Creating a highly successful restaurant business is no small feat. If you’ve found the winning combination and people love your food, it may be time for you to start thinking about opening a second location.
It’s likely that you already have all the skills you need to create another thriving restaurant, but learning how to open a second location for your business doesn’t stop there. Once you’ve found the perfect spot and researched all the costs involved, you’ll need to come up with the money to fund your new venture. Here’s a look at five popular options.
How to Finance a Second Location For Your Restaurant
1. Commercial Loans
When considering how to finance a business, a commercial loan may be the first thing that comes to mind. Most people are familiar with the process of borrowing from a brick-and-mortar bank. However, traditional lenders often require a significant amount of paperwork and documentation.
They may also have strict qualification requirements including a minimum credit score and maximum debt-to-income ratio. You may also be required to personally guarantee the loan and/or put up collateral. Even if you meet the qualification requirements, this may involve a bit more risk than you’re willing to take.
2. SBA Loan
The Small Business Administration (SBA) offers highly competitive loans to business owners. Some consider this to be the best way to finance a business, due to the low interest rates and low fees. Some SBA loans even come with additional support to help you set up and run your business. SBA loans offer lower down payments when compared to other types of loans and some may even allow you to forego putting up collateral.
However, there are some potential drawbacks. The application may require extensive documentation and the approval process is notoriously slow. If you’re trying to jump on the perfect restaurant location, waiting for your financing to come through could lead to a missed opportunity.
3. Equipment Loans
Opening a second location for your business typically requires the purchase of a whole new set of equipment–and this can be expensive. Restaurant equipment loans are a great way to get your kitchen up and running quickly without having to come up with all the capital at once.
Equipment loans don’t require additional collateral and some may not require a down payment. You’ll just need to make your fixed payments on time. Otherwise, the lender could repossess your equipment, leaving you in the lurch at a time when you need it most. An equipment loan can also only be used for equipment, so you may need to combine this with other sources of financing.
4. Merchant Cash Advance
If your current business is thriving and you accept a high volume of credit cards, a merchant cash advance (MCA) could be a great way to finance your new location. An MCA actually isn’t a loan at all. Instead, it’s an agreement that allows you to receive a lump sum of cash in exchange for a percentage of your future sales.
There are several advantages to choosing this option. First, since it’s not a loan, you may be able to access an MCA even if you have poor credit. This can be a great opportunity for restaurant owners who can’t qualify for a traditional business loan. The application and approval process is also very fast, so you can move forward quickly without any additional hassle. One unique feature of an MCA is that your payments fluctuate with your income. If you run into a slow period, you won’t have to worry about keeping up with a large fixed loan payment.
5. Outside Investors
Some restaurant owners choose to allow one or more additional investors to help finance their second location. If you can find the right investor, this may be the best way to finance a new business. However, it’s important to keep in mind that most investors will want at least a bit of control over your restaurant and the way it’s run. If you’re not willing to let someone else influence your business, then you’ll want to look into other financing options.
Explore Restaurant Financing with Zinch
Zinch offers two different loan products that could help you finance your second restaurant location. Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
