Working Capital Loans for Restaurants
Think of it: a busy restaurant, filled with happily chatting customers. Beautifully plated dinners flowing out of the kitchen, hot and delicious. Sounds like a recipe for prosperity, right? However, the very next night, at the very same restaurant, there could be a room filled with empty tables, the staff milling around, trying to look busy. Most restaurants’ income fluctuates, ebbing and flowing on a particular night or during a cyclically slow season. Having the right financing in place can ease the stress of an uncertain business. Working capital loans can be an excellent solution for restaurants or others working in the food industry.
What is a Working Capital Loan?
According to the business newsletter Investopedia, a working capital loan is a loan that helps finance the day-to-day operations of a company. These loans are not for buying long term assets but rather are primarily for covering soft costs such as salaries or accounts payable. Typically, they are often used to cover periods when sales are down in a cyclical business such as the food industry and are generally thought of a short-term solution. Working capital loans that are specifically tailored for restaurants can be a great economic solution in a changing industry.
Working Capital Loans Tailored for the Food Industry
Financing restaurant operations can be a difficult juggle. While there are many start-up costs for an entrepreneur looking to open a new restaurant, a working capital loan is meant to help cover expenses once the restaurant is already up and running. Working capital loans can be used for
- unplanned emergencies
- during a seasonal downswing in sales – covering salaries and supplies
- marketing costs
Where to Find a Working Capital Loan in Canada
Generally speaking, the big banks don’t like funding anything with potential risk. When looking for financing in the food industry, it’s important to speak to someone who knows the business and the fluctuations it can take. In Canada, the leader in restaurant financing is a company called Econolease. Econolease has worked with thousands of clients working in the food industry, including caterers, bars, and grocery stores. Clients must have monthly sales of at least $15,000, have been in business for at least six months and cannot be home-based. Econolease can offer up to $500,000 and financing can be available in under three days. The length of terms run from six to twelve months.
Other Financing Options
Other financial options that work well with the needs of the food industry are pre-approved lines of credit, or leasing equipment. As one of the biggest ticket items for any restaurant owner is kitchen equipment, leasing can make economic sense. The client sources the required equipment, often from multiple vendors, the finance company then buys the equipment and leases it to the client. The client can opt to buy the equipment at the end of the lease. Renting equipment can also be an option, and while the terms of a rental agreement are often shorter, the rates can be higher.
There are many options to consider when seeking financing. If a working capital loan is the best solution for your restaurant, speak to a specialist in food industry financing.