How to Get Funding for Your Restaurant

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restaurant funding

Many people dream of opening their own restaurant, creating showstopping meals and hosting their friends in their very own social hub. This is a lucrative industry; according to Statista, 43 percent of Brits eat outside of the home at least once a week, spending an average of £19 a week in restaurants, pubs and cafes. For those that can crack the formula, a profitable business brings huge rewards but many ventures arent successful. The restaurant industry is notorious for its high number of business failures, so entrepreneurs that are to prosper must be prepared to put in a significant amount of money, dedication and hard work.

Many restauranteurs will tell you that the hardest part of running a restaurant business is setting it up in the first place. This is because securing funding is often very difficult. You may have the skill, creativity and drive to run a successful restaurant, but investors wont be willing to sign over their hard-earned cash unless you can prove youve got a solid financial plan in place.

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Restaurant Funding Options

When sourcing restaurant funding, your first thought might be to try to secure a business loan through a bank. This is a popular option, but it is not the only one. There are a number of routes you can go down in order to get your restaurant business off the ground. Instead of or alongside a bank loan, you could apply for a government grant or a government-backed Start Up Loan. If you are struggling to secure a bank loan, you could approach a private or angel investor, who will lend you money in return for a percentage of the business profits.

If you would rather not source external funding, you could form a business partnership with friends or family members to boost the amount of capital you have access to. When the business is up and running, you could choose to buy out partners stake in the business and continue managing it yourself. However, make sure that you select your business partners wisely. You will need to be able to work well together and agree on the direction and values of the business. Also, try to ensure that you all contribute an equal amount of money, time and effort into the restaurant, as it could negatively impact your relationship with partners if you have disagreements further down the line.

How to Get Funding to Open a Restaurant

If you have organised a meeting with a bank to discuss a business loan, you should come prepared with all the necessary documentation. Bring evidence to demonstrate that you will be a reliable borrower. This includes a business loan, detailing the desired location of your restaurant and an extensive exploration of your funding plan, including rent, staff salaries and other expenses, your break-even point, profit forecasts and potential interest calculations. Take into account your decision to work or not work on national holidays and think about your initial and ongoing spending on everything from napkins to knives and forks, as well as food and drink.

If you can, also bring along a personal financial statement, stating your assets and liabilities; your tax returns from the past three years; and a credit report. You should be able to explain any imperfections on it, as well as any marks on your criminal record.

Tips for Starting Up a Restaurant Business

First of all, youll need to have a good idea of what it takes to run a business before you attempt to secure restaurant funding, but if you take a college course or university degree in business management, you will also be able to eliminate the costs of hiring other people to manage this side of the business for you once youve opened the doors to the public. Therefore, you should aim to get familiar with business law, contracts and accounting.

Also, although your thoughts will probably be centred around getting your restaurant into profitability over the first few months, it is important to think about your long-term ambitions. You want your restaurant to be viable for the foreseeable future, so try to focus on providing customers with food they will enjoy a few years down the line, rather than tapping into a trend. With longevity in mind, try to sign a long-term rental contract if you sign a short-term one, youll give the landlord the opportunity to raise the rent when you go to renew it. A lengthier contractual period will keep your expenses lower for longer.

Other ways to save money include leasing kitchen equipment and furniture or buying second-hand rather than new. As long as you have the necessary safety certificates, you can serve your customers delicious food for a much lower price.

Manage Your Spending

Once your restaurant is up and running, there are more ways to ensure you keep costs down and boost your profit:

  • Invest in a Point-of-Sale (POS) system to manage your day-to-day sales and expenses, as well as stock levels.
  • Think about where you source ingredients discount warehouses can offer you great prices for items you need to buy in bulk, while local suppliers provide high-quality food and can save transportation costs and have less of an impact on the environment.
  • Keep thinking about the long-term ramifications of your actions remember that this may not be the last time you apply for funding in your lifetime, so make it your priority to pay investors back as soon as possible in order to maintain a good credit score. This could mean that you give the majority of your profits away for the first few months, but it should be worth it in the long run.

>> Read more articles on the Restaurant sector

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