Keeping in mind the growing demand for the eateries business, banks and financial institutions are extending business loans to restaurants at favourable terms and conditions to fund these businesses in Food and Beverage (F&B) sector. A restaurateur needs to have a steady source of continuous funding especially for daily working capital needs like fresh supplies of edible items, logistics costs and wages for skilled chefs and cooking staff.
Restaurant Business Loan Eligibility Criteria
While the eligibility criteria may be relaxed on a case to case basis by the lender, broadly, the following criteria need to be complied with:
- Guarantee: In case of a start-up restaurant, banks would generally insist on guarantee prior to extending the business loan
- Collateral: The tangible assets for which the loans have been taken would be acceptable as collateral cover
- Down Payment Component: Generally, the banks would insist on a certain lumpsum portion of the expenses be funded by the promoter. For example, the cost of certain sophisticated cooking and freezing equipment, which are complex to value by the bank, may be required to be borne by the promoter
- Financial Track Record: Factors like the business model, location of the restaurant, skilled staff, and tenure of licence, brand value and marketing initiatives influence the revenues and financial performance
- Good Credit Score: Since the lender is primarily concerned with the repayment capability of the borrower, a good credit score of over 750 would help easily obtain a business loan
- Management Experience in the related field: This is a very crucial aspect. Unless the promoters are interested in culinary matters, it would be difficult to innovate and attract new customers. Often, the initial promotional expenses are as high as the operational costs in a new set up
The restaurant business is a promising one and banks offer loans to sole proprietorships, partnership firms and companies.
Restaurant loans may be used for short-term working capital purpose or long-term capital expenditure needs like:
- Purchase of land or building to host the eatery
- Renovation of the kitchen or the customer sit out area
- Acquisition of fixed assets like kitchen equipment and specialized machinery
Banks and financial institutions generally mandate a guarantor and adequate collateral prior to loan approval.
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Tenure
- Term loans for capital expenditure have a tenure ranging from over a year to 5 years.
- Short-term working capital assistance are payable in 12 months’ time
Lenders also extend asset-based loans to fund the cost of assets like real estate land and premises, stock and inventory, and specialized machinery, with the asset itself being accepted as collateral.
Documents required for Loan Application
The following documents need to be submitted with the loan application form:
- Duly filled loan application form
- 2 Passport-sized photographs
- Self-drafted business plan
- Identity proof: Voter ID, Driving License, Passport, Aadhar Card
- Residence proof: Voter’s ID, Driving License, Passport, Telephone Bill Electricity Bill, Registered Sale or Lease Deed
- Income Proof: Last 12 months’ bank statement
- Last 1 years’ ITR with Sales Tax returns
- Business address and vintage proofs
- Company, SSI or MSME registration certificate, as applicable
- Audited Financial statements and net worth position of applicant and guarantors
- Rental agreement in case of business operating out of rented premises, with pollution clearance
- FSSAI Certificate
- NOC from fire department
- Approval from state, district or local authorities, as applicable
- Any other documents as required by the lender
How to Apply for Restaurant Business Loan?
Below mentioned is the step-wise business loan verification process:
Step 1: Visit paisabazaar.com to check and compare from all the business loan options offered by leading financial institutions.
Step 2: Pick the deal that suits your business requirements by just filling the basic details like your name, mobile number, residence, loan amount, email address, annual turnover & profit, etc.
Step 3: After submitting the details, paisabazaar’s customer care professional will contact you to verify the submitted details and to proceed with the discussion on the chosen loan deal.
Step 4: Your business loan application will be sent to respective bank for further verification and then the bank’s representative will further contact you to proceed with loan formalities.
Step 5: After your loan application is approved, within defined working days the approved loan amount shall get disbursed in your mentioned bank account.
Customized Credit Services
Some of the customized business loans being extended to the restaurant business are:
- Vijaya Bank’s V Restaurant loan scheme
- SBI loan for restaurants
- Anna Poorna and Arogya Scheme extended by Indian Bank: The Anna Poorna scheme facilitates financial assistance to women entrepreneurs in the restaurant business.
Restaurants whether big or small tend to opt for business loan or loan for restaurants as sometimes the restaurant expenses; including wages, rent, equipment cost or raw materials becomes tough for the business owner to pay on time. Business loan for restaurants makes easy for restaurateur to manage these expenses and also witness growth in the business.
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