Financing
Starting a small restaurant costs money and may be one of the single most prominent deterrents to opening a small business -- but it doesn't have to be. If you need to borrow money to fund your business start-up and plan to apply for a business loan, arm yourself with a written business plan. Even if you seek financing from a source other than a financial institution, a business plan is important. It will provide insight into your business and will serve as a financing proposal tool.
Financial Options
If you are looking for financing other than a conventional business loan, consider the following options:
Friends and family - This may sound like the best option, but borrowing from friends and family has its drawbacks. For instance, if your restaurant runs into financial difficulties and you need a little more money, will they be able to extend another loan? Also, if you aren't able to pay back the money as fast as you thought, it can lead to hard feelings. If you do choose this route for financing your business, be sure to discuss all the particulars up front and to get them in writing.
Using your personal savings - If you've saved for the purpose of starting a small restaurant business, good for you. It's a great way to keep your debt down. However, be sure to have a back up plan in the event your savings run out and you need more money.
Credit Cards - This is not a good option. If you use credit cards to buy items you need for your business, most often they charge a daily interest rate. Other factors that come into play include maximum limits (depends on your credit history) and paying a minimum amount each month.
Home Equity - This is a risky option because if you use the equity you've built up in your home and the business fails you risk the chance of losing your home.
