How Small Business Loans Can Help Restaurants Weather Financial Storms
In spite of inflation, consumers are still eating out, research shows. The Commerce Department recently reported that restaurant spending for March 2023 was up 13% year-over-year. This percentage exceeds the inflation rate for restaurant purchases in March 2023, which was 8.8%, according to the consumer price index report. That means people aren’t just spending more on restaurant food because it costs more, but that they are eating out more frequently — or making larger purchases — than they were at this time last year.
I’m a Self-Made Millionaire: These Are the 6 Investments Everyone Should Make During an Economic Downturn
Find: How To Build Your Savings From Scratch
However, that doesn’t mean all restaurant owners have it easy right now. Restaurant owners are also suffering from the effects of inflation, which shrinks profit margins. Many restaurant owners had to redesign and reprint menus to reflect higher prices. And many restaurants are still recovering from the effects of the pandemic, which included lengthy shutdowns and extensive renovations to make their establishments social-distancing friendly.
Small Business Loans: Hope for the Shrinking Restaurant Industry?
The U.S. currently hosts fewer restaurants, per capita, than it has in 25 years. This figure was cited by Nick Cole, head of restaurant and hospitality finance at Mitsubishi UFJ Financial Group, per FSR Magazine. And there might be more closures on the horizon, according to Cole.
“Throughout much of the year, we have seen consistently higher sales figures due to rising menu prices and stable foot traffic. However, in the last month or two there are signs that foot traffic might be slowing,” he told FSR Magazine. “If foot traffic continues to decline significantly, even an offset in prices might not be able to sustain revenue.”
If you’re a restaurant owner who doesn’t want to join the rapidly growing list of closures, or an impending recession has you nervous about maintaining the current business pace, a small business loan can help.
But what type of loan should you consider, and how can you increase your approval odds?
Take Our Poll: Are You Concerned About the Safety of Your Money in Your Bank Accounts?
Types of Small Business Loans for Restaurant Owners
The Small Business Administration (SBA) provides loans of up to $5 million for restaurant owners. If your bank has partnered with the SBA, they might be able to assist with the loan application process.
A private working capital loan can provide a bit more of a lift to help you cover expenses and operating costs. These loans are typically good for up to $250,000, and the approval process might be faster than for an SBA loan, according to ROK Financial.
Other options to secure working capital include equipment financing, inventory financing, or lines of credit. You may be able to secure these loans through your bank, through a private lender, or through the company selling the equipment or inventory.
How To Get the Money You Need for Your Restaurant Business
Securing a business loan is similar to securing a personal loan. You will want to make sure both your business credit and your personal credit is in good shape. Make sure to have a solid business plan that you can present to investors or lenders. Likewise, make sure your financials are complete and accurately reflect your past income and expenses. For an SBA loan, you’ll need to show three years of personal and business federal income tax returns.
Finally, don’t be afraid to reach out for help. The SBA can walk you through the process of applying for a 7(a) loan, which you can use to consolidate business debt, gain access to short- or long-term working capital, or purchase equipment or inventory.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: How Small Business Loans Can Help Restaurants Weather Financial Storms
