Today, restaurant owners have a dozen or more options for financing their businesses.
Still, restaurant loans remain one of the most common ways to infuse more money into cafes, fast casual establishments, franchises and independent fine dining restaurants. But where to start? Before you opt for a traditional restaurant loan, there are some things you should consider. This includes:


1. Your credit history

Check your credit history before you decide to apply for a loan, and ensure there are no inaccuracies that decrease your chances of getting a loan. Most banks will not fund restaurant loans for those with credit scores below 650, and having an even higher score will help your chances. Do not be surprised if the bank also checks your spouse’s credit score.  


2.Your relevant experience

Many funders require that you have extensive relevant experience in the industry before granting a restaurant loan. The U.S. Small Business Administration, who runs the popular SBA Program, is just one example of a lender who will expect you to show that you have the experience and skills to succeed before giving you a loan.


3. Your assets

It may seem counter-intuitive, but banks expect you to have some capital on hand. For example, most banks require 20 to 30 percent of the loan amount for real estate purchases. Some lenders ask that you have even more, up to 50 percent in some cases.


4. Your business plan

Business plans are the most overlooked aspect of the loan application process, but are also one of the most important. A comprehensive, professional business plan that outlines realistic financial projections and contingencies is key in showing lenders you have what it takes to succeed. Take the time to develop a solid business plan, and have it written or edited by a professional with experience in restaurant business plans.


5. Your cash flow

Every aspect of the loan application process is designed to give lenders peace of mind that you can pay them back. While credit scores and business plans give them an idea of your financial responsibility, what matters is you have the cash flow necessary to make the loan payments. Document your cash flow, and use this information to show that you can afford the loan even if you have a rough month.


6. The required documents

A loan determination relies on a number of factors, everything from your criminal record to past years’ financials. Before you even visit with a loan officer, it is a good idea to collect all the documents you may need. Many lenders, including the Small Business Administration, offer a list of documents needed to apply for their loans.


7. The right lender

Once you have decided that the best funding option for your needs, you still need to consider what type of lender best fits your priorities and circumstances. Some lenders do not offer restaurant loans, so applying is a waste of your time and energy. Others only lend money to well-established businesses.


Local banks are more likely to approve you if they know you as a community leader, and are familiar with your restaurant’s role in the neighborhood. If possible, talk to other business owners in your community about their funding sources and ask if they have any recommendations.


Walking into a meeting with a potential lender, comprehensive business plan and required documents in hand, shows you’re serious. The more prepared you are before applying for a restaurant loan, the less stressful the application process.