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BFS Capital Blog

Checklist for Restaurant Owners Applying for a Small Business Loan

January 4, 2016

Running a restaurant is a capital-intensive process. From employees to food to equipment, the average restaurant owner has to worry about many different daily and long-term expenses. Making matters more complicated is the knowledge that even a restaurant with a skilled chef and a great location might not attract enough customers to pay for all those expenses. That’s why so many restaurant owners look to small business loans to help fill their funding gap.

BFS Capital works with restaurant owners across the country to help them responsibly maintain or grow their business with small business loans or merchant cash advances of up to $2 million. We work closely with these small business owners to determine a loan amount and a repayment plan that makes sense for both parties. With nearly two decades of experience providing loans to small business owners, we would like to share a checklist of questions for restaurant owners to help streamline the application process.

  • What’s the money for?

This may seem obvious, but many restaurant owners may not have an exact plan for how and when they plan to spend the money. Every business would happily accept more cash on their books, but a small business loan has to be repaid too. Before beginning the application process, think carefully about whether the added cash will actually help you grow or maintain your business. A brand new oven or refrigerator might be nice, but if your business is functioning smoothly with the old one then there’s no need to rush.

  • How much do you really need?

There is absolutely such a thing as too much cash. Many small business owners, especially those new to the world of business, have a tendency to blow through their cash pile trying to scale their business too quickly or pay for a large headquarters that may take years to fill with staff. It’s important to consider how large of a loan you really need to get to the next phase of your business.

If you just want to hire a couple more line cooks or waitresses, then a small loan under $100,000 should suffice. If you’re operating a franchise and want to open a second location, then you might need upwards of $1 million. Only ask for the amount you’re actually planning to spend. Then if all goes according to plan, you’ll have that much of an easier time getting a second loan because lenders will see that you’re reliable.

  • What are your other assets and liabilities?

Every business, and individual, has a number of different assets and liabilities. An asset is simply anything that can generate cash flow-a financial investment, real estate property, cooking equipment, etc. A liability is something that you owe, such as a loan, a mortgage or credit card debt. The ratio between a business’ assets and liabilities is a strong indicator of the health of a business. Since restaurants operate in an industry where future revenue streams are highly unpredictable, many small business lenders will often look at a company’s assets and liabilities to gauge the likelihood of a loan being paid back.

Borrowers with fewer assets or more liabilities will typically have to pay a higher interest rate on any potential loan. So it may make sense for a restaurant owner to pay off other large debts first before pursuing an additional loan, or to make sure you have enough assets to cover debt payments in the event the restaurant doesn’t bring in as much revenue as you anticipated.

  • What’s your credit score?

Just like when applying for an individual loan, a lender will want to look at the restaurant owner’s credit score-as well as the business’ credit report-to determine the likelihood that he or she can pay the loan back. If you have a history of being late on your debt payments or defaulting on loans altogether, then the odds of you getting a small business loan become that much more unlikely.

Fortunately, there are ways to boost your credit score. There are many online resources dedicated to improving consumers’ credit scores, such as this one from, but the two basic principles are (1) don’t accumulate too much debt, and (2) pay off your debt on time. If you find out your credit score is indeed low then take the time to build it up to better take advantage of lower interest rates on your loans.

  • How much experience do you have?

It’s one thing to point to a balance sheet and proclaim that you’re a successful business owner. But lenders want to hear that you have a strategic plan on how to grow the business, or at least a plan to repay the loan. Be prepared to discuss your business plan and your past experiences to show a lender that you’re a trustworthy and creditworthy customer.

If this is your first foray into business management then you might have a difficult time convincing a lender to give you a shot. Instead, try to raise funds from family and friends and build the business from the ground up. Once you have some momentum or are ready to expand, then you may be ready for a larger business loan.