How to Fund a New Food Service Business
In order to make your dream of opening a food service business a reality, you must be able to pay for all the expenses that come along with opening such a business. This often includes the building, equipment and supplies, food and beverages, decor, inspections, payroll, and more. If you cannot cover these expenses, it is unlikely your business will ever become successful. Therefore, you must decide how you are going to fund your business way before you get started.
Personal Savings
If you have personal savings tucked away that you can utilize, this is the ideal way to fund your own business. You won't incur any debts and you won't have
any partners to answer to. Even if your savings can only cover a percentage of the costs, it can still be helpful. You may find that it is easier to acquire more funding if you have some of your own money to chip into the budget.
Bringing in Investors
A second option that many choose is to bring in investors or partners into the business. Generally, investors are attracted to the food services because it is a relatively safe place to put their money, as opposed to the risks of the stock market. They also have the advantage of being able to visit and enjoy the establishment that they invested in.
However, if you receive a large portion of your funding from investors, you will have to keep them happy . This means making sure that their money will be returned to them someday in the future and with a profit. On the other hand, if you choose to find partners, as opposed to investors, you can divide up the investment and the ownership of the establishment as best suits your needs and theirs. In this way you are all in it together, and your successes will be felt among all the partners.
Obtaining a Loan
Loans are one of the more common options for funding a food service business. You can opt for a small business loan or a traditional bank loan in order to get the money needed to finance your operation. Depending on where you acquire your loan, you may need to provide an initial down payment. The amount required for a down payment will be based on several factors, including the risk of the business, your collateral, and your credit rating. The disadvantage of a loan is that you will be increasing your debt by having to make a steady payment each month, despite how well or poorly your restaurant is performing.
Non-Traditional Funding
Sometimes there are ways to accomplish what you want in a non-traditional manner. If you are struggling with funding, you may be able to use alternative means to help you achieve your goals. For example, when you look for a building, you can look for a seller who would be willing to finance the purchase. This means that he would sell it to you for an initial down payment, with further payments to be made over time, rather than have you pay the full asking price at once. In order to purchase equipment and other supplies, you may be able to take advantage of lines of credit, or business credit cards in order to arrange financing options The interest you will be paying will be higher, but this will give you the chance to continue with your plans and make your dreams happen.
Determining how to fund your restaurant is one of the most important decisions that you will have to make before opening your restaurant. You should consider all factors before you settle on a method and begin the process. Unless you are using your own money, you will find advantages and disadvantages to any choice you make. Your goal should be to go through each option and determine which one works best for your situation.