How to Get a Business Loan for a Restaurant?

How to Get a Business Loan for a Restaurant?

Published on 2022-04-04

Category: Small Business Owners

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In recent years, the restaurant business in Australia has witnessed impressive growth. Many new players have joined the restaurant business. As a result, the competition in the industry is more intense than it was in the beginning.

Along with proper planning, operating a restaurant business in Australia also needs financing. Unless one has huge savings, pumping a hefty amount of money into the business can be challenging. One way of arranging for it is to apply for a business loan. But to do so, you need to have a strong business plan that you can present to your lender. In addition, you also need to do due diligence and take several other steps.

Here’s an overview of everything you need to know to obtain a business loan for your restaurant.

What do banks look for before approving a business loan for a restaurant?

The market size of catering services and function centers are different from that of restaurants. So, Banks view them differently from how they evaluate the market size of warehouses and buildings.

Upon receiving a loan application, the first thing a commercial lender assesses is the serviceability ratio. They examine whether the income of a loan applicant is at least 1.5 to 2 times the amount for expenses at proposed interest. Another thing a lender takes into consideration before approving a business loan for a restaurant is a clean loan history. If you do not have it, you can still make your loan application credible in the eye of a commercial lender in Australia by sharing the details of how you settled your default issues.

If you were in employment and changed your mind to start a restaurant business venture, you might want to get a loan for it. For the approval of your application, you need to provide ample evidence for the fact that you can run it successfully. A commercial lender will consider your work experience in a managerial role in the industry. Other than your work experience, your academic qualification and a solid business plan to succeed in your venture will also be useful for the approval of your loan application.

Reasons for which banks offer business loans to restaurants and cafes

Those who run a restaurant or cafe may apply for a loan for many reasons. These include the following:

  • Recruitment and training of staff members
  • Upgrading or leasing premises
  • Marketing campaigns
  • Equipment upgrade
  • General overheads

Getting a business loan for a restaurant

Banks or commercial lenders offer a wide range of business loans for restaurants in Australia. These range from a business overdraft to an unsecured business loan. Before filing a loan application, you must know the type of loan you wish to apply for. Here are the details of the loan application for different kinds of loans are given below.

Business overdraft:

Primarily aimed at enhancing the cash flow of a restaurant for a short time, a business overdraft depends on two factors. These include the requirements of a borrower plus the agreement of a lender to provide a loan by considering those requirements. The minimum amount for a business overdraft is $1000. You can choose to obtain it as both secured and unsecured options.

Business credit cards:

Do you have a business credit card? If yes, you can use it to obtain a loan for your restaurant or cafe. The best part about this form of loan is that a borrower can obtain it without the need for lengthy paperwork. However, it can be expensive if prolonged for a longer duration of time by a borrower.

Equipment finance:

As the name suggests, equipment finance is for the purchase of equipment and machinery. For this loan, lenders do not ask for additional security. The equipment itself acts as collateral. Generally, non-banking entities provide this form of a loan. The tenure for equipment finances may go up to 5 years.

Bank term loan:

This form of loan is common for restaurants, but it involves lengthy paperwork. You must be careful while doing paperwork as it needs to be flawless for approval from the lender. Also, do not forget to enquire about the details of the terms of the loan, payments, and its interest rate.

Online unsecured business loan:

To obtain an online unsecured loan, you need to provide the details of your business and its finances to a lender. They will analyse the details through an online process and approve them if they are satisfied. The procedure for it usually takes less than 24 hours. Following the approval of your loan application, a lender will transfer the funds directly to your bank account.

Final thoughts

Getting a business loan for a restaurant boils down to many factors as discussed above. Taking them into consideration will be necessary for the approval of your loan application. If you are not sure how to go about it, your best bet would be to reach out to a consultant. Apart from answering your queries, they will be able to guide you through to the right option based on your needs.


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