In today’s “go, go, go” lifestyle, eating out at restaurants accounts for every one out of three pounds being spent on food and drink in the United Kingdom. With this market on the rise, it is no surprise that more and more entrepreneurs and business moguls are looking to open their own eating establishment.
The market growth has a huge impact not only on the restaurant industry but also on those current business owners who are looking to expand their business or consolidate existing ones. The good news is that mortgages are available for a variety of different restaurant types, from chains to family owned.
Costs Associated with Restaurant Start-Up
New restaurants have a notoriously high failure rate and financial institutions and lenders are well aware of this. In many cases, the totalities of expenses that are associated with this type of business are rarely covered by the revenue that is brought in through sales.
It is important to take note of this when thinking about opening a restaurant and seeking funding to make sure the cost of expensive kitchen equipment, dining room furniture, food costs and other overhead expenses will all be covered for a long enough amount of time.
Since the failure rate of these businesses is so high, lenders will charge more in interest in order to cover their investment should the restaurant face hard times and have to close.
Have a Solid Business Plan
Before any lender will extend financing for a restaurant business they will require the potential borrower to provide a detailed business plan. In this plan, lenders will look for the amount of money that will need to be invested to purchase the property as well as make any necessary upgrades or additions to the property, where the restaurant is located within a region, the borrower’s experience in the restaurant industry including knowledge of food safety, hygiene regulations, and other laws as well as record of the previous two years of trading.
If this is a new business for the borrower, he or she will also need to provide the lender will a fully detailed projected income statement for the business.
What Lenders Should You Work With
Generally, high street banks and specialised commercial mortgage lenders will be the best institutions to work with in order to obtain the funding needed to open a restaurant, refinance an existing one, or release capital for further business ventures.
These lenders are prepared to lend up to 85 percent of the value of the property that is intended to be the restaurant – this percentage only applies to those borrowers who bring a detailed, sound business plan to the table for lenders to review.
Although 85 percent of the property’s value is common, it is important to have the right plan in place as well. If you need more information about mortgages for restaurants, please contact EuroGuide.