Financing a Restaurant Purchase

Financing a restaurant purchase is getting easier by the day - IF you know where to look. The days of saying “no” to all kinds of lending to buy a restaurant seems to be past us as restaurant brokers see new programs hitting the market.   In particular, there is a great deal of opportunity surfacing for smaller loans known as “micro loans.”  These are great opportunities for financing a restaurant if you’re looking for $50,000 or less. 

One micro loan company offering choices for financing a restaurant purchase is Accion.  Accion offers business loans ranging from $500 to $50,000.  They specialize in working with small business owners who cannot borrow from traditional banks due to a business type, short length of time in business or insufficient credit history.

What are the loan requirements?  Here’s a look at their requirements:

• Credit score of 525 or more
• No bankruptcy in the past 12 months or foreclosure in the past 24 months
• No late rent or mortgage payments in the past 12 months
• Up-to-date on all bills
• No more than $3,000 in past due debt, generally acquired under emergency circumstances (such as layoff or illness)
• Steady cash flow and the ability to support monthly loan payment
• Any mortgage must be fixed-rate or be an adjustable rate mortgage that does not adjust during the term of the loan.
• Additional security may be required depending on strength of application.

For most buyers seeking financing for a restaurant purchase, this is much simpler than SBA lender requirements and more cost effective for smaller loans.   

You can also get funds from this micro lender for the purchase of an existing business or change of location as long as the restaurant has been in operation for six months or more.  They need six months of revenue records on the business.  You’ll also need to provide a qualified cosigner, a market study and 12 months of projected financials (or a business plan) and if the business is not yet profitable, a borrower must have external income that is fully able to support the loan.  

This is just one of the new sources of funding for financing a restaurant we’ve uncovered.  We’ll review another in our next blog posting.