For those of us who started out in this business with excellent credit you find very quickly that Osama unknown reason within a year at 640 turns into a 580 or worse. Then you want to go to the bank and the guy gave you USD10,000, USD30,000 or even USD50,000, now looks at you like you grew third eye. Even if you're doing great it's a simple fact that the restaurant industry suffers greatly when it comes to traditional funding. In many cases this is the reason that you see restaurants with great reputations closing their doors when things get a little tough.
Now you can approach your friends, family and neighbors and estimate they want to be part of a great opportunity. And for the most part everybody wants to be a restaurant owner, however, that same name only. It is an emotional tie and they understand how hard you work every day every night all weekend long to keep the business running smoothly and turning out a great product, you might get some investment. In most cases though, someone's got to say "I don't know anything about the restaurant business", as you be very assured that they have plenty of ideas on what you not doing right or what you need to be doing. So, we move onto the next group of people we might speak to about getting funding for a specific reason like furniture, fixtures and equipment known as dg&E in the restaurant trade. Or, you may want to change the menu, but I some equipment, hire a new chef or all or any of the above.
This already cost money, serious money. And when you found the funding to get the ball rolling stay in business over year, which is usually the time most restaurants die out, even if they have decent traffic, you find that those sources have dried up. Going to the bank, which I mentioned above is not really a great option, because they want to know what you're going to do with every single dime, and then they have to approve it.
Now if you choose to go this route the fun really begins. You have to offer collateral and I mean collateral. They want to see all your financials, personal checking, personal wealth, personal portfolio, mortgage statement and everything they possibly could find out about you from the day you went to high school, maybe even earlier. The idea of putting your house up as collateral for your business is insane at any level. Even if you could sell it to your spouse, which is really doubtful, it's a very, very, very bad idea. Going to some local businesses who are in the same industry, if you know the owner very well, sometimes they will extend you some financing if they have lived with the wherewithal and know that you have a strong establishment. There are more nefarious sources that are really won't go into as you might as well just close the door lock, if you have to go that way.
There are several organizations that have a decent reputation in the area of working capital, better known in the textile trade as factory. They will offer funds based on your historical performance over a period of time. Generally 6 to 12 months as a rule. Naturally they will ask for some information, but nowhere near what a traditional bank or finance company will ask for. If you were current with your landlord, your vendors, and you not bad about writing checks, meaning no NSF's, and you cash flow is such that it will be able to satisfy the loan without putting you out of business in the meantime. They have a shot at getting funding for just about anything you want without having to detail exactly what if funding is for.
The rates vary considerably depending on your creditworthiness but having said that, if you are incorporated, and have other members of the Corporation who have decent credit, if yours is not sufficient, then they can apply as an officer of the organization scratch that is an officer of the Corporation. The rates are more expensive than traditional loans, and the payback is generally within 6 to 12 months. You then assign a percentage of your daily receipts that they the funding company scratch that, the funding company, take electronically for your credit card processor, or E CH.
Some people say it's too expensive, and many cases it is, however, if this is a stopgap measure to get you over the hump or something you know that will generate more revenue and could justify the expenditure, then I'd say go with it.
Hope you're success with ur shop ^_^
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