Getting a business loan is very important for your business development and growth. The Restaurant Business particularly requires initial investment with greater growth potential.
Restaurant business is easy to scale and highly profitable but at the same time, can be challenging as there are 100s of different things which is required to be managed.
Starting a Restaurant business requires skills, dedication, careful planning, and a good financial standing. In this article, we will discuss how to get a business loan for a Restaurant, Eligibility, How to Get a Business Loan for a Restaurant, and much more.
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Features of Restaurant Business Loan
The following are the features of the Restaurant Business Loan which may interest you-
- Restaurant businesses can take business loans up to Rs.2 Crores and if the amount is less, then the loan
- The entire loan application and processing can be done online conveniently without requiring any visit to the bank
- The sanctioned amount can be transferred to the applicant’s account quickly and secured. Some banks provide instant cash disbursal especially, if it is a pre-approved loan.s
- If the business loan for the restaurant is less then the bank may provide you with an unsecured Business loan which does not require any collateral
- The interest rate charged on our business loan will be conservative and will be determined on a case-to-case basis, but if your credit score is good then you’ll be provided with a low interest rate
Eligibility Criteria for Business Loan
The following are the eligibility criteria for a Business Loan-
- An operational History of 6 months to 2 years is required. Business history provides the lender the confidence to lend you the money as it increases the trust amongst the lender.
- A minimum annual turnover is required by the lender to ensure that the restaurant has sufficient cash flow to repay the loan
- Credit Score is yet another factor that lenders check before giving you any loan. This score provides bank information related to your credit history and your debt repayment habits
- If you are setting up a new business, then you are required to prepare a business plan as well which is to demonstrate how you will invest the money that you’ll receive
- Your debt-to-income ratio is also very important for your loan offer. The bank will check your Debt-income ratio to determine the risk associated with it.
How to Get a Business Loan for a Restaurant?
The following are the steps that you’ll have to take to apply for a Restaurant business loan-
- The very first step is to evaluate your business requirements and find how much money you would need to get started with your restaurant business. The equipment, Working capital, running cost capital, employee funds, etc. are some of the important things that you’ll have to consider for finding out your expense requirement.
- After finding out that amount, you’ll have to accumulate all the documents that the bank will ask you to apply for the business loan
- Now, you’ll have to prepare a list of banks or NBFCs where you can apply for business loans. You’ll have to evaluate the loan based on interest rates, available options, eligibility, etc.
- Based on the list prepared, apply for the business loan on the best option that you can find. First, fill out the loan application form with details like name, address, education qualification, etc., and attach all the documents listed below
- After completing the application, you’ll have to submit your loan application and requirement documents to the bank representative
- The lender will process your application and will reach you for further information or evaluation of your profile
- You’ll have to pay a small processing fee at the beginning for processing your loan documents and other administration process
- After evaluating your application, the lender will decide whether to provide you with a loan or not. if your loan is passed then your loan amount will be disbursed into your account.
Documents required for Business Loan for a Restaurant
The following are the documents required for a Business Loan for a restaurant-
- Loan Application
- PAN Card in the name of the Company/Firm/Individual.
- identity proof like Aadhaar Card, Passport, Voter’s ID Card, PAN Card, or Driving License.
- Address proof- Aadhaar Card, Passport, Voter’s ID Card, PAN Card, or Driving License.
- Bank statements of the previous 6 months.
- latest ITR along with computation of income, Balance Sheet, and Profit & Loss account for the previous 2 years after being CA Certified/Audited.
- Proof of continuation (ITR/Trade license/Establishment/Sales Tax Certificate) is also required.
- Sole Prop. Declaration OR Certified Copy of Partnership Deed
- Director-certified copy of Memorandum & Articles of Association
- Board resolution (Original)
If your loan is rejected then talk to the bank representative and ask him/her for the reason for the rejection. If it is due to a document problem, then you can provide a new document, if your credit score is low then you can improve your credit score.
Yes, you can get a business loan with a low credit score but you may have to pay higher interest on the debt. The interest may range from 19-30% per annum but, you may have to negotiate for better terms and conditions as well.
Lona’s disbursal may take anywhere from a day to a week for it to get disbursed into your account.
Yes, you can get a Mudra Loan for a restaurant business up to Rs.10 Lakhs for both new establishments or upgrading an existing one. The interest charged on Mudra Loan is also very competitive as compared to other business loans.
I’m Shiv Kumar, a graduate with a passion for finance, marketing, and technology. My journey into finance started with a desire to understand money management and investing.
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