If you are in the restaurant business, you certainly won’t need me to tell you how tough it can be financially.
While you are building up the reputation of your establishment, money is often tight and one bad night can mean an unprofitable week. As for cash flow – well, the cash certainly flows, doesn’t it? You just wish that more of it was flowing in than out. And what about those slow periods? What do you do if they last longer than you anticipated? How do you get the funds you need to get your restaurant business over that hump.
OK, I’m painting a negative picture here, but funding can be a problem for even the most successful restaurant, especially if you wish to expand quickly. The question remains: what is the best way to get financing for your restaurant?
LOANS
A loan may be an obvious way to raise finance for your restaurant business, but look at it from the point of view of the lender.
The 2004 Restaurant Industry Operations Report published by Deloitte & Touche LLP indicates that average pre-tax profit margins range from 4-7%. This means that, from the lender’s point of view, even a profitable...
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