also need to budget for operating costs during the first | | | | equipment items so that you can pay for them over a |
| few months while income is slow and you need to | | | | period of several years rather than having to pay the |
| think about your personal living costs. | | | | full price amount up front. Leasing equipment is also a |
| These are a variety of ways that you can fund a | | | | good idea. |
| restaurant business. Let's consider some of the more | | | | Suppliers are usually willing to let you pay invoices up |
| common restaurant funding options that are out there | | | | to 30 days after supplies are delivered so this also |
| so that you can compare all the options. | | | | gives you some flexibility to delay payments. |
| Personal Assets and Savings | | | | Contractors |
| This is the safest way to proceed if you can afford it. | | | | In a slow economy you may find that there are plenty |
| You may have savings in a bank account, some | | | | of contractors looking for work. It may be possible to |
| assets that you can sell or some investments that you | | | | have them do the remodelling work that you need for |
| can cash in. | | | | a minimal amount upfront if you can arrange to pay it |
| Friends and Relatives | | | | back slowly over a longer time period. |
| If you can arrange to get funding from people who | | | | Government Funding |
| you are close to then this method is also among the | | | | There are government grants and loans available to |
| best options that you have. Friends and relatives are | | | | entrepreneurs wanting to start small businesses. There |
| likely to give you low interest rates and relaxed | | | | is always a catch though and you will probably find out |
| repayment terms. Be very careful with this approach | | | | that you are not really eligible in some way. Even if you |
| though as it would be devastating to damage | | | | do see an opportunity then you will find that the |
| relationships with loved ones over a financial matter. | | | | application process is lengthy and you will have many |
| Partnerships | | | | limitations or restrictions placed upon you. |
| You may find that you are simply unable to get | | | | The US Department of Housing and Development |
| access to the amount of startup capital that you need | | | | sometimes targets run down urban areas for |
| to start a restaurant alone. By taking on a partner you | | | | development. Grants are available for renovating run |
| can share the financial burden. However you will have | | | | down buildings in such areas although these locations |
| to be able to cooperate with any partners that you | | | | are usually not the best spots to be opening a new |
| take on as your business plans will never work out if | | | | restaurant. |
| you don't see eye to eye. | | | | Credit Card Financing |
| Equity Investors | | | | As a last resort, many entrepreneurs these days are |
| You may be able to find an investor willing to invest | | | | using credit cards to finance themselves into new |
| funds into your restaurant in return for an ownership | | | | businesses. |
| stake. Getting venture capital like this is often not easy | | | | You would be best to leave this option for a rainy day |
| for small businesses though. If you do find an investor it | | | | that may come some time in the future. Although, if |
| is likely that they will come through your personal | | | | absolutely necessary then you could fund a small |
| network of friends and associates or through your | | | | percentage of your startup costs with a variety of |
| restaurant industry connections. As with a business | | | | credit cards. Interest rates on credit cards are higher |
| partner, investors will want full access to your business | | | | than other funding options so if you do go with this |
| records and they may want to have some say in key | | | | method make sure that you are confident in your |
| management decisions. | | | | ability to be able to start making repayments within a |
| Many investors like the idea of being able to say that | | | | fairly short time period. |
| they own a restaurant. They can have a place that | | | | |