Loans to open a restaurant

Restaurant loans to spur growth

• Loans to buy or build a restaurant:

Commercial mortgages may be used to buy an existing restaurant, buy a property and convert it into a restaurant, or build a new eatery from the ground up. Borrow up to 90% of LTV (loan to value, a comparison of the size of the loan to the value of the property), repay the loan over 1 – 30 years. The property acts as security for the loan.

• Finance to refurbish or expand a restaurant:

Development loans are ideal for refurbishing, expanding and retrofitting restaurant premises – paying for land, design and construction costs. Borrow up to 90% of the cost of the project, repay in 6 – 24 months, or convert to a commercial mortgage. The property acts as security for the loan.

Asset finance may be used to pay for expensive restaurant machinery and fittings, such as HVAC systems and big-ticket kitchen equipment. Pay for the assets as you use them to make money for your business. The asset acts as security for the loan. (You may also consider asset-refinance – a reverse loan that lets you release the equity in your existing business assets and then rent them back. Use the tied-up cash to pay working expenses, expand your business, pay taxes, or pay off other debt)

• Loans to join a restaurant franchise:

Buying into an established hospitality franchise can make good business sense – you become part of a well-known chain, gain valuable marketing support, and have easy access to supplies and equipment. However, restaurant franchises don’t come cheap, with some major chains asking more than £100,000 to join. Franchise finance helps you pay the joining and startup costs. Borrow from £1,000 up to £5million. Additional security may be required.

• Working capital for restaurants:

Cashflow problems are the most common cause of restaurant failure. Working capital loans are short-term debt that help you cover dips in trade, especially if your sales are seasonal. Choose from a small-business loan, merchant cash-advance, revolving credit line, or invoice-finance to secure the funds you need. Use the cash to pay for almost any business purchase, including wages, business rates and utilities. Additional security may be required.

VAT loans for restaurants:

Seasonal income and slow business periods can cause cashflow chaos, making it tough for some restaurants to pay their VAT bill on time. Use a short-term VAT loan to pay HMRC and avoid penalties and interest. The lender pays the taxman direct. You repay the loan over 3, 6, 9 or 12 months. Additional security may be required.

Restaurant loans for startup companies:

Launching a new restaurant can be daunting, and budding restauranteurs should secure as much funding as they can. Startup loans can provide much-needed seed money to get new businesses off the ground. Some of these loans are UK Government backed, allowing entrepreneurs to borrow up to £25,000 per business partner and a maximum of £100,000 if four partners are involved. (Repay over  1 – 5 years, with no personal guarantee required). A strong business plan and accurate financial forecasts are essential to secure a startup loan. Previous experience in hospitality is useful but not mandatory. Note that startup loans from non-government lenders may require security, have higher fees and interest rates and offer different funding limits and repayment terms.