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How to Determine If Your Business Is a ‘Small Business’

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To be considered for loans and other assistance from the U.S. Small Business Administration, your company would need to meet the SBA’s definition of a small business.Certain government contracts and loan programs from the SBA are reserved for small businesses. To ensure the right companies receive these opportunities, including the relatively low interest rates that come with its loan programs, the SBA enforces eligibility requirements.

The SBA’s size standard is based on employee count and average annual receipts. The current averaging period is three years, although the SBA recently proposed a rule change that would allow businesses to average revenues from the past five years. The SBA’s size standard indicates the largest size that a business could be to remain eligible for SBA loans and federal contracting programs.

“What they have is conditions on how much a business can make as far as revenue in order to qualify for an SBA-guaranteed loan,” said Kyle Bayliss, regional director of the Maryland Small Business Development Center. Across the country, SBDCs assist business owners through a partnership with the SBA.

Continue reading to find out whether your business is a small business according to SBA guidelines, and what that means for your company.

The SBA’s definition of a small business

To be classified as a small business, your company would need to meet or fall below the SBA’s maximum annual revenue or employee count. The SBA sets specific standards for individual industries, so the exact requirements would depend on the type of business you run.

The SBA outlines standards for each industry listed in the North American Industry Classification System, or NAICS. The SBA provides a lengthy table describing employee and revenue limits for each industry, organized by NAICS code. You can find the table here.

Revenue limits range from $750,000 to $38.5 million, depending on industry, and employee requirements span 100 to 1,500 employees. As long your business falls below its designated revenue or employee threshold, it could be considered a small business in the eyes of the SBA.

All workers, including those employed on a full-time, part-time and temporary basis, contribute to your overall employee count. If you acquired another business, employees from that business would also contribute to your total. The SBA takes an employee count on a 12-month basis, or counts employees for each pay period if you have not yet been in business for a full year.

The SBA’s definition of a small business incorporates companies that are far larger than the average small business seeking help from the Maryland SBDC, Bayliss said. An SBA small business may be larger than most would think. Businesses that support oil and gas operations, for instance, can have annual revenue up to $38.5 million.

Furthermore, the SBA requires that small businesses also meet the following requirements to be eligible for funding:

  • For-profit, officially registered and operating legally
  • Physically located in the U.S. and operates in the U.S. or its territories
  • Invested equity from the business owner
  • Sound business purpose
  • Ability to repay any debt

What it means to be a “small business”

Businesses that meet the SBA’s small business criteria can apply for SBA loan programs and federal contracting assistance. “The lending part of it is a really big help,” Bayliss said.

Your small business could be eligible for the following SBA-backed loans:

7(a) loan program: The SBA’s most popular program provides general-purpose loans for small business owners. You could borrow up to $5 million with repayment terms between seven and 25 years. Specialty loans within the 7(a) programs are available for certain needs like smaller loan amounts, export working capital or express time to funding.

CDC/504 loan program: Small businesses looking to acquire fixed assets, like buildings, land or machinery, can borrow funds to finance their purchase. There’s no set limit on loan size, though Certified Development Companies must administer all 504 loans. The SBA typically provides 40% of the total cost while a CDC contributes 50%. The business owner would need to provide the remaining 10%. The assets being purchased would serve as collateral on the loan.

Microloan program: For smaller funding needs, the SBA microloan program provides up to $50,000 to small businesses that have trouble qualifying for traditional business loans. Repayment terms for microloans typically max out at six years. SBA microloans are generally reserved for women, low-income, veteran and minority business owners.

SBA-designated small businesses can also apply for federal contracts through the following program:

8(a) Business Development program: The SBA limits competition for certain government contracts to small businesses that participate in the 8(a) program. The goal is to help disadvantaged businesses win valuable contracts. To be eligible for the program, an owner who is economically or socially disadvantaged must control at least 51% of the business. The owner must also have a personal net worth of $250,000 or less, $4 million or less in assets or $250,000 or less in average adjusted gross income for three years.

Additionally, business owners must show good character and potential to successfully perform. If approved for the 8(a) program, you could compete with similar businesses for sole-source contracts. You could also receive assistance such as business training, counseling or marketing help from a mentor who is also participating in the program.

The SBA 8(a) program provides a leg up for small businesses that may not otherwise win big contracts, Bayliss said. Women and minority entrepreneurs particularly benefit from this program, he said.

“Actually doing government contracting, it’s really hard, especially for small businesses,” Bayliss said.

Other benefits of meeting the SBA’s size standard

SBA-approved small businesses could have access to additional assistance, most notably resources set aside for women and veteran entrepreneurs.

For instance, the SBA’s Women-Owned Small Businesses Federal Contracting program reserves federal contracts for qualified women-owned businesses. It’s like the 8(a) program, but specifically designed to give women entrepreneurs increased access to federal contracts.

Organizations such as the National Women’s Business Council and the Association of Women’s Business Centers also provides resources and opportunities for women-owned small businesses through partnerships with the SBA. To access resources for women-owned small businesses, you would need to receive certification from the SBA. You can apply for certification here.

Eligible veteran-owned small businesses could also access training programs and specialized loans through the SBA Office of Veterans Business Development. Programs like Boots to Business and the Veteran Federal Procurement Entrepreneurship Training Program teach veterans the skills to successfully run a small business.

The SBA also guarantees loans for veterans through the SBA Veterans Advantage program. Additionally, the Military Reservist Economic Injury Disaster Loan Program provides funding to businesses with employees who have been called to active duty.

Becoming certified for these programs could be a lengthy process. The SBA would ask you to submit information about your business, such as organizing documents, past financial statements and a business plan, as well as personal information like income statements and proof of citizenship.

As an SBA small business, you may be able to qualify for government-sponsored business grant programs as well. Both the Small Business Innovation Research Program and Small Business Technology Transfer Program are tied to the SBA, and grant recipients would likely need to meet SBA size standards.

The bottom line

The SBA provides countless resources to business owners across the country, but there’s a catch — you have to qualify as a small business according to the SBA’s standards.

Fortunately, these requirements are broad and take your specific industry into consideration. You would need to fall below the threshold of number of employees or annual revenue that the SBA sets for your industry. The limit on employees ranges from 100 to 1,500 workers, while revenue maximums range from $750,000 to $38.5 million.

If your business is within the SBA’s parameters, you could apply for a number of contracting and business loan programs. You could also receive additional resources set aside for underserved business owners, such as women and veteran entrepreneurs.

Your local small business development center could help you determine which programs your business may be eligible for and provide assistance with any applications. Be sure to calculate the correct size of your business before applying for SBA resources.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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How Does a Business Loan Work?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

In the course of day-to-day operations, many businesses discover they come up short on the necessary cash to pay expenses, employees and other business costs. To cover this gap, many business owners turn to business loans.

So, how does a business loan work? Business loans can provide much-needed capital to ease cash flow and help businesses stay on top of their bills. Especially helpful during slow seasons, business loans are a tool that business owners can use to keep business operations moving smoothly.

How do business loans work?

Business loans provide business owners with operating capital to pay expenses, payroll and other costs during slow times or when waiting for client payments to come in.

Most business owners rely on one of six types of small business loans to provide the cash they need. Deciding which financing option to choose depends on the individual needs and financial situation of the business. Some business owners need a small infusion of cash they plan to repay quickly, while others need a large amount of capital as well as time to repay that money.

6 types of small business loans

1. SBA loans

SBA loans are guaranteed by the Small Business Administration (SBA). These loans are not offered directly by the SBA but rather through SBA partners, such as banks, that agree to adhere to SBA guidelines for the loans. In general, the money can be used to pay expenses, cover rent or mortgage payments and buy equipment, among other costs. However, some loan programs do set restrictions on what the funds can be used for, so talk with an SBA-approved lender for specific requirements to determine if the loan fits your needs.

Because the SBA backs a portion of the loan, the risk for lenders is reduced, paving the way for them to offer larger loan amounts — ranging from $500 to $5 million — and more favorable terms. In general, SBA loans have lower down payments, do not require collateral and offer low interest rates, typically ranging from 5% to 10% depending on individual factors and financial needs.

Repayment terms are usually dependent on what the loan is used for, with maximum maturities set for SBA loans. For instance, the maximum maturity of a loan used for real estate is 25 years, while the maximum maturity of a loan used for equipment, working capital or inventory is 10 years. Like other loans, payments are usually made monthly.

To be eligible for an SBA loan, a business must:

  • Be located and operate in the United States or its territories
  • Be a for-profit business
  • Meet size standards based on the SBA’s definition of a small business
  • Have an owner who has invested equity into the business
  • Have exhausted all other financing options

2. Term loans

With a term loan, the business borrows a specific amount of money, which it must then repay over a set period of time with interest. These loans can be set up to be paid over the long or short term. The features of each loan, as well as your business needs and financial circumstances, will help determine which loan is right for your business.

Often used to cover equipment purchases or construction costs, long-term loans are paid over anywhere from three to 10 years, and sometimes longer. The interest rates of long-term loans tend to be lower compared to those of short-term loans. However, long-term loans can be harder to obtain, generally requiring collateral to secure the loan, a good business credit history and at least two years in business.

Short-term loans, on the other hand, are typically used to fill the cash flow gap for payroll, purchase office supplies or pay utility bills. They generally require repayment within three to 18 months and typically have higher interest rates. Unlike long-term loans, which may take quite a while to apply for and receive approval for, short-term loans have a much simpler application process that results in quicker funding, even for businesses that may not have a solid credit history.

3. Equipment financing

Equipment financing refers to business loans used to purchase equipment for the business, such as vehicles, commercial kitchens and construction machinery. The equipment itself serves as collateral for the loan, meaning the lender can repossess the equipment if the business defaults.

Business owners repay this loan over an agreed-upon period of time with a relatively low interest rate. Qualifying for equipment financing tends to be much easier compared to other types of business loans because the business does not have to be established for a specific period of time nor does the business owner need valuable assets or excellent credit.

4. Invoice financing

Invoice financing, also called accounts receivable financing, refers to a loan that works like a revolving line of credit. However, instead of basing the loan amount on assets or real property collateral, this financing arrangement is based on a company’s average invoice volume. The lender examines the company’s weekly volume of invoices and then may offer between 70% and 90% of the average invoice volume.

This type of financing often is used to provide needed cash flow that will cover payroll expenses, utility bills or the purchase of office supplies. Business owners are not obligated to take the entire loan amount at one time as with a traditional loan. Instead, they can draw out only the amount of funds needed at any given time, similar to a line of credit.

As with other business loans, invoice financing terms include interest rates and repayment terms. While fees and interest rates vary, companies often charge a processing fee of approximately 3% of the total invoice amount as well as a factor fee based on how long it took the client to pay the invoice. The factor fee usually is taken weekly and equates to approximately 1% of the total invoice amount.

Qualifying for invoice financing typically requires a good credit history as well as a proven record of invoices.

5. Business lines of credit

A business line of credit is a business loan that works like a credit card. Once approved for a predetermined credit limit, business owners can access the cash they need when they need it rather than taking out the entire amount at one time. They can use these funds to cover payroll, hire new employees, purchase goods or even grow and expand their business.

Once the borrowed amount is repaid, the business owner can access the full amount once again. When repaying the borrowed amount, business owners will pay interest only on the amount borrowed. Interest rates on lines of credit can be higher for those with a poor credit history.

Applying for a line of credit is similar to applying for a traditional loan. You’ll need to complete an application, provide financial documents and go through a personal credit check. In addition, you may need to sign a personal guarantee or provide collateral to receive approval.

6. Merchant cash advances

A merchant cash advance provides cash to business owners in exchange for a specific percentage of their future debit or credit card payments. Funds obtained through this financing option often are used to purchase new equipment, obtain seasonal merchandise to supplement regular inventory or even pay for building expansion or remodeling.

With a merchant cash advance, the lender — usually a non-bank lender — issues a set cash amount, and as you process debit or credit card payments, the lender takes a percentage of each payment and applies it to your loan balance. As such, payments are based on daily sales, so your payments will fluctuate based on what those sales are.

Because a merchant cash advance is not a traditional loan, it is not regulated like a regular business loan. Therefore, interest rates can be extremely high. In addition, these companies may start collecting payments — including interest — the next business day after the receipt of your funds. As such, lenders that offer merchant cash advances often seek out businesses with poor credit histories that cannot qualify for other types of business loans.

The high interest rates and frequent payments can be difficult for some businesses to pay as required, driving them further into debt. However, this can be an attractive option for many businesses given approval can happen in as little time as 24 hours.

How to repay business loans

Repayment for business loans depends on the type of loan obtained. You could make payments through installments, or regular payments, made weekly, monthly or even quarterly. Or payments could be made on a revolving basis, meaning you repay what you borrow. In some cases, payments may be taken out per purchase or business transaction.

Here’s how you can expect to make payments depending on which type of business loan you get:

  • SBA loans, term loans and equipment financing: The borrower makes regular payments as agreed upon with the lender. These could be weekly, monthly or quarterly.
  • Invoice financing and business lines of credit: These are revolving financing options, which means you are preapproved for a set amount that you can borrow against. When you repay the amount borrowed, you can then borrow those funds again, and the cycle continues.
  • Merchant cash advances: The borrower repays this business loan by giving the lender an agreed-upon percentage of each debit or credit transaction it completes until the loan has been repaid.

Business loan requirements: How to get a business loan

1. Build your personal and business credit scores

Because business loan requirements may look at both your personal and business credit score, you need to build your credit scores by making regular, on-time payments on your existing loans and credit cards, as well as keeping your debt level low.

2. Research lenders and check requirements

Getting a business loan that’s right for your business means finding a lender and loan qualifications that align with your needs and financial situation. Most business loans require a minimum number of years in business, a good credit score and a strong financial history. Some financing options also require collateral.

With regard to SBA loans, the qualification requirements are a bit different. While SBA loans do take into account a business’s ability to repay the loan, lenders also look at how the business makes money, where it operates and if it meets SBA size standards as a small business.

3. Gather documents

To get a business loan, you typically will need to provide the following documents:

  • Loan application form
  • Resume
  • Business credit report
  • Income tax returns
  • Accounts payable and receivable
  • Financial documents, such as bank statements, balance sheet, income statement and cash flow statements
  • Legal documents, such as articles of incorporation, business licenses, commercial leases, franchise agreements and any contracts with third parties
  • Business plan

4. Provide collateral if necessary

While not all business loans require collateral, for those that do, be prepared to provide a collateral document. This should list the cost or value of all personal and/or business property that you are prepared to offer to secure the loan.

Where to get a business loan

Banks

Large commercial and community banks offer a wide array of business loans, often with terms that fit your needs as well as lower interest rates than other lenders. However, their requirements may be stricter and the application process can be lengthy, requiring a lot of paperwork and documentation as well as a long time for review and approval.

Because they are generally smaller, community banks can sometimes offer more personal service and be more willing to work with a business to get approved for a loan than a larger commercial bank.

Online lenders

Small business loans through online lenders, such as Rapid Finance and OnDeck, often are easier to get approved for because these lenders are more likely to work with borrowers that have less-than-perfect credit, have not been in business for very long and/or don’t have large annual revenues. Additionally, the application process is typically quick, sometimes taking just a day, with funding received in as little time as one to two days after approval.

On the flip side, online small business loans often have higher interest rates, shorter repayment terms and lower borrowing limits than traditional lenders.

Bank lenders backed by the SBA

The SBA works with major lenders, such as Wells Fargo and Chase, to provide loans to businesses at lower rates with long repayment terms. These lenders take on these loans because they are guaranteed by the SBA, which will pay off a portion of the loan should the borrower default. However, businesses must meet a unique set of eligibility requirements to receive an SBA loan, which can be hard to do.

Peer-to-peer lending sites

Peer-to-peer loans are loans between an investor, rather than a bank, and the borrower. Examples of peer-to-peer lenders include Upstart and Peerform.

Peer-to-peer lending can be a good option for new businesses or those with poor credit.

Qualification requirements vary by lender. Upstart, for example, requires a minimum credit score of 620, while Peerform requires a minimum score of 600. It’s important to check with different lenders for exact qualifying requirements.

While approval may be easier, these loans also may have very high interest rates and origination fees.

FAQ and other things to know

Loan approval can range from just a few days when applying with an online lender to one to two months when applying for a term loan through a bank or SBA-approved lender. Loan approval for a merchant cash advance also can be quick, while approval for a line of credit may take a week or more.

Business loan terms vary based on the type of loan you have. For instance, long-term loans may be for up to 10 years, while short-term loans range between three and 18 months. SBA loans also may have long terms, while invoice financing and merchant cash advances have short terms.

The amount of funding that a small business can get varies based on the type of loan and the individual business’s financial standing. Traditional loans can be for very large amounts — the SBA offers loans up to $5 million — while short-term loans, invoice financing and merchant cash advances have much lower borrowing limits. For instance, invoice financing is based on your outstanding invoices, so if you have an average amount of $2,000 in outstanding invoices each month, your loan would be based on this amount.

Getting a business loan that fits your needs depends on a number of factors. Traditional business loans and lines of credit usually require a solid credit history, several years in business and, in some cases, collateral. Other financing options, such as invoice financing and merchant cash advances, are more likely to provide loans to newer businesses and those with less-than-perfect credit.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Restaurant Business Loans: Top 5 Financing Options

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Whether you’re opening a restaurant or have been operating one for years, restaurant business loans can provide working capital for daily expenses or major purchases such as equipment. But getting a restaurant loan can be a challenge since traditional lenders often view restaurants as high risk because of industry volatility. Here are our top picks for restaurant business loans.

Top 5 restaurant business loans

We chose to highlight online lenders that cater to restaurants because they typically have more lenient eligibility requirements and faster funding, although interest rates can be high depending on your credit history. Online lenders typically work with a variety of businesses and can help restaurant owners pay for equipment, inventory, payroll and other expenses.

The lenders on our list also had to show:

  • Transparency: Information on loan amounts and time to funding is described on lender websites. While transparency is key for us, it’s not common for online lenders that offer restaurant business loans to list APRs online, so you’ll often need to reach out to the lender for specifics.
  • Reputation: Lender credibility was a factor in our determination.
  • Accessibility: We heavily weighted lenders that have relatively low revenue requirements and time-in-business requirements, with these lenders requiring one year or less.

Fora Financial

Fora Financial offers restaurant business loans between $5,000 and $500,000 that can be used to purchase equipment, hire staff, buy inventory, market the business or open a new location. The company, which also offers food truck financing, advertises 24-hour approval and funding in as little as 72 hours.

Repayment terms are up to 15 months. Fora Financial doesn’t require collateral and offers early payoff discounts. To be eligible, you need at least six months in business and $12,000 in gross monthly sales, and you must have no open bankruptcies.

Fora Financial uses factor rates — which are written as decimal figures rather than percentages — to express interest. You would multiply the factor rate by your loan amount to determine the total cost of your financing. However, the company doesn’t publicly disclose its factor rates.

Kabbage

Kabbage offers a revolving line of credit for qualified restaurateurs from $1,000 to $250,000. You can draw from your credit line at any point and repay the balance on a 6-, 12- or 18-month schedule.

Each month, you would need to pay back either one-sixth, one-twelfth or one-eighteenth of your debt, plus a fee between 1.25% and 10.00%. To qualify for the 12-month term, you must borrow at least $10,000. And the 18-month term requires a $20,000 minimum withdrawal.

Restaurant owners need at least one year in business and $50,000 in annual revenue or $4,200 in monthly revenue in the past three months. You could receive funds within three business days of being approved.

National Funding

National Funding offers small business loans to help restaurant owners grow their establishments. Eligible applicants could borrow between $5,000 and $500,000 to cover expenses such as inventory, kitchen equipment or dining room furniture. The company could issue funding in as little as 24 hours after approval.

Loan repayment terms span 4 to 24 months, but National Funding doesn’t disclose APRs. To qualify for a business loan, you need $100,000 in annual sales and at least one year in business.

National Funding also offers equipment financing, which requires just six months in business and has terms between 24 and 60 months. This could be a better option for someone with poor credit, as the minimum credit score requirement for equipment financing through National Funding is 575.

Balboa Capital

Balboa Capital provides restaurant business loans from $5,000 to $250,000. You could receive same-day funding with repayment terms from 3 to 18 months. The company doesn’t disclose its APRs.

Collateral isn’t required, and applicants with all types of credit can be considered. Balboa Capital requires your restaurant to have been open for at least one year with a minimum of $300,000 in annual sales.

Balboa Capital also offers equipment financing for restaurants. Equipment financing requires one year in business and $100,000 in annual revenue. You could receive same-day equipment loans up to $250,000 with lease terms starting at 24 months.

OnDeck

OnDeck offers short-term loans for restaurant owners between $5,000 and $500,000 with terms from 3 months to 36 months.

APRs start at 11.89% for well-qualified borrowers, though the weighted average is 49.06%. OnDeck requires one year in business and at least $100,000 in annual revenue. If approved, you could receive funds as soon as the same day.

OnDeck also offers lines of credit between $6,000 and $100,000 to restaurant owners.

6 types of restaurant financing

To cover the particular costs of running a restaurant, lenders offer several financing options. Here are some of the common types of restaurant funding from which you could choose.

Term loans

Long-term or short-term business loans can help restaurant owners cover large or small expenses. A long-term loan offers a fixed interest rate — typically between 6% and 8% — and monthly payments that often span three to 10 years.

Long-term loans typically range from $25,000 to $200,000, but they often require a lot of paperwork, such as a business plan and tax returns, that slows down the funding process. These loans are often backed by existing collateral.

Short-term loans have faster funding times and less required paperwork, such as no tax returns or financial statements. Repayment terms typically range from three to 18 months. Short-term loans typically come in amounts between $5,000 and $500,000 (though you can find them for lower amounts). They can be easier to obtain than long-term loans — especially if you have bad credit — but they also tend to have higher APRs.

Lines of credit

Restaurant owners can have continuous access to up to $100,000 in funding through revolving business lines of credit. You could draw from your credit line on an as-needed basis and only pay interest on what you borrow. Once you repay the borrowed funds, the full amount becomes available again.

Some lenders may charge a maintenance fee for keeping the line open, regardless of whether you use it. PNC Bank, for example, charges an annual fee of 0.25% based on your committed line amount. You may also need to secure the line with collateral. Lines of credit are possible for applicants with low credit, but you would likely face higher APRs.

Equipment financing

Equipment financing allows restaurateurs to take out a loan to purchase equipment or machinery for the business. The assets act as collateral on the loan, which can keep interest rates low, potentially between 4% and 12.75%.

There may be other costs, though, such as application or appraisal fees. You may need to make a down payment of 10% to 20% when applying for an equipment loan.

If you don’t want to own a piece of equipment, you may want to consider a lease instead of a loan. An equipment lease could provide lower monthly payments, and you could return the equipment or purchase it at a discount when the lease term ends.

Inventory financing

Restaurant owners can find short-term loans and lines of credit that are designated for purchasing inventory. That inventory would act as collateral, though the lender may only finance up to 80% of the inventory value.

Inventory financing could be beneficial if you want to buy items at a large discount but can’t make the full purchase upfront. You typically need good credit and a proven sales history to get a better APR. Rates may be as high as 35%. You may find higher loan minimums of at least $500,000.

SBA 7(a) loans

The U.S. Small Business Administration offers general business funding through its 7(a) loan program. Business owners can apply for loans up to $5 million from SBA-approved lenders. The SBA guarantees 85% of loans up to $150,000 and 75% of loans greater than $150,000.

Repayment terms could be up to 10 years for general working capital loans or up to 25 years for loans used for real estate expenses.

Variable rates would be based on your loan amount and repayment term:

  • Loans less than 7 years:
    • $25,000 or less: Prime rate plus 4.25%
    • $25,001 to $50,000: Prime rate plus 3.25%
    • Over $50,000: Prime rate plus 2.25%
  • Loans 7 years or longer:
    • $25,000 or less: Prime rate plus 4.75%
    • $25,001 to $50,000: Prime rate plus 3.75%
    • Over $50,000: Prime rate plus 2.75%

Fixed rates would be based on the Prime rate plus 5% to 8%. As of March 17, 2020, the Prime rate is 3.25%.

Business credit cards

Though not a business loan, business credit cards can offer restaurateurs fast access to funds. Business credit cards have average APRs between 13.12% and 19.87%. Business owners with strong credit would likely receive lower rates.

Business credit cards may charge annual fees, although you may be able to earn rewards as you use your card. Sign-up bonuses are possible, too. Keep in mind that you would need to pay off your balance in full each month to avoid costly interest.

How to qualify for a restaurant loan

When applying for restaurant loans to give your business a financial boost, you would need to meet each lender’s individual eligibility requirements. However, you could expect lenders to review some common documentation and information:

  • Personal financial statements: These would illustrate your history of borrowing and repaying money, indicating how much of a risk you’d be to a lender.
  • Profit and loss statements: A lender could review your business costs and expenses in a specified period.
  • Balance sheets: These would outline your business’s overall assets and liabilities.
  • Projected financial statements: A lender would need to make sure you expect to generate enough income to repay debt.
  • Business certificates and licenses: You typically need to be in compliance to be eligible for a business loan.
  • Business tax returns: Your tax returns would provide an additional window into your business’s financial history and current standing.
  • Resume: The more experience you have as a business owner, the more willing a lender may be to approve you for a loan.

A restaurant startup costs breakdown includes inventory, payroll and equipment, and those expenses will keep piling up as long as you stay in business. Labor is another common obstacle since restaurant owners typically have trouble finding dedicated workers while facing high turnover rates.

Be sure to shop around to get the best APR and repayment terms for your restaurant business loan. Once you find a lender with which you feel comfortable, you can be on your way to growing your restaurant.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.