Many people dream of owning a coffee shop. The relaxing smell of coffee, the luxury of being your own boss and making money are quite tempting. But, obviously, you need to run and manage a coffee shop just like any other business; you still need to apply for restaurant business loans, market your business, and hire employees, pay for expenses, and everything in between. Fortunately, you don’t have to worry about working capital because there are different types of business loans available for you.
When scouting for lending companies, keep in mind that lenders will look at your personal and business credit score and your cash flow. Lenders want to know if you are capable of repaying the loan on time. With that said, here are the three most popular loans most coffee shop owners apply for.
Many business owners prefer a business line of credit because of the flexibility it offers. It functions just like a credit card where lenders give you a predetermined credit line to spend against. However, you need to apply for it just as you would with a traditional loan. Once qualified, you can withdraw funds from your line of credit. You only have to pay for the amount of money you’ve withdrawn – not the entire credit limit – and pay for the interest.
Furthermore, there’s no time constraint as to when you can withdraw the money. You can withdraw everything at once or you can let it sit there for months. Business owners like the flexibility of a business line of credit. It’s great for seizing business opportunities, emergency expenses, and more.
You can’t run a coffee shop without purchasing or leasing certain equipment. Ideally, coffee shops need the following equipment:
Coffee shop equipment doesn’t come cheap. Equipment financing is a great option if you need working capital to acquire business equipment. It’s also easier to qualify for compared to term loans and you don’t have to put up collateral because the equipment purchased acts like one. If you default on the loan, the lenders have the right to repossess your equipment.
If you need bank-rate funding but you can’t qualify for one just yet, SBA loans are the perfect solution. Banks have strict qualifications and they need to see you’re a strong cash flow, credit, business history, and revenue, to name a few. SBA loans can grant business owners up to $5 million. SBA loans are created by the Small Business Administration specifically for small business owners. They guarantee the loan up to 85%. This means that the government covers 85% of the lender’s losses if the borrower defaults on the loan.
In order to qualify for SBA loans, you need to apply and submit the necessary requirements to an SBA-approved lender. The lender will then send the application to the Small Business Administration for approval. Sometimes, the process can be tedious due to paperwork and more.
A coffee shop is technically not a restaurant; but when you apply for small business loans for your coffee shop, it falls under restaurant business loans. If you’re looking for reputable lending companies, add SMB Compass to your list. We offer restaurant business loans for coffee shops, restaurants, bars and more. Call us today at (888) 853-8922 or email us at firstname.lastname@example.org to schedule an appointment or speak with one of our lending experts.