If you’re in the restaurant business or food and accommodation services, now might be the best time to take out a loan.
According to an August 2019 study, lenders are approving loans 51% of the time for restaurateurs. These are some of the highest approval rates for small businesses in any industry, making it a fantastic time to jump on the opportunity of restaurant growth.
This is especially exciting news, given the high costs and various pitfalls that are part and parcel of owning a restaurant, including replacing broken equipment, resolving customer issues, and high employee turnover rates.
Why Has There Been an Increase In Restaurant Loans Approval?
Part of this increased approval rating is tied with the economy. The economy is doing well so businesses, in general, are finding it increasingly more likely to be approved for a business loan.
While labor costs have increased to meet the cost of living and high employee turnover rates, food costs have been relatively stable, which keeps restaurant profit margins in the green.
There’s also been a positive shake-up in the food industry with the advent and growing popularity of online food ordering options, apps, and delivery services. Now, restaurants are able to reach a wider audience of customers, including people who would otherwise be unable or unwilling to drive to the restaurant for a sit-down meal.
Payment processing devices that work with mobile devices have also made it easier for startup restaurants to begin processing credit and debit card payments faster, which has increased their revenue.
The low-cost, high-exposure of social media advertising has also helped to bolster the restaurant economy. Restaurants benefit when customers share photos of their food dishes or dining spaces, tag the restaurant in posts, and leave glowing reviews, all done on the restaurant’s behalf for free. All of these social media actions have the potential to reach a wide audience, spreading a positive image of the restaurant and creating higher demand.
This has all equated to a higher than average revenue for restaurants. This makes them a lower risk investment option when banks are deciding whether or not to approve a loan.
Restaurants are also more likely to be part of a franchise, which establishes credibility and access to high-end technologies and resources in the eyes of the lender. Of course, this isn’t always the way it plays out but it definitely works in the franchised restaurant’s favor.
Considering a Restaurant Loan?
If you’re considering a loan for your restaurant, it’s best to get all of your ducks in a row first. There are a variety of loan options available, depending on your needs. Will you be using the loan for small purchases, like minor upgrades or repairs? Or will you be using it for a larger investment like opening another location, refurbishing your kitchen or dining area?
No matter your reason for pursuing a business loan, make sure to compare fees, interest rates, and terms. You should also be aware of what is required from you, such as a minimum credit score and revenue.
Based on the market, the time is ripe to go out and find the best restaurant loan for your business!