Working capital has to be considered by any business that wants to survive the critical 2 years from its inception, especially if it’s a restaurant business. Although each business has a startup capital, a working capital loan provides a cushion for those unexpected or higher than expected expenses. And if the business takes longer than planned to turn a profit that can cover the expenses, you should definitely consider a working capital loan.
So how do you use a working capital loan for your restaurant?
- Apply for it before you get in a position where you need it. It sounds counter-productive, but there is a logic behind it: a working capital loan is still a loan. It’s easier to get approved for it than for standard bank loans, but it’s still a loan and it has requirements. When applying for a working capital, some merchants get denied usually because they don’t meet the financial requirements. They apply after one or two lean months, the bank looks at their statements and declines them. If the first half of the month is lean, then you should definitely consider a working capital loan as soon as possible so that the current month is not considered, your file has only strong months of bank statements and thus in a better position to get approved.
- Use it to open a second location when your restaurant is doing good, you have a loyal base of clients but you just don’t have the funds for a second location yet.
- Buy new equipment in the restaurant or remodel the business: stoves, cutlery, table cloth, anything from hinges to fridges. This is especially useful for restaurants that need to meet the franchise requirements placed upon them.
- Buy trucks to bring in supplies, trucks for the catering side of the business, delivering food to clients.
- Running a program that does not turn a profit immediately, but it does bring in loyal customers. The working capital again provides a cushion for all of this.
Also check out our updated list of things that you can do with Working Capital Loan for your restaurant or retail business.