Whether you’re opening a bar or need support keeping the lights on during a slow period, many financing options are available for small businesses.
Why You Might Need Bar Financing
Financing can help you pay for all aspects of running a new bar, including:
- A mortgage or rent: Whether you’re buying or renting property for your bar, you will need to pay these costs before your revenue starts rolling in.
- Equipment: Most bars will need additional funding to pay for equipment and supplies to get started.
- Furniture: Some rentals include furnishings, and some do not. Even if your building has furniture, you might want to change it to match your bar’s energy.
- Payroll and staff expenses: Whether or not you’re currently bringing in money, your hourly staff need to get paid for their work.
Types of Bar Loans
There are a few different kinds of loans that you could use to fund a bar:
- Term Loans: Term loans are cash loans given to businesses with set return terms. These loans are usually intended for established companies.
- SBA Loans: SBA loans are available to all small businesses, whether they are getting started or are already established. These government-insured loans tend to be more readily available for small businesses.
- Real Estate Loans: Renting a space for your bar and requiring a loan is usually done through a regular business loan. You can, however, take out a mortgage loan if you are buying the property where you will do business.
- Conventional Loan: These loans usually get taken out from lenders or banks. They can be used to pay for almost anything you need to start your business but can be challenging to acquire for high-risk investments like bars.
- Opening a line of credit: If you cannot get approved for a conventional loan, you may be able to open a line of credit with your bank. The interest rates will likely be higher, however, so beware.
How to Get a Business Loan for a Bar
How to get a business loan, whether for a bar or another business, depends on what the loan is for. Start-up loans are available from conventional lenders (banks and other lending organizations), the Small Business Administration (SBA), and online lenders.
Best Options for Funding a Bar in 2023
Aside from putting in your own money and asking your friends and family for help, there are two primary funding sources for any new business, including bars: commercial loans, government loans (SBA loans), and alternative online loans.
Commercial and Conventional Loans for Bars
Commercial or conventional business loans are a good choice for many businesses, especially if you need money faster than an SBA loan can approve. Conventional loans can have reasonably low-interest rates, ranging from 3-7%.
The drawback of a conventional loan is the difficulty of receiving one. Because the government does not insure these loans, the lender has no guarantee of return.
Many lenders are reluctant to fund businesses without any current revenue, especially for restaurants and bars, which largely depend on the economy and the skill of hired labor.
Online or Alternative Loans for Bars
Online or alternative loans often have very high-interest rates but are easy to get. If you need money for your business and need it fast, online loans can get you a loan in just 24 hours.
SBA Loans for Bars
SBA loans are federal government-insured loans that can help you get your business off the ground. There are caps on interest rates, which helps ensure you are getting a good deal.
SBA loans are also easier to get than commercial loans. The government insures these loans, so lenders are far more confident that they will get some kind of return for their investment.
While SBA loans can be an excellent choice for many businesses starting, they are still more challenging to qualify for than alternative or online loans.
How Much Does it Cost To Open a Bar Business?
Opening a new bar can be very expensive, but it can also be cheaper than you might think. The cost is highly dependent on a few factors:
- Bar type (nightclub, full-service, attached to a restaurant, etc.)
- What you already own (equipment, a space, etc.).
While average bar opening costs are usually around $100,000, it’s crucial to come up with an expected expense report before you start applying for loans. Fortunately, the SBA offers a calculator to help you estimate your start-up costs.
How Much Does it Cost To Run a Nightclub?
The cost to run a nightclub or bar depends on the location and type of bar or nightclub, the site, and the amount of business you get. These costs can even change depending on the time of year.
To get a complete estimate of how much it will cost to run your business, you will have to run a full analysis of your losses, costs, and income. This report should include every place where money is entering and leaving your business, including:
- Staff: Predicting staff expenses is easy based on the schedule, but estimating how to schedule and understanding the amount of staff you will need can be very difficult.
- Rent/mortgage: Rent and mortgage expenses should be easier to estimate as they are stable.
- Utilities: Utilities will likely be variable, depending on the season. See if you can obtain utility information from the previous bar owner or building manager.
- Supplies/product: This includes the usual bar expenses glasses, tumblers, ice, and alcohol, but remember to include other expenses like printing menus, getting coasters, and cleaning supplies.
- Repairs and maintenance: Some repairs you will be prepared for; others may be unexpected
- Advertising: Create a budget for advertising and stick to it, if possible.
Estimating your start-up costs can be difficult, but once you know how much to ask for, obtaining funding from an SBA or alternative loan can be easy. There are many different kinds of loans for supporting small businesses, and it’s important to know what you need before you apply.