How to Get a Loan for Your Restaurant Business from Restaurant Financing Companies

The restaurant business is often started up with the help of some saved capital, or loans taken from friends and family. If the first restaurant venture does well, then restaurateurs often look to expand their business. The revenues of an average restaurant are usually just enough to cover their expenses. Therefore, restaurateurs resort to raising funds from external sources to expand or renovate. However, getting finance from banks is not an easy task. Banks need collateral or guarantee of repayment of the loan. This article will tell you about the other ways to raise funds for your restaurant business, such as the restaurant financing companies.

How to Get a Loan for Your Restaurant Business 

There are several restaurant financing companies and Fin-tech start-ups such as Loanframe, Lendingkart.com, Capital Float, Impact Guru, etc. that solve the problem of acquiring funds. However, getting finance from these start-ups isn’t as easy as we think. It is very critical to know your numbers and do the substantial homework on your restaurant business before you look out for money. You should be aware of the finances of your restaurant businesses such as rent, labor, food cost, the cost of equipment and all of that as a percentage of total sales. Applying for a restaurant loan becomes easier if you’re aware of the exact finances required for your restaurant business.

Who are these Restaurant Financing Companies? What do they do?

Some of the top restaurant financing companies that provide loans in India and will help you get funding for your restaurant are-

1. Capital Float

It is an online finance company providing that provides working capital finance to small, medium enterprises (SMEs) in India. Capital offers flexible, short-term loans that can be used to service new orders, renovation of existing set-up and optimize cash cycles. At capital float, borrowers can apply online in minutes, select a repayment term and get the desired loan in three days. As of now, the company has disbursed close to over Rs 250-300 Cr and has more than 1,000 borrowers in 40 locations PAN India. The interest may vary from 16-19 percent.

2. Lendingkart

Lendingkart is a technology-based finance company that helps SMEs to get a short and long-term loan. It was found in 2014 by Harshvardhan an ISB Hyderabad alumnus and Mukul Sachan who has passed out from IIM Banglore. The Fin-Tech company has joined hands with online marketplaces and trade associations to service the financial needs of both online and offline companies. The company offers loans starting from Rs 50,000 to Rs 10 lakhs depending upon the need and profile of the borrower.

3. Loan Frame

Loan Frame is a Fintech company that aims to become the largest SME lending marketplace in the sub-continent. The company is backed by leading global private equity and venture capital investors. It provides loan against property, unsecured business loans, working capital loans, cash and non-cash loans and equipment loans catering to various prominent sectors.

Assessing Your Financial Needs to Get a Loan for Your Restaurant Business

Restaurateurs should invest time in accurately gauging the funds they need. One should have a clear idea of how many customers he needs daily to break even with an estimated average ticket size (total sales/ total number of orders), what would be the food cost, etc., down to the last detail. After having all the figures in hand, one should be ready with the plan to expand the business.

Many restaurants such as Box8, Dana Choga Kitchen (DCK), WOW! Momo and Foodlink restaurant has raised money for expansion. Most of them have been successful in expansion and even getting PE investors on board in their later stages of expansions.

Applying for Loans for Your Restaurant Business

With the help of Fin-Tech companies, restaurants can either raise funds for the next outlet or get money for the renovation of the existing outlet. “Getting access to finance from banks or NBFCs for MSME ventures is extremely difficult,” with banks ordinarily reluctant to do the due diligence of such small businessmen, said Harshvardhan Lunia, CEO of Lendingkart in a leading newspaper report.

These restaurant financing companies can lend from Rs 2 lakh to up to Rs 1 crore with nominal interest rates. They process data to check the creditworthiness of customers with the help of technology. The entire process is online; one can get their applications through their website, and fill-up the form with the relevant documents (below is the list of required documents). After the application, an ID is generated and sent across to your mail for further tracking. You can follow that id to know the status of your loan. Your application is then processed, and if accepted, the loan is given.

List of Mandatory Documents and Information to Be Submitted While Applying For a Restaurant Loan For Your Business

The following are the required documents that would need to get a restaurant loan for your business in India.

1. Registration Certificate

2. Incorporation documents such as Partnership Deed for a partnership firm and incorporation certificate for a private limited firm. In case of a sole proprietorship, any registration with government body such as Shop establishment act can be deemed at Incorporation document for that firm

3. Financial Documents The following documents are required and acceptable as financial documents

• Business PAN Card
• Audited Financials (P/L & Balance sheet) for FY15 and provisional FY16.
• Bank Statements of 6 months
• Latest ITR (Income Tax Return)
• Address Proof
• Existing loan details along with a copy of sanction letter(s)
• Address Proof (utility bills/driving license/passport/voter ID) along with Ownership proof (utility bill/property tax receipts etc.)
• CIBIL Score (if known)

4. Disbursement Information: Information required of a bank account that can receive funds for your organization, such as Bank Name, Branch Address, Bank Account Number, Bank IFSC code, Scanned copy of a canceled cheque

5. Organization Name

6. About the Organization (400 characters or less)

7. Causes of Interest

8.  Geographic Focus (Nationwide, particular state)

9. Organization Contact Information

10. Organization Email

11. Telephone Number/Mobile

12. Key Individual/Partners/ Directors Contact Information

• Name
• Email
• Registration Number / Date
• PAN of both business and individual
• Audited accounts of last 1 year (Balance Sheet/Income & Expenditure / Receipts & Payments/ Statutory Auditors’ Report/ Schedules) / annual report
• Income Tax Return filed for last one year

Getting a loan for a restaurant business used to be quite a tedious task in the earlier days, but with restaurant financing companies coming up, the process has become quite simple. Whether you want a loan to start a restaurant business, or want to expand your current business, you can now get the loan easily.

However, these restaurant financing companies or any of your other potential investors would need to have faith in you and your business model before they can invest in you. For that, you must have a stellar restaurant business plan. Here is how you can write one yourself, and which is sure to help you get that loan for your restaurant venture.