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A Short Guide to Business Loans for Restaurants and Cafés

business loans for restaurants

Running a restaurant or café business requires getting all the ingredients right. These include quality food, friendly staff, exceptional customer service and a good location. Behind the scenes, cafés and restaurants need finance to get established and continue operating successfully. Here we’ll examine some of the reasons cafés and restaurants get business loans and consider some of the finance options available.

Reasons for business loans for restaurants and cafés

There are many reasons that restaurants and cafés get business loans:

  • Recruiting and training staff – having the right staff is key to success in the restaurant and café business. Training to perfect their skills and match the needs of the business takes time and money. Business loans for restaurants and cafés can make it possible to recruit and train the best staff.
  • Leasing or upgrading premises – the saying ‘location, location, location’ applies to restaurants and cafés. Being in the right place and having an attractive ambience can boost the success of a restaurant or café. As this can be a large expense, especially for a fine dining establishment, a business loan is often required to make it happen.
  • Running marketing campaigns – whether a restaurant is a local favourite or attracts guests from further afield, marketing is needed to bring people in.
  • Upgrading equipment – restaurants and cafés require a unique range of equipment to operate effectively. Equipment could even include a food truck for a self-contained takeaway restaurant on wheels.
  • General overheads – this includes a wide range of expenses, from food and beverages to utility bills and alcohol licensing.

Types of business loans for restaurants and cafés

There is a range of business loans for restaurants and cafés seeking to boost cash flow and grow. Here we’ll take a brief look at a few of these.

Business overdraft

A business overdraft enables you to borrow money by running a negative balance on your business transaction account. The amount of your overdraft will depend on your requirements and what the bank agrees to lend. Overdrafts usually start at $10,000 limit and are available in secured and unsecured versions. The interest rate is higher with an unsecured overdraft and you won’t be able to borrow as much as with a secured business overdraft. With either version, you only pay interest on the funds you use plus a monthly fee.

A business overdraft is usually used as a short-term solution to improve cash flow. One of the main shortcomings of a business overdraft is that it can be withdrawn at any time at the bank’s discretion. Find out more in What Is a Business Overdraft?

Business credit cards

Some restuarants and cafés use business credit cards for short-term finance needs. Although it’s easier to get a personal credit card, a business credit is recommended if you are using it for business purposes. With a higher interest rate than other financing options, a business credit card could be expensive if you keep an ongoing balance on it.

Equipment finance

Banks and non-bank lenders offer equipment loans for purchasing machinery and equipment. Often the item being purchased serves as the collateral for the loan, so no additional security is required. Some non-bank commercial lenders specialise in funding restaurant and café equipment. Equipment finance terms usually go up to five years, so are considered a short-term business loan. Learn more about equipment finance

Bank term loan

This is what often what comes to mind when people think about business loans for restaurants and cafés. A bank term loan has a set interest rate, payments and loan terms. This makes it a predictable form of finance for restaurant business owners. On the negative side, a bank term loan can require a large amount of paperwork and time to get approved.

Online unsecured business loan

This form of small business loan has been growing in popularity in recent years. Using a streamlined online process, the finances of a business are quickly, safely and securely analysed to make a lending decision. This is usually completed within 24 hours. If approved, the funds are transferred immediately into your account.

Learn more about unsecured business loans from Moula and check out our business loan calculator for estimated interest and principal repayments on business loans.


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