Tips on Getting the Capital to Open a Restaurant Franchise
Interested in opening up a restaurant franchise in your area? As you’re looking into available franchises and thinking about what type of menu you’re hoping to serve, it’s important to consider how you’re going to finance your venture as well. If you know you won’t be able to finance a restaurant venture completely out of pocket, here are a few steps you’ll want to take.
1. Find out how much capital you’ll need before you apply for any loans.
The amount of money required to open a restaurant franchise will depend on the particular franchise you’re hoping to get involved with. Typical costs may include the initial franchise fee, the cost of the facility, the cost of renovations, the cost of inventory, and general operating fees. Your franchiser may cover some of these costs, so you should inquire about what you are responsible for before moving forward.
2. Develop a solid business plan for your potential restaurant franchise.
You’ve decided on a restaurant franchise and you’ve realized how much money you’ll need to put down to get started. But your research isn’t over yet. When you start applying for loans, you’ll want to make sure you’re completely prepared. Any potential lender will want to see that you are taking this venture seriously and will have a plan in place to succeed—ensuring that they get their money back on time.
3. Do your research on banks and credit unions in your area.
Take a look at the different loan options being offered by banks and credit unions in your area. Keep in mind that the best option for you may not be at your personal bank. Before you walk into an appointment, make sure you have all of your financial information prepared to make the process easier. This may include your personal financial statement, personal tax returns for the past 3 years, and verification of your down payment.
Additionally, it’s important to note that your choice of restaurant franchise could impact the lender’s decision. Your best bet would be to choose a franchise that has a track record of success and/or a business concept that is likely to perform well in your area.
4. Consider other sources for loans.
If you are having trouble securing a loan, you may be able to acquire one through a specialized program. These include the Small Business Administration (SBA), which provides loans through participating financial institutions or the Department of Veterans Affairs, which offers loans to active-duty military and spouses or survivors of veterans.
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