The restaurant industry has been one of the most successful in the United Kingdom for some time – one pound of every three that consumers are spending is being spent on dining. With this type of success being proven every day, it is no surprise that more and more people are building dreams around opening their own restaurant.
For those who need help financing their restaurant dreams, there are a number of different financing options available to help them purchase, open, and run their business.
Know the Start-Up Costs for Restaurants
It is important to note that new restaurant ventures have a very high failure rate and financial institutions are well aware of the statistics. In many cases, the income generated from these types of businesses in their early stages is simply not enough to cover the overhead expenses.
Restaurant purchase prices have risen more slowly over the years than other businesses, leaving many potential restaurant owners with the temptation of throwing all their effort, and money, into opening this unsteady business.
Before you begin financing this type of business, it is important to know that equipping a new restaurant with the needed equipment, supplies, and employees to make it run is not cheap. It is important to budget these costs into the amount you will need to open the business.
It is generally recommended that £5,000 be budgeted for kitchen equipment alone and another £5,000 for furnishing and decorating the dining area. When all these expenses add up, it can be easy to see why so many restaurants fail.
Have a Solid Business Plan
Before any lender will approve a commercial mortgage for a restaurant, they will want to see a solid business plan. When creating this plan, it is important to include some key information. Lenders will be looking for full account information for the previous two years of trading, detailed projected income, location of the business, the borrower’s experience in the industry, as well as the amount of money intended to invest alongside the amount of additional funding that will be needed to open the business.
Find a Knowledgeable Broker
Since banks are aware of the failure rate of restaurants, they are less likely to approve a commercial mortgage loan for this type of business. In order to secure financing, it may be required to solicit the help of a knowledgeable mortgage broker.
Brokers will work with a number of specialised lenders in order to find their client a loan package that will best fit their needs and their budget. Brokers like Jubilee often have great relationships with their lenders and can secure deals that borrowers would not be able to negotiate on their own.