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Despite inflation, consumers still eat out, research shows. The Commerce Department recently reported that restaurant spending for March 2023 rose 13% year-over-year. This percentage exceeds the inflation rate for restaurant purchases in March 2023, which was 8.8%, according to the Consumer Price Index report. This means that people don’t just spend more on restaurant food because it costs more, but that they eat out more often – or makes major purchases – than they were at this time last year.
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However, this does not mean that all restaurant owners have it easy right now. Restaurant owners also suffer the effects of inflation, which erodes profit margins. Many restaurant owners had to redesign and reprint menus to reflect higher prices. And many restaurants are still recovering from the effects of the pandemic, which included lengthy shutdowns and extensive renovations to make their establishments social distancing friendly.
Small Business Loans: Hope for the Shrinking Restaurant Industry?
The US currently hosts fewer restaurants per inhabitant than in 25 years. This figure was quoted by Nick Cole, head of restaurant and hospitality finance at Mitsubishi UFJ Financial Group, according to FSR Magazine. And there could be more closures on the horizon, according to Cole.
“Throughout most of the year, we have seen consistently higher sales figures due to rising menu prices and stable foot traffic. But within the last month or two, there are signs that foot traffic may be slower,” he told FSR Magazine. “If foot traffic continues to decline significantly, even price compensation may not be able to sustain revenue.”
If you’re a restaurant owner who doesn’t want to join the rapidly growing list of closings, or an impending recession makes you nervous about maintaining the current pace of business, a small business loan can help.
But what type of loan should you consider and how can you increase your approval odds?
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Types of small business loans for restaurant owners
The Small Business Administration (SBA) provides loans of up to $5 million to restaurant owners. If your bank has partnered with the SBA, they may be able to help with the loan application process.
A private working capital loan can provide a little more of a boost to help you cover expenses and operating costs. These loans are typically good for up to $250,000, and the approval process can be faster than for an SBA loan, according to ROK Financial.
Other options for securing working capital include equipment financing, inventory financing, or lines of credit. You may be able to secure these loans through your bank, through a private lender, or through the company that sells the equipment or fixtures.
How to get the money you need for your restaurant business
Securing a business loan is similar to securing a personal loan. You want to make sure that both your business credit and your personal credit are in good standing. Make sure you have a solid business plan that you can present to investors or lenders. Also, make sure your finances are complete and accurately reflect your past income and expenses. For an SBA loan, you must show three years of personal and federal tax returns.
Finally, don’t be afraid to reach out for help. The SBA can guide you through the process of applying for a 7(a) loan that you can use to consolidate business debt, access short- or long-term working capital, or purchase equipment or inventory.
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