Getting into the hospitality business is an expensive endeavor, so if you’re wondering how to get funding for a restaurant, you’re not alone. In fact, the average restaurant costs more than $3,000 per seat to startup, translating to about $275,000 in start-up expenses. Whether you’re just getting started or looking to raise money to expand your business, there are plenty of financing options out there.
This guide to fundraising for restaurants will cover:
Should You Raise Funds for Your Restaurant?
There are several scenarios in which you might want to raise funds for your small business. The first is when you want to startup a restaurant and simply don’t have enough money to be able to do so.
Another reason is that you need extra cash to meet a goal, such as to expand the business by adding a new location, investing in equipment or renovating your space.
In some cases, you may have the funds required but don’t want to sink all of your money into one initiative. Raising funds can help you have money to play with while also keeping an emergency fund.
Still not sure if you should fundraise? Here are some pros and cons to consider.
Pros of raising funds for a business:
- Gives you access to cash you don’t already have.
- Opens up new opportunities.
- Lets you keep some cash in your reserves.
Cons of raising funds for a business:
- Loans and other financing options come with steep interest rates, which can be difficult to pay back with the restaurant industry’s low profit margins and high operating costs.
- When you take money from others, you can lose creative control. Some funding options, like working with an investor, involve being beholden to that person’s demands.
- Taking on debt is always risky.
How to Raise Money for a Restaurant
If you want to move forward with fundraising, follow these seven steps to learn how to finance a restaurant.
1. Identify Your Fundraising Goals
Financing a restaurant starts with identifying your needs. Why do you want to fundraise? Then, figure out how much money you need to raise and what you will do with it.
2. Create a Pitch Deck
The next step is to create a pitch deck. A pitch deck is a slideshow that provides context on your business, explains why you need the money, when you plan to use it and why your business is a smart investment. Not sure where to begin? Check out this resource for pitch deck inspiration.
3. Prepare Messaging
You’ll need to create other types of messaging for your fundraising efforts beyond your pitch deck. Depending on how you’ll go about looking for money, you might need to create email templates, social media posts and/or messaging for your crowdfunding page.
4. Identify Fundraising Sources
With these pieces in place, you’re ready to think about who you’ll ask for money. Check out the next section of this guide to learn about different options for how to finance a restaurant. Select the one(s) that work best for your goals and your business.
5. Launch Your Fundraising Campaign
Now you’re ready to launch your fundraising campaign for your restaurant! How you launch will depend on where you’re seeking funds.
For example, launching a crowdfunding campaign involves setting up a landing page. Working with investors, on the other hand, involves contacting investors and setting up meetings. And obtaining a loan involves comparing and applying for loans.
6. Be Persistent
Whether you’re reaching out to friends and family, applying for bank loans, running a crowdfunding campaign or trying to work with investors, it’s important to be persistent with your efforts. Fundraising can feel demoralizing and futile, so you need to follow up with contacts, keep reaching out and sharing your vision until you secure the funds you need to make it a reality.
6 Sources for Raising Funds
Without further ado, here are six avenues for raising funds for your restaurant.
1. Friends and Family
One fundraising option for restaurant owners is to ask your loved ones to donate or lend you money. Friends and family are usually willing to lend funds with no interest rate or at a lower interest rate than a traditional lender would charge. However, sometimes working with friends and family can cause tension, so proceed with caution.
2. inKind Capital
An alternative option for fundraising for restaurants is inKind Capital. inKind is a revolutionary alternate financing option that gives you upfront capital in exchange for food and beverage credit. Unlike traditional lenders, there’s no loan to pay back with inKind Capital. Guests who purchase credit on inKind come back 2.5 times more often and spend 80% more. You can be preapproved for $100k if your restaurant grosses more than $2 million annually.
inKind integrates with SevenRooms so that you can automatically tag inKind guests in guest profiles on your customer relationship management (CRM) platform. SevenRooms users can get $250 in inKind credit to test out this partnership.
3. Small Business Loan
Financing a restaurant through a small business loan is one of the most popular fundraising options for restaurant owners. This method involves working with a bank or other lender to get a loan. Obtaining a loan requires paying it back with interest, so keep these costs in mind as you explore your options.
If your restaurant is in the United States, the Small Business Administration (SBA) can help you obtain a small business loan more easily. Check out the SBA’s website for more information.
You could decide to raise capital for your restaurant through an investor. There are various types of investors, including angel investors, venture capital firms and private equity firms. They service businesses in different stages and with various revenue flows.
5. Business Partner
Rather than working on your restaurant alone, you could bring on one or more business partners who share ownership of the business with you and contribute funds and expertise. Keep in mind that you’ll also be splitting profits with your partners, and will be giving up some creative control through this route. Ask your network for introductions to like-minded people who are also looking to get into the restaurant industry.
If you’re looking to raise several thousands of dollars, rather than tens of thousands or more, you could fundraise successfully through crowdfunding. Websites like GoFundMe, Indiegogo and Kickstarter give you the infrastructure through which to launch and manage your crowdfunding campaign.
Wrapping Up: How to Get Funding for a Restaurant
Raising funds isn’t easy, which is why persistence is crucial at this stage of your business. Fortunately, there are myriad options for getting funding for your restaurant. Whether you want to startup a new restaurant or get cash to grow your existing business, there’s a financing option for your needs. For additional resources, get in touch with the National Restaurant Association, your local restaurant association or your local business improvement district.
Take advantage of inKind Capital’s partnership with SevenRooms. Claim your free $250 credit today.
FAQs About How to Get Funding for a Restaurant
1. How Much Does It Cost to Fund a Restaurant?
The average restaurant start-up cost is $275,000. There are a lot of different factors that go into how much it costs to fund a restaurant such as location, concept, size, materials, new or existing location and equipment.
2. How Hard Is it to Get a Loan for a Restaurant?
Due to the volatility of the restaurant industry, obtaining a loan for a restaurant can be challenging. Your best option is to get an SBA-backed loan. You will need a good credit score, loan collateral, and a down payment of at least 10% to qualify.