Have you long dreamed of opening a restaurant? You have the menu, theme and location all planned in your mind, but when you turn to the issue of restaurant financing, it can seem a bit overwhelming. Don’t worry—there are alternative capital solutions available for the aspiring restaurateur. Borrowing from family or friends, using home equity to secure a loan, or taking on additional employment are all options you have considered using when starting up your new eatery. However, there are other, perhaps lesser-known options you should consider as well.

Merchant Cash Advances

Operating a restaurant requires significant financial investment from the very beginning. Staff, equipment, advertising and other costs may accumulate quickly. You likely need a large sum of cash upfront; one of your potential options is the merchant cash advance. This type of advance refers to financing in which borrowers make small routine payments (for example, each business day) over a shorter period (often under 24 months) when compared to conventional loans. With a merchant cash advance, you’ll typically receive a lump sum payment based on expected future credit card sales. You will then be expected to pay back a fixed or variable percentage of your business’ future sales by credit card until you pay off the amount of the advance. Though this category of restaurant financing has historically been accompanied by higher interest rates than traditional bank loans, increased competition has led to downward pressure on rates. As with other financing options, you’ll receive more favorable terms if you have a higher FICO score.

Equipment Leasing

Proper equipment, from commercial ovens to refrigerators, is a must when operating a restaurant. Unfortunately, covering needed equipment is expensive. Leasing is one way to finance the equipment you need at a reasonable price. With this option, you will pay a fixed monthly amount to use the equipment for a certain time period; as a small restaurant owner, you will typically be asked to make a personal guarantee which allows the lessor to seize assets if you do not fulfill your lease obligations. Once you have complied with all terms of the lease, you typically have the option to purchase the equipment at fair market value, return it, or lease new equipment. Though leasing often results in your paying a higher price for the equipment over the long term, it is a viable (and common) option for many small restaurant owners who otherwise could not purchase equipment essential for their business.

Operating a restaurant can be an immensely rewarding business endeavor. Though it requires considerable planning and hard work, you can achieve this goal, even if you don’t qualify for conventional loans. With alternative restaurant financing options such as merchant cash advances and equipment leasing, you can obtain the cash you need to run the restaurant of your dreams.

If you would like to discuss or have questions about alternative capital solutions for your restaurant endeavor, please contact us or give us a call at 404-602-9100. To stay up to speed on all things Barrington Commercial Capital, follow us on Facebook and LinkedIn. And lastly, sign-up for our monthly email below to stay informed of the latest commercial capital options available to you and your business.