Funding your Restaurant: What Expenses Require a Loan?
One common way for entrepreneurs to start making a living is by opening a new, delicious, and, hopefully, popular restaurant. While it may be your dream to open the tastiest new restaurant in town, it can also be an extremely expensive endeavor, requiring a lot of start up capital.
Unless you happened to fall into a large inheritance, chances are you are going to need a restaurant business loan to get your restaurant operating efficiently. While there are several expenses you need to take into consideration, here are some of the most common start-up expenses for restaurant owners that you will need to consider when deciding how much money you need to borrow. Quick cash infusions and quick small business loans carry more importance depending on the expense.
1. Loans for Building Expenses
Building expenses may vary from business owner to business owner. For example, you may be looking at anything from new construction fees, renovation fees, and/or leasing fees, depending on the space that interests you.
Keep in mind that new construction fees will initially require the most amount of money, because you will also need to pay for labor and materials. Regardless of what type of building plan you have in mind, you will also need to factor in expenses the following into your loan amount:
- Commercial kitchen equipment
- Point-of-sale system
2. Loans for Employee Wages and Insurance
It’s difficult to start a restaurant without hiring people to help you run your restaurant. You will need restaurant managers, chefs/cooks, waiters, servers, cleaners, and more to help keep your restaurant afloat. For more information about how much you should pay your employees, feel free to browse the average salary ranges for your area.
Not only will you need to pay wages, but if you have more than 50 employees, you will also need to offer insurance for full-time employees.
3. Loans for Marketing Your Business
You may have the greatest idea in the world, but if you don’t plan on a marketing budget, people may not ever find out about your restaurant in order to patron it. Set aside a good portion of your budget in order to set up some smart marketing campaign.
4. Loans for Inventory Stock
You will want to have enough of a budget to stock up on food and beverages you need until you begin making enough money to cover inventory costs. When you make your first purchase, consider buying large quantities of things that don’t easily go to waste, and then shopping weekly for fresh ingredients. You will also want to spend time shopping around for food vendors that match the needs of your restaurant.
Helpful Tip: Remember that you can negotiate deals with food vendors. You can negotiate product standards, delivery schedule, and payment.
5. Working Capital Loans
As soon as you are ready to open your doors, you will need some cash in order to help you get rolling. At the beginning, you will surely have more expenses than profit, but if you plan correctly, this scenario should switch over time.
Remember, one of the best ways to get a business loan for your restaurant is to outline all of these expenses in your business plan. This type of detail lets your lender know that you have a good idea of how much you are going to need, and where you will be allocating your funds.