8 Ways to Finance a New Restaurant

Twenty five percent of new restaurants close their doors within their first year. It’s therefore hardly surprising that they’re not exactly the easiest businesses in the world to find financing for. Throw in the shaky economic climate and you have a financing challenge that can be difficult to overcome.

restaurant business
photo credit: Hallenser

The good news however is that finding restaurant financing is far from impossible. All you need is a good idea, the talent to conceivably pull it off and a thorough understanding of the financing options available to you.

This article deals with the latter. Here are eight ways to finance a new restaurant.

Personal Savings

First off, we have personal savings. You don’t need to invest a lot of your own money into your new restaurant but you do need to invest some. It demonstrates how serious you are about your new venture. It also demonstrates how much you believe in its potential for success. You can’t ask other people to invest in your new restaurant until you’ve proven that you’re willing to do the same.


Bank Loans

There’s never been a worse time to approach a bank looking for a loan but contrary to popular belief, the banks are still lending. The only difference between now and a couple of years ago is that, these days, they take a lot more convincing. Here are a few tips for getting the yes:

  • Draw up a pitch perfect business plan. Seek professional assistance if necessary.
  • Get your credit score in order.
  • Be willing to put up collateral.
  • Talk to multiple banks.
  • Stick to local institutions with an understanding of your area.

Micro Lenders

If the banks turn you down, another option well worth looking into are micro lenders. Backed by the Small Business Administration, approved micro lenders provide small business loans that range in size from $2,500 to $35,000. The requirements are strict but provided you meet them, obtaining such loans can be surprisingly straightforward. They are also well known for approving loans that banks have previously turned down.

Ask Friends and Family to Invest

One of the many side effects of the current economic climate is that property is no longer a safe investment. This has left many people with money to invest but no idea where to put it. As a result, there’s never been a better time to ask family and friends for business investments. Doing so is particularly suited to the restaurant industry as everyone knows how it works and it’s something that many people would like to be a part of.

Local Investors

If your friends and family don’t want to invest in your new restaurant, that doesn’t mean that a local investor won’t feel differently. Make a list of potential backers and start approaching them one by one. Existing restaurant owners are always a good place to start. In a similar fashion to bank financing, your odds of success will depend largely upon the quality of your business plan.

Part Financing From Seller

If you’re considering purchasing an existing restaurant, it’s always worth asking the existing owner if they’d be willing to help finance the deal.  Such arrangements are a lot more common than most people think. The reason being that they can prove greatly beneficial for both the buyer and the seller, allowing both parties to get what they want faster.  


Another form of restaurant financing that many entrepreneurs overlook can be found in crowdfunding. Crowdfunding sites such as Kickstarter.com allow potential entrepreneurs to pitch their ideas to web users all around the world. If people like it, they are then invited to invest anything from five to five thousand dollars. Provided your restaurant idea is somewhat novel, crowdfunding can prove surprisingly effective.

Franchise Companies

Finally, if the other financing options in this article have proved less than fruitful, another option well worth considering is the franchise model. If you’ve got your heart set on something unique, this obviously isn’t an option. But if you’re willing to go down the chain route, most franchise companies offer very generous financing options. The equally generous training and support can also prove invaluable for first time restaurant owners.

About the Author: The author of this post, Brian Smith, is part of the team at YellowStone Capital, which offers merchant cash advance amongst other services. He is passionate about cooking and watching movies.