How To Avoid Common Restaurant Financing Mistakes


One of the most common mistakes restaurant owners make when seeking funding is not doing their homework. There are nearly endless funding options available to help cover restaurant costs, from traditional bank term loans and credit cards to online lenders and venture capitalists. Each option has its own set of pros and cons.

Why do you need funding right now? For many entrepreneurs, that’s the first big question that needs a firm answer. Are you looking to hire an assistant manager? Replace the walk-in cooler? Stock up on ingredients or liquor? Are you launching new branding on social media or renovating your dining area? Knowing the parameters of your project leads to knowing the size of the loan you need.

Once you know what you’re doing with your money, you need to ensure that you’re looking for the right loan. Some forms of restaurant financing, like equipment loans, can only be used for equipment purchases, repairs, or upgrades. SBA loans require a precise explanation of your plans, while merchant cash advances are a form of business financing that requires no declaration of intent.

Which is best? That depends on your needs, your restaurant, your credit score, and your ability to offer collateral. But make sure to look around. If you’re buying a new ventilation system for the kitchen, you may not want to use a merchant cash advance just because it’s easiest and fastest, for example. There’s a right fit for every project. It’s important to do your research and choose the option that makes the most sense for your business.

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