Restaurant business loans are helping current and prospective restaurant owners to set up and expand their establishments. Even though applying for a loan is not a hassle anymore, especially with the introduction of the online application processes, individuals can keep in mind some pointers to improve their chances of securing a loan easily.
6 ways to get easy financing for a new restaurant
Here are some tips to improve on the chances of securing restaurant business loans –
- Maintain a sound credit profile
Lending a substantial amount, that too without any collateral, bears a significant risk on part of the financial institutions. Hence, they evaluate an individual’s credit profile to gauge his/her reputation as a borrower.
Therefore, maintaining a healthy credit score, preferably above 750, is vital as it represents that you are a responsible borrower. Also, keeping a credit payment history devoid of any default or mistakes is crucial to create a good impression in front of the lender. Also, the business vintage of an applicant also plays its role in determining the eligibility.
- Be ready with a business plan
If you plan to avail of a business loan for your restaurant, then having a detailed outline of your venture is crucial. A plan like this reflects the working principle, areas of investments, revenue channels, etc., of a business. It helps the financial institution to understand the usage of the funds and the revenue model of an organisation.
A well laid out plan like this convince the lender about your business growth and improves your chances of securing a loan easily.
- Keeping the required documents handy
A significant part of any loan application is the documentation process, and a business loan is no different. Keeping these documents handy and in-order is imperative to make this process smooth and reduce the chances of any rejection.
Usually, for business credit, financial institutions focus on business documents, its turnover details, KYC of the applicant, etc. Failing to submit any of these papers lower your chances of getting a loan.
However, customers of Bajaj Finserv can skip the hassle of documentation with the pre-approved offers. Available to existing customers on a host of financial products and services, you can now check your pre-approved offers simply by entering your name and contact number.
- Refrain from making multiple applications
It is never ideal to make multiple loan applications at once. The reason being, following one such credit application, the lender initiates a query with the credit bureaus regarding the credit score of an applicant. These enquiries are regarded as ‘hard queries,’ and multiple requests within a short span can dampen your reputation as a borrower, as it will regard you as a credit hungry individual. This will also bring down your existing credit score.
- Apply with the right lender
Instead of making multiple applications, you should focus on going through the loan terms, and compare offers from different lenders and then opt for a financial institution that suits your needs. However, you should be prepared to answer some questions that your business loan may ask you in this process.
- Choose the right loan amount
Selecting the correct loan amount is also crucial to avail a loan easily for opening a new restaurant. Since the loan amount depends on a borrower’s eligibility, you should check these criteria and then apply for a credit accordingly to avoid any rejection.
The restaurant industry of India is currently valued at about Rs.4.2 lakh crore, of which 35% is in the organised sector. After a recent slowdown, the hospitability sector of this country is recovering and promising a better future prospect for current restaurant owners. With assistance from restaurant business loans, and following some essential tips to grow your business can help achieve your dream.
Apart from financial institutions in India, the Central Government has also devised various financing schemes to help small and medium scale businesses grow in this country. Since the MSME sector contributes heavily to this country’s economy, such financial help is encouraging entrepreneurs to invest and set up businesses.