Award-winning Nottingham-based DIY app builder platform AppInstitute sought an expert view on restaurant financing for its widely read online magazine.
Andrew Ward, the Reparo M.D, provided invaluable insight into how restaurants should plan to approach lenders and how security is valued in the sector. You can read his views here.
Planning and Security in the Restaurant Sector
Here is a summary of some of the key points Andrew made plus some additional insights:
Prepare Your Documentation: Whether you need financing immediately or in the future, it’s important to keep your key documents up-to-date. Bank statements, company accounts, financial plans and details of other lending should be at hand. Using a modern cloud-based accounting system like Xero will make this considerably easier.
Beware of Security Valuation: Most restaurant businesses don’t own property or any other substantial assets which greatly limit asset-based lending options. Even restaurants that do own property need to appreciate that lending levels are based on vacant possession. Empty restaurant premises are usually worth only 50% of the value if they were operational.
Consider Equity Fundraising: The inherent difficulty of financing restaurant businesses means that it’s often hard to find asset-based lenders that can offer financing solutions. There are other viable options like selling equity; smaller businesses often use crowdfunding platforms, and larger businesses turn to private equity, although many private equity deals in the casual dining sector have underperformed.
Beware of Expanding Too Quickly: A number of restaurants in the casual dining sector have experienced financial distress recently due to the complications of rapid expansion. So whether you’re opening one new site or five make sure you carefully budget for the costs required to build out the required infrastructure.
Expect Cash flow Issues: Hopefully your business doesn’t experience any financial distress, but in any hospitality business outside factors can affect income levels, like the economy, bad weather or a great competitor moving in up the road. Where possible have a buffer that means you can survive if revenues decrease for a while. If the business is experiencing cash flow issues then try to be proactive with cost reductions – expect for the worst and plan for the best.
FastTrack Finance is an Option: Reparo Finance offer a product called FastTrack Finance that provides loans of up to £50,000 that are based on your ability to pay, and your personal credit score, backed by personal guarantees only. If you need money for any reason, then this product may be a good option for you.
Reparo FastTrack Business Finance
✔ Short-term loans of up to 12 months.
✔ Loans of up to £50,000.
✔ No security required apart from a personal guarantee.
✔ Use for any purpose.
✔ Simple paperwork.
✔ Funds are released quickly.
✔ No hidden charges.
✔ Repayment terms are flexible.
✔ Must be UK based.
✔ Must be willing to offer a personal guarantee.
✔ Must have a sensible business plan.
Read more about our FastTrack Finance Product here.
To speak with an commercial lending expert, please get in touch with us on firstname.lastname@example.org or 0161 451 5710.