Marketing is an essential part of any business but can be harder to do without working capital. For small businesses like restaurants, marketing allows you to reach a wider audience or customer base, keep your current customers or clientele, and help with the overall growth of your business. Factoring in a budget for marketing can be costly but isn’t something you should be footing the bill for out of pocket or using your personal credit.
Thankfully, there are many loan options available for marketing your restaurant business, including a business line of credit and small business loans like equipment loans, a traditional bank loan, a term loan, and loans from alternative lenders. This article will help you learn what your options are for the restaurant industry, how to qualify, and the standard application process for the type of financing you need.
Whether you’re a new business owner with a new restaurant or an established one, funding options are readily available to help you get your startup restaurant off the ground and assist identifying the type of loan you’ll need to market your restaurant.
What is Marketing in a Restaurant?
Simply said, marketing is a plan for reaching out to your target audience. In order to attract customers, you must market your restaurant by presenting and promoting it to the general public. One of the most important factors in establishing a restaurant’s name recognition is the quality of its food and service, but without marketing, expansion and growth are nearly impossible.
Ways to market your restaurant could include:
- Social media channels (including Pinterest, Instagram, Facebook, YouTube, TikTok, LinkedIn, and Twitter)
- The local community (newspapers, flyers, word-of-mouth)
- Ads (Google, social media, commercials, billboards)
Is it Hard to Get a Loan for a Restaurant?
Getting a restaurant business loan can be a challenge since lenders view the industry as unpredictable. The Small Business Administration (SBA) guarantees small business loans, making it easier to get a restaurant loan through them, which helps your bank be more inclined to accept the risk of lending to your business to help with your business needs. Various lenders, including banks and credit unions, are involved in SBA financing so that restaurateurs can get the money needed to finance their marketing efforts.
Do Restaurant Owners Qualify for SBA loans?
Loans for both newly opened and already operating restaurants can be given through the SBA. Microloans, which have a maximum limit of $50,000, are typically more suitable for startup restaurants or eateries that have a lower requirement for working cash. The SBA 7(a) loan program may provide up to $5 million in capital, and the CDC/SBA 504 program can provide up to $20 million in capital to restaurants so that they can buy, build, or renovate commercial real estate.
However, it’s essential to keep in mind that eligibility requirements for SBA loans might be stringent, and the funding process could take several months. To qualify for a loan of this kind for your restaurant business, you will need to have a minimum credit score, in addition to offering collateral, and you will also be required to provide a personal guarantee. In order to be considered a small business, you will also need to satisfy the size criterion, which is determined by the number of workers, yearly income, and net worth that your company has.
Before applying for a Small Business Administration loan, your restaurant must first meet a number of prerequisites, including having a valid business license, being located in the United States, and having pursued all other possible sources of funding. For purposes of equipment financing or other restaurant improvements, owners can qualify for SBA loans. Be sure to have your business plan, annual revenue, bank statements, and any other pertinent information that’ll show business operations, cash flow, or growth.
Can Restaurants Use an SBA Loan for Advertising?
The short answer is, yes, restaurants can use SBA loans for advertising. The SBA provides an extensive list of the programs they offer and how business owners can use the money. Some of the program options include:
- Basic 7 (a)
- Working Capital CAPlines
- Lender Structured Line of Credit
- 504 Loan Program
- Microloan Program
Top Lenders for Restaurant Loans
There are a number of business lenders that are great for restauranteurs looking for a loan. Many restaurant owners have used them for restaurant equipment financing and equipment purchases, inventory financing, renovations, and of course, marketing and advertising.
If you already have a relationship with a bank or other financial institution, whether for personal banking or other types of commercial banking services, you might be able to use that relationship to get a loan from them to open a restaurant.
How Does a Business Owner Apply for a Restaurant Loan?
There is a multitude of ways to apply for a restaurant loan, including:
- Through an online lender
- Through a traditional bank
- Through the Small Business Administration (SBA)
You can expect to be asked for information about your business, including contact information, length of time in business, and revenue when applying for a loan for a restaurant, just as you would expect to be asked for this information when applying for any other type of business loan. While the specific requirements may vary from one lender to another, in general, you can expect to be asked for this information. If you are personally guaranteeing the loan as a borrower, then the lender may additionally ask you for details regarding your personal finances and look at your personal credit score. This will determine your loan amount and repayment terms.
The sort of loan you are seeking will also determine the level of difficulty associated with the application process. An application for a traditional bank loan or an SBA loan may take some time to complete, whereas an application for a merchant cash advance may only take a few minutes to finish. A traditional bank loan or an SBA loan application will most likely require financial and tax documentation from small business owners.
No matter what kind of loan products you choose for marketing your restaurant business, Nav is here to help. With the help of Nav’s resources and loan matching tool, you can get the best business financing for your needs, including small business loans like small business startup loans. From how to establish business credit to a full list of business credit cards, the choice is yours to make sure you get the best restaurant financing options.
This article was originally written on June 21, 2022 and updated on June 30, 2022.