A New Restaurant

I know I’ve mentioned this before, but it’s worth repeating; restaurants are risky business.  You know it, I know it, and the lenders know it.  That’s why it is critical that you have done your homework before you go to the banker for financing.

Here’s how the conversation goes:

You: I’m looking at opening a business and I need to talk to somebody about lining up my financing.

Banker: We would love to help you.  what kind of business are you thinking about?

You:  I’ve got an idea for a great restaurant concept.

(Silence)

Banker:  Ummm… A restaurant?  Let’s see what we can do?  Do you have any restaurant experience?

Be prepared for the fact that loans for restaurants have a higher bar for qualification.  A credit score that might qualify you for a regular business loan will be a little higher for restaurants.  Depending on which financial institution you go to, the requirements can be very different.  One bank I spoke to offered an SBA backed line of credit with nothing down, no business plan of a line under $100,000, interest rates between 6.5% to 9%, but you needed a credit score of at least 750 to qualify.  The next bank wanted a credit score of 640, but they wanted 20% down, a business plan with 2-years projections, and an interest rate of 9.5%.

In general, the easier it is to get the loan, the more you are going to pay in the long run.