There are many instances in which you might find yourself wondering if you should apply for a business loan, but when it comes right down to it, not every reason is a good reason to go into debt. Here are six situations in which it’s not only appropriate, but also ideal to consider getting a business loan for your restaurant.
1. You Want to Expand
If you run a restaurant, it’s always a good thing when your business starts to outgrow its physical location. However, expanding isn’t cheap, and it often requires a substantial initial investment. If your physical location is bursting at the seams, a business loan is a fantastic opportunity to obtain the funding you need to expand, whether it be moving to a bigger venue, adding an extension to your current spot, or opening a second restaurant.
2. You Want to Build Credit
Like most restaurant owners, chances are your end goal involves growing your business over the years. In today’s day and age, that growth is going to require a strong credit score. A business loan is a phenomenal way to build that credit, especially if you borrow responsibly. For example, it is absolutely worth it to take out a small business loan and make every payment on time; this will improve your credit significantly.
3. The Benefits of an Opportunity Outweigh the Risk
You might find yourself in need of funding to participate in an opportunity that is too good to pass up. For example, you might have the chance to buy a significant amount of inventory with a bulk discount, or you might find equipment at an auction that could benefit you. In these cases, the benefit associated with taking advantage of those opportunities outweighs the risk of the debt itself.
4. You Need Equipment
If you run a restaurant, the commercial equipment you need to best serve your customers is quite expensive. Business loans provide you with an outstanding opportunity to get the equipment you need, and since the equipment itself serves as the collateral for the loan, you can often get this type of funding even if your company is still new or your credit is less-than-perfect.
5. You Need More Inventory
Inventory is likely one of your restaurant’s biggest expenses, and failing to keep up with demand can spell disaster. Whether you’re interested in stocking a brand-new menu item or your business is seasonal, which means you have less income during some parts of the year, there’s likely going to come a time when you don’t have the cash on hand to make your large inventory purchases – a business loan is a fantastic way to get those funds.
6. You Want to Hire New Talent
As a restaurant owner, you could take on many of the roles associated with making that business run. You might handle payroll, bookkeeping, inventory management, maybe even IT. While your restaurant grows, you’re likely to find yourself stretched too thin, and certain tasks may start falling through the cracks. A business loan can help you hire new talent, such as an IT professional or accountant, and ease some of the burden associated with running your company.
Although a business loan isn’t the right solution for every scenario under the sun, it’s perfectly acceptable for all six of the situations listed above. As long as you know what you can afford to repay and you’re borrowing responsibly, these loans can help your restaurant succeed.
Have more questions about small business financing? Learn more with Thinking Capital’s Educational Resource Centre.
About the Author
Brenda Lien is a content creator, blogger and social media specialist covering the fintech and alternative lending industry. She currently manages all content production, PR and social media at Thinking Capital, a Canadian fintech leader.More Content by Brenda Lien