Restaurant Funding Plan

Funding Your Business

How much money you need to start depends on the type of business, the facility, how much equipment you need, whether you buy new or used, your inventory, marketing, and necessary operating capital. Most aspiring restaurateurs’ dreams never see the light due to lack of funds, and this is one of the most important things to consider when you think of opening a restaurant business. 

• Self-funding – If you have enough money in the bank, then congrats, you have crossed the first hurdle of opening a restaurant. It is also a good idea to open a restaurant in partnerships, as it reduces the risks of investment.
• Loan- You can take a loan to fulfill your restaurant dream. However, securing a loan from a bank may include hassles as they look for collateral or someone who can underwrite the loan.
• VC/Angel funding- Getting investors on board can be difficult, especially if yours is a first-time venture. Investors usually look for your restaurant venture’s growth potential, quality, and the scalability of your business model. The performance of your first few outlets is taken into consideration before one agrees to invest in your business.

Regardless of how much you need, you will definitely need some cash to start your food-service business started. 

• Your own resources. Do a thorough inventory of your assets. People generally have more assets than they realize, including savings accounts, retirement accounts, equity in real estate, recreation equipment, vehicles, collections and other investments. You may opt to sell assets for cash or use them as collateral for a loan. Also look at your personal line of credit. Many a successful business has been started with credit cards.

• Family and friends. The logical next step after gathering your own resources is to approach friends and relatives who believe in you and want to help you succeed. Be cautious with these arrangements; no matter how close you are with the person, present yourself professionally, put everything in writing, and be sure the individuals you approach can afford to take the risk of investing in your business.

• Partners. Using the "strength in numbers" principle, look around for someone who may want to team up with you in your venture. You may choose someone who has financial resources and wants to work side by side with you in the business. Or you may find someone who has money to invest but no interest in doing the actual work. Be sure to create a written partnership agreement that clearly defines your respective responsibilities and obligations. And choose your partners carefully--especially when it comes to family members.

• Government programs. Take advantage of the abundance of local, state and federal programs designed to support small businesses. Make your first stop the SBA, but be sure to investigate various other programs. Women, minorities and veterans should check out special financing programs designed to help them get into business. The business section of your local library is a good place to begin your research.

Restaurants aren’t profitable overnight. It takes time to market your new place, attract a crowd, and get people to come back for more. Some say you shouldn’t plan on making money for at least the first six months. It’s easy to go over budget when you’re first starting out, so make sure that you have some additional money to cover the unexpected. If you’re not sure about how to do this, consider a business line of credit. When you do hit a bump, evaluate the numbers and your processes.