Credit cards, loans and more: Tips to finance your restaurant

It’s no secret that bank financing remains tight, which means restaurant operators may have to think outside traditional lines when it comes to managing finances and securing capital.

Financing a new restaurant starts with evaluating your plans and calculating how much you’ll need for to get up and running, everything from construction or renovation costs to your first grocery order.

If you’re opening a franchise, the franchisor might be a resource. Some have been offering incentives including discounts on franchise fees, and recently, Wingstop announced that it has secured $15 million for franchisee loans under a partnership with Franchise America Finance and Bancorp. Formed last year, FAF takes a collaborative approach to helping restaurants and other franchise companies find the right fit when it comes to financing.

If you’re the proprietor of an established restaurant and lucky enough to be running the operation on cash flow, more power to you. If you’re reading this, it may be more likely that you’re in a situation similar to that of Santiago Espinal, who had to borrow from friends to replenish his restaurant’s larder after unexpectedly losing power for a week after Hurricane Irene last summer.

Other factors to consider:

Friends and family can be a key source when your restaurant is need of smaller loans, as can personal and small-business credit cards and your own personal savings.

You may also want to consider adding partners or investors who trade their cash for an ownership interest instead of making a loan. Experts advise checking ahead of time with your accountant to gauge potential tax implications and consulting an attorney to make sure partnership agreements comply with federal, state and local laws.

Even if your eatery qualifies for a conventional business loan, that’s probably not the answer when unexpected costs come up and you need money fast. If your oven breaks and you need the cash to fix or replace it, you don’t have the time to wait for loan approval.  Small-business credit cards are one possible solution, especially if your cash needs are relatively small and you’ll be able to pay the bill out of cash flow when it comes.

Merchant account financing is another way to go. These loans provide cash advances against future credit card sales, and typically come with much faster approval times.

The website Allfoodbusiness.com offers more non-traditional financing ideas.