You’re going for your dream of opening your own bar, or do you already own and operate one? Before you take the big leap, make sure you’re financially prepared for the expenses ahead. As with many other businesses, there are overhead costs, rent or mortgage payments, inventory, payroll, taxes, and unexpected expenses that you will need to cover. If you don’t have the money upfront, a loan can still help you make that bar a reality. Here’s how to get a loan for a bar or restaurant.
Why Would you Need a Loan for a Bar?
Opening and running a bar takes money - often more than you may think. A loan can give you the cash you need to cover the expenses and give you time to pay it back as you start making a profit from running the bar. Below are some expenses that a loan can help you cover for your bar.
Renovations and Updates
Whether you’re opening a new bar or are taking over an existing one, you may want to update the space to fit your bar’s vibe. From changing the décor such as new paint and lighting to updating tables, chairs, and equipment, the amount you invest in updating your bar can pay off in the long run.
Inventory can add up and while you're waiting to turn a profit, you still need to pay for the initial stock of alcohol, glasses, silverware, dishes and cookware, if you’ll be serving food. Utilizing a business loan can help you pay for those upfront costs.
Repairs and Emergency Expenses
Equipment breaks, the new stock doesn’t sell, and life happens. In the ideal world, you would have money put aside to handle the unexpected expenses that can - and undoubtedly will - come up. Often times bar owners don't have that extra cash on hand to cover these types of expenses. Having a business line of credit on hand can help you cover unexpected expenses when the arise.
Business Finance Options for Bars and Restaurants
There are a few types of loans you can try to get, depending on what you plan to use the loan for.
- Family and Friends - The simplest and simultaneously most complex loan is borrowing from family and friends. While there will probably be less of a paperwork hassle than the other loans and they won’t run your credit score, the situation can be quite complicated if you are unable to repay the loan. Unless you’re willing to make them a partner in your bar, you may want to avoid borrowing from family and friends.
- SBA Loans for Restaurants - The U.S. Small Business Administration (SBA) gives small businesses and restaurants loans for up to $50,000. It can be a tedious process to get qualified and it can take some time for you to get approved for the loan, but small business loans for restaurants are an excellent resource as the government helps subsidize it.
- Equipment Financing - Equipment loans are used to specifically cover your bar equipment, such as a new refrigerator or taps. The interest rates are usually low, and the lender has a hold on the equipment as collateral in case you don’t repay the loan.
- Commercial Loans - Loans from larger institutions such as banks and credit unions are helpful if you need a larger amount than small business loans for bars will provide. Research the best banks for restaurant loans to find the one that will give you the best rates and terms. However, commercial loans tend to have must stricter guidelines. So if you're planning on applying with a traditional bank, make sure your personal credit is up to par.
- Alternative Lenders - Online or alternative lenders, like ROK Financial are great options for Restaurants looking to expand. Guidelines tend to be much less strict than traditional lenders, and personal credit scores do not have to be perfect. Also, less paperwork is required and funding can be complete in as little as 24 hours.
Common Challenges for Getting a Loan for a Bar
Obtaining a bar or restaurant loan is not as simple as asking how to get funding for a restaurant. When working with traditional banks, lenders want to make sure you will be able to pay back the loan. To ensure that you can qualify for a loan, make sure you have a business plan, have a good credit history, and work to improve your credit score if you don’t. Here are four tips for how to qualify for a restaurant loan.
However, if choosing to work with an alternative lender there is limited paperwork, simple application, and fast approvals and funding process compared to a traditional lender.
If you are determined to make your bar successful and just need the capital to make it happen or need quick restaurant funding, a loan can help you. While getting small business loans for restaurants can be challenging during COVID, there are several routes you can take to secure a loan for a bar in 2021.
To learn more about obtaining a loan from a bar, you can speak with an experienced Business Financing Advisor today at ROK Financial to learn more about your options.
About the Author, Madison Taylor
Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates!Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.