Financing Your Restaurant:
"Where There's A Will, There's A Way"

If you are thinking about starting your own restaurant you might be surfing for information on restaurant financing. Unlike other articles and websites that will offer you loan applications or suggest you refinance your house, I'll try to give you my perspective from my 30+ years in the restaurant business.

When it comes to financing your restaurant there are 4 major ways I've personally seen it done.

#1 Way Of Financing Your Restaurant

Traditional banks and lenders: You write up a detailed restaurant business plan and then try to get a traditional business loan from a bank. Or, perhaps a government loan like a SBA loan. After the economic downturn credit for entrepreneurs is rather tight. If you have a track record as a successful restauranteur, and a substantial amount of capital to put in as equity, you might be able to talk a bank into financing your restaurant. Unfortunately, most new restaurant owners don't have 65-75% of the capital needed to start a restaurant. In the majority of new start-up restaurant loan applications the answer will be "NO"

#2 Way For Financing Your Restaurant

Present your well researched restaurant business plan to a group of investors who can tolerate a high risk venture. Be prepared for a barrage of questions and make sure you can answer each and every contingency. Also, these investors want to do ZERO work (in most cases), and get a lions share of the profits. It is important that you establish expectations and you'll have to report to these investors in a open, transparent way on a very regular basis. If you are prepared to give away a large percentage of the profits, and realize that your investors might be making as much as you without doing any work, you can probably negotiate some restaurant financing from a group like this.

#3 Way Of Financing Your Restaurant

Talk to friends and family and get them to put up the credit, collateral of actual dollars to start your venture. Be VERY careful of choosing this option. This won't be just a business relationship. Ask yourself whether you are willing to risk losing all your closest relationships if things don't work out?

I have seen many, many families and friends lose special bonds and never speak to each other again because of financial partnerships in less than successful restaurants. If you have any other alternative for financing your restaurant, I suggest you take that option. The only caveat to this would be a family of restaurateurs where a child is starting their first operation on their own, and the parents provide funding.

#4 Method Of Financing Your Restaurant

On very rare occasions I've seen energetic restaurant owners start their restaurant using credit and create financing from others inside the restaurant industry. When I say "creative financing" I'm referring to some of the same methods that made many real estate investors wealthy in the '90's and up until 2008. Even individuals with zero credit or capital were able to negotiate ways to own millions of dollars worth of real estate.

I've seen the exact same create financing principals used to buy restaurants. It requires a lot more patience and diligence, but it can be done. In my case, I was able to own a restaurant with virtually no money down. If you really, really, really want to own your own restaurant there are ways to get the financing for your restaurant.