Starting a restaurant with not an envious amount on hand? It can seem worse if you have no credit history or bad credit. Well, the gigantic status of banks may make you feel that there is no other way for getting finance if banks refuse. The truth is not so. The business world is not all-dependent on banks. There are alternate channels and here are 5 effective ways to get finance for your restaurant.
1) Loan From Family And Friends
Your family and friends are your well wishers and they never doubt if you will succeed unlike other financial institutions which go by your finance history. Hence, feel free to ask them. However, treat the loan as obtained from an outside lender to maintain your financial discipline to aid in prompt repayment of the loan. Here is how it works best:
- Draw your budget taking into account every expense and income so that you can decide how much you can afford as repayment. Knowing the figure will help to assess the time frame within which you can close the loans for restaurants.
- Having the loan transaction properly documented helps both the parties. Draw an agreement covering all aspects including the possibility of unexpected delay in repaying the loan and what has to be done under such circumstances.
2) Mortgage Loan
Next to the option of borrowing from your family and friends would be the mortgaging of your loan. This again is an inside affair as it is your home that you are mortgaging, though the loan is from a financial institution.
As an entrepreneur, you may find it difficult to get mortgage loan as this loan format favors those with regular pay check. However, you still can avail mortgage loan if you have the required papers, the most important being your previous two years returns, both personal and business and your credit history and to take a look of restaurant start up costs.
3) Credit Cards
One of the best features of availing credit card loan is that you don’t need to wait long to complete the formalities and the money is for you to use with no questions asked. But to make the most out of it and not get involved in habitual borrowing, you set the following rules:
- Borrow only what you need
- Be accountable
- Never indulge; use your loan amount wisely
- Never forget that it is only a loan and not your money
- Repay at the earliest
An amazing way to raise capital through your close contacts and not-so-far contacts is crowdfunding. Crowdfunding platforms offer you a wide reach primarily through social network. You can campaign through emails and employ every marketing tactic present online.
There are four types of crowdfunding namely:
- Donation-based crowdfunding
- Rewards-based crowdfunding
- Equity-based crowdfunding
- Debt crowdfunding
5) Other Loans
If you are looking for still other types of loans, go for loans such as:
- Loan for working capital
- Loan for purchasing equipments
You need not worry about the credit score as loans under these categories are often sanctioned.