Startup restaurant by tathuafire

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Startup restaurant

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									Startup restaurant




The amount that you require in startup capital for your restaurant business will depend on
many factors. These include your concept, scale of operations, necessary equipment,
inventory purchases and the risk that you want to take on in terms of having funds set
aside in case things don't go as expected.

Startup costs for a new restaurant can run into six figure for some operators but can be
minimized down to the five figure level for other startups. Either way you will need
access to startup funds or your dreams will not get off the ground at all.

If anyone is going to take a risk by financially backing your restaurant venture then you
will have to prove to them that what you have planned is viable and that they will get a
return on their investment. Restaurants are known to have a high failure rate so the onus
is on you to prove that you are an exception. It is essential to have a well researched
restaurant business plan if you are serious about convincing others to trust you with their
funds.

Always plan for your restaurant funding needs well in advance as you will undoubtedly
encounter long application times or other roadblocks while you wait for the cash to
appear.

Remember that when you start a restaurant you will not only need to meet your startup
costs up to the point where you open your doors for business. You will also need to
budget for operating costs during the first few months while income is slow and you need
to think about your personal living costs.

These are a variety of ways that you can fund a restaurant business. Let's consider some
of the more common restaurant funding options that are out there so that you can
compare all the options.

Personal Assets and Savings

This is the safest way to proceed if you can afford it. You may have savings in a bank
account, some assets that you can sell or some investments that you can cash in.

Friends and Relatives

If you can arrange to get funding from people who you are close to then this method is
also among the best options that you have. Friends and relatives are likely to give you
low interest rates and relaxed repayment terms. Be very careful with this approach though
as it would be devastating to damage relationships with loved ones over a financial
matter.
Partnerships

You may find that you are simply unable to get access to the amount of startup capital
that you need to start a restaurant alone. By taking on a partner you can share the
financial burden. However you will have to be able to cooperate with any partners that
you take on as your business plans will never work out if you don't see eye to eye.

Equity Investors

You may be able to find an investor willing to invest funds into your restaurant in return
for an ownership stake. Getting venture capital like this is often not easy for small
businesses though. If you do find an investor it is likely that they will come through your
personal network of friends and associates or through your restaurant industry
connections. As with a business partner, investors will want full access to your business
records and they may want to have some say in key management decisions.

Many investors like the idea of being able to say that they own a restaurant. They can
have a place that they can be proud to bring friends and can possibly receive special
treatment while they dine there. This is a good selling point.

Loans from Banks or Finance Companies

Banks and other financial institutions often lend money to small businesses such as
restaurants. At the very least it would be wise to establish a line of credit with a local
bank just in case you needed to access funds at short notice. Lenders will assess the
viability of your business model and they will also want you to put up some of your
personal assets as collateral. Talk to the banks that you have a good credit history with
first.

Cooperative Landlords

One way to reduce your expenses during the early days of your restaurant's life is to ask
your landlord about deferring some of the rent before you sign a lease. During the crucial
first few months your revenue levels may be slow to grow. In the right market you may
be able to ask for a rent free period. Alternatively you could ask for the first few month's
rent to be reduced by a certain amount that can be added on to future rent payments,
possibly in the second year of the lease.

Equipment and Supplies

It is likely that a large part of your startup costs will be related to equipment purchases as
well as buying initial supplies. You may be able to get financing on certain equipment
items so that you can pay for them over a period of several years rather than having to
pay the full price amount up front. Leasing equipment is also a good idea.
Suppliers are usually willing to let you pay invoices up to 30 days after supplies are
delivered so this also gives you some flexibility to delay payments.

Contractors

In a slow economy you may find that there are plenty of contractors looking for work. It
may be possible to have them do the remodelling work that you need for a minimal
amount upfront if you can arrange to pay it back slowly over a longer time period.

Government Funding

There are government grants and loans available to entrepreneurs wanting to start small
businesses. There is always a catch though and you will probably find out that you are
not really eligible in some way. Even if you do see an opportunity then you will find that
the application process is lengthy and you will have many limitations or restrictions
placed upon you.

The US Department of Housing and Development sometimes targets run down urban
areas for development. Grants are available for renovating run down buildings in such
areas although these locations are usually not the best spots to be opening a new
restaurant.

Credit Card Financing

As a last resort, many entrepreneurs these days are using credit cards to finance
themselves into new businesses.

You would be best to leave this option for a rainy day that may come some time in the
future. Although, if absolutely necessary then you could fund a small percentage of your
startup costs with a variety of credit cards. Interest rates on credit cards are higher than
other funding options so if you do go with this method make sure that you are confident
in your ability to be able to start making repayments within a fairly short time period.


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