Setting up your own restaurant requires a considerable amount of cash which is why you need to learn about the real secrets behind successful restaurant equipment financing.
Restaurant equipment financing is a tough nut to crack for most entrepreneurs aspiring to start their own restaurant. It requires a considerable amount of cash. For one, you need to set aside cash for restaurant equipment such as credit card machines, cash register, seats, tables, freezers, gas range, grills, stoves, and so on.
Explore Your Financing Options
There are many ways you can finance your equipment and perhaps the first option would be to apply for a business loan. It sounds very practical but if you spend all your money on equipment, how will you cover all other expenses such as supplies, paying workers, etc.? Is there another alternative financing option that you can use to acquire equipment? Fortunately there is. Rather than making a cash purchase on all the equipment that you need, why don’t you consider looking for investors?
Gaining investors means that you have to meet all the right people within the industry. You have to prove that you are able to make your new restaurant a success. Most investors are easily impressed with tangible skills. If you have a background in accounting or are a culinary expert, you could increase your chances of getting someone to invest in your restaurant. You can offer incentives to your investors. For example, consider offering them equity in exchange for a certain amount of money. This means that your investors lose their investment when your business fails but share a portion of your profits. Consider looking for several investors so that you can minimize the amount of funds you need from each investor. This method however may not be the right path for you if you are a start up because you might get locked into interest payments.
The other option is leasing. Leasing has several benefits over business loans. For instance, it is easier to apply for a lease. For a business loan, you need to have collateral, and have all the documentation needed for small business loan applications. With leasing, however, all you need to have are your bank statements and other necessary documentation. The process is usually brief and most restaurants get approval for a lease within 24 hours and at most a week.
The Real Secrets Behind Successful Restaurant Equipment Financing
For kitchen gadgets such as blenders, coolers, refrigerators, mixers, etc., should have a National Sanitation Foundation (NSF) sticker. When the local health department conducts their sanitary inspection and find that you are using kitchen equipment that does not have a NSF sticker, they could fine you.
Make inquiries from your local health department, building inspector, fire inspector and other city zoning regarding local regulations for furnishing a restaurant. Most local regulations have guidelines regarding how restaurants should furnish their premises.
Avoid being one of those entrepreneurs who order too many equipments and gadgets and end up overspending. There is a little excitement that comes with opening up a new restaurant but before you order the equipment to be leased, consider your budget, space and be realistic.
Shop around and compare lease rates from different leasing companies. Apart from the prices, consider other factors such as hidden costs, quality of customer service, terms and conditions of their lease, etc.
Rather than just scheming through your contract, read it thoroughly before signing it. Have your lawyer go through your lease if you are not familiar with some of the terms used. Besides, they can negotiate a better deal for you.
Check your credit rating. Some leasing companies only grant approval to clients that do not have a damaged credit history. While some may approve your lease application with a bad credit history, they might charge you higher interest rates because they consider you as a risk. However, some companies such as LeaseQ only do soft credit pulls so this will virtually have no effect on your credit score.
Get free lease product distributors. Some companies may offer their equipment to you free if you agree to be their official supplier. For instance, you can be the official supplier of a beverage company and they will provide you with a freezer at no extra cost.
Calculate whether the section 179 deduction and bonus depreciation will benefit your business or not. The section allows businesses to subtract the cost of qualifying business equipment placed in service in the year 2012 up to $125, 000. Unless congress acts, the deduction may drop significantly to $25, 000 in 2013.
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