To manage a restaurant it cost a lot money. Restaurants face many challenges on day to day basis. The restaurant industry is susceptible to internal and external factors to include, change in food prices, seasonal trends, competition, expansion, customer demands and more. These changes make maintaining a restaurant an expensive venture. When you face these challenges you need a source of capital that is there when you need it the most. The four benefits of using a business line of credit for your restaurant are:
Buy or Replace Equipment
You don’t expect for equipment to breakdown at any time. Let’s assume it does, what do you do? How much will it cost to buy a new equipment or repair it? You may not qualify for equipment leasing or equipment financing at any given time. If you have a business line of credit, you can withdraw the funds you need to either purchase a new equipment or repair. The best time to apply for a business line of credit for your restaurant is when your business is performing well financially.
Maybe you don’t have issues in covering payroll. However, many restaurants will face a payroll issue sooner or later due to a vast list of factors. Seasonal trends is one of the major factors that can affect your payroll expenses. Also, when you expand and open new locations it may take time for revenues to come in and you still need to cover payroll for those new employees. Also, food prices may affect your overall expenses, but it may only be for a short-term basis. As a result, your expenses go up but you want to retain your staff. A business line of credit allows you to access cash when your restaurant deals with these short-term setbacks that affect your payroll.
Remodeling is an expense that can affect your day to day operations drastically. Also, it will affect your cash flow on a short-term basis. Some restaurants make minor remodeling, and some make major remodeling. Sometimes, you may need to remodel fast because your restaurant needs a major make over. You may not have the time or all the paperwork ready to apply for a conventional or bank loan. If you have a business line of credit, you don’t need to worry, and you can tap into the funds fast.
Expanding to a new location
Expansion is a must for restaurants to grow. One location can only generate a certain amount of revenues. If you want to increase revenues you will need to expand at some point in time. Expansion cost include; lease cost, equipment, staff, marketing and more. Also, when you open a new location the time frame to reach profitability can range from 6 months to 3 years. If your existing location has a proven formula for generating revenues, you may not need to wait 3 years to reach a profit point. If you take a long-term loan you will be stuck with a monthly payment. A business line of credit allows you to access the funds you need to expand, repay it back and have funds accessible for your business for future usage.
Knowing that a business line of credit will help you make the best decision for your restaurant’s situation is a wise choice.