Financing the Opening of a Restaurant Business- Part 2

If you have put together a reasonable stake from these sources, you can often leverage the rest by using an SBA loan. A reasonable stake means 50% of the total you will need if you are starting from scratch, or 10-20% of the total if you are buying an existing business. The SBA favors borrowers who can show they have related industry experience, so if you don't have any, now is the time to recruit some mentors and advisers to your team who do, to make your application look much stronger.

If you are buying a business, you will hopefully also have some financing coming from the current owner. These funds, while they don't put actual cash into the deal allow you to pay a part of the purchase price over time, thereby reducing the total amount required to get started. Owner financing, combined with bank financing is the lowest cost way to get into the restaurant business for most people.

Another option, if you are looking at franchises, is third party financing arranged by the franchise company. While many franchises have steep net worth requirements, if you qualify they will often help you find the actual cash you need to get into the business.

Once you have exhausted the above options, you can pursue outside investors. While it is difficult to find an investor interested in funding a restaurant, it does happen, so be persistent. Your best bet is to find a successful business owner already in the restaurant business who may want to expand and have the capital, but not the time. This is where you come in, with a concept and the passion, but not quite enough cash.

Venture capital is a dead end for restaurants. The only time you will get interest from these investors is if you already have a chain of five or more locations, and a concept that can turn into the next Starbucks. Another dead end is grants. While the guy on late night TV promises that the government will give you money to start any business, don't believe it. There simply are no grants for restaurant startups.

If you are persistent, and you have a solid business plan, anyone can eventually find the money to start a restaurant, even if you are starting with nothing else. All you need to do is keep at it and not give up, and you can succeed.

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