Many people have heard the startling myth that nine out of 10 restaurants fail within their first year of opening. Hearing this can make anyone who is contemplating going into the restaurant industry think twice.
But according to H.G. Parsa, associate professor in Ohio State University’s Hospitality Management program, as quoted in a Business Week article, this is not true.
After researching, he found that realistically, 3 out of 5 restaurants close or change ownership within their first year of business.
According to the article, Parsa also identified “…lack of sufficient startup capital as one of the major elements that contribute to a restaurant’s failure,” leading him to believe that many banks won’t lend to restaurants because they may believe those mythical statistics. The article states, “Typically, the ones that do [lend] require would-be restaurateurs to pay sky-high interest rates or put up significant collateral…”
But even if banks are wary of lending to restaurant owners, especially new ones, for the reasons mentioned above, there is another option; restaurant loans.
Restaurant loans can be used for startup restaurants, or for restaurants that have been in existence for any length of time. The loans are unsecured, so there is no collateral required, nor are there fixed monthly payments. Restaurant loan payments are made via the restaurants credit card sales. Once a restaurant owner receives a restaurant loan, whenever customers use their debit or credit cards to pay for their food or drinks, a small percentage from the sale goes to repay the restaurant loan. This allows the loan repayments to go with the flow of business.
Another benefit of the restaurant loan is borrowers receive the opportunity to renew their restaurant loan once 60 percent of their previous balance has been paid. Therefore a new restaurant can get a loan and the money funded into the account of his/her choice within the first week of the restaurant’s opening. But it doesn’t stop there. These renewal opportunities allow restaurant owners to have access to an ongoing source of business financing, as they can renew their loans as many times as they like.