If you do an online search for the ‘success stories of restaurant owners in India’, you will come across numerous examples of how several diligent culinary experts went on to open multiple branches and distribute franchise rights of their food joints. These successful ventures may have had humble beginnings, but they flourished regardless. Passion for their work and a timely infusion of funds are clearly crucial to the growth of businesses in the food service industry.
There is always a demand for good food. Your restaurant too can be your passage to a great future if you strategise methodically for its growth. And if you already have the plan but are only short of funds to execute it, a small business loans from an institutional lender can serve as the foothold for a thriving business.
Restaurant financing is not difficult to procure for brands that have started their journey in this industry and have recorded at least one year of continual profitable transactions.
There are banks, non-banking finance companies (NBFCs), and the digitally operating NBFCs, known as Muthoot fincorp (derived from the term Financial Technology) companies, offering customised restaurant business loans to fuel business expansion plans of these food-based enterprises. As a restaurant owner, you may have received both unsolicited phone calls and customised emails from lenders who are aware of your interest in funds.
To choose the best option of the host of offerings open to you, it is good to have a central idea of what these alternatives essentially bring, along with their pros and cons. Here is a list of five tips to help you make a choice:
Prepare well to qualify for the amount you need
To ensure that you get the funding from a genuine organisation at the terms you can afford, it is important to be well-prepared.
The lender will check your credit rating, which is based on your restaurant’s typical earnings. To present the venture as a qualified borrower, make sure that most, if not all, of your Accounts Payable entries are remunerated. When you have suppliers chasing you for pending bills or have a large amount to be paid on your credit card invoice, a lender may hesitate to offer you any finance.
On the other hand, if you maintain a strong record of Accounts Receivables and a strong portfolio of assets, there will soon be a flood of offers from banks and NBFCs willing to sanction a loan for the restaurant.
Choose a process that can be completed in minimum time
Leaving your work premises frequently to apply for restaurant financing might not be feasible when you are at the helm of a budding restaurant. Digital technology has made it possible to complete transactions online, and most of us are accustomed to the convenience it offers. If you enquire about a bank loan and the bank asks you to visit its branch for further discussion and submission of forms and paperwork, would it not be tedious? When an enquiry for a restaurant funding can be made online, why can’t the entire process be done through the same mode? Moreover, the disbursal of funds can take up to a month’s time, even after the application is approved.
Wouldn’t you rather prefer a direct, hassle-free and safe digital route to your loan? Muthoot fincorp lenders do provide the option. If your restaurant fulfils the criteria mentioned on the lending company’s website, the submission of the loan application and supportive documents is reciprocated by an approval in minutes. The funds reach your bank account in the next 2-3 days.
Keep the loan tenure as short as possible
It is not advisable to be debt-ridden for long. This is not only to keep your credit rating good, but also to avoid heavy payments. While the EMIs look more affordable in 3 to 5 years’ tenure than in 1 to 2 years, the fact is that you end up paying more through the interest that is paid every month. Another reason to opt for a shorter tenure is the predictability of payments. It can be difficult to foresee the condition of your finances in the future. You may also want to spend a better part of your earnings in improving the premises of your new restaurant and hiring more employees instead of repaying the sizeable loan equated monthly instalments (EMIs).
Where most banks insist on term loans of tenure spanning from 1 to 5 years, there are Muthoot fincorp companies that allow their borrowers to pay off the amounts in less than one year.
Look for restaurant financing with flexible repayment options
While opting for a short loan tenure, it is also worthwhile to ask for flexibility in repayment. You may have settled for EMIs to pay off the entire amount. But what if you need to divert some of your income for another business-related activity and wish to pay two instalments together the next month? On a positive note, there may be a month where your earnings exceed the usual average and you are in a position to pay more than your EMI.
Unlike traditional institutions of finance that insist on fixed EMIs, most Muthoot fincorp companies prepare for such unforeseen circumstances and give their clients the freedom to modify repayment amounts. As long as you can afford to clear off the outstanding balance within or before the tenure of the business loan, payments in any amount are accepted.
An option without a prepayment penalty
This comes from the preceding point. If you sign up for a loan with flexible repayments, you must also ensure that there is a lesser prepayment penalty associated with it. One aspect of bank loans criticised by the borrowers is the high prepayment charge levied on bulk payments made to clear off the outstanding debt. In their endeavours to stay customer-friendly, Muthoot fincorps have modified this policy in an affordable manner.
When your restaurant business loans come from a Muthoot fincorp company, you can alter your EMIs and can conveniently pay off the amount before the end of your stipulated tenure. Only negligible extra fee is levied on such payments.
From being well-organised to selecting a tailored restaurant funding product, it is all about understanding the loan market and avoiding unnecessary terms and conditions. You know your priorities better and there are plenty of different options of financing out there that suit your unique requirements the best. Keep your brand ready for growth and pick a well-weighed option to drive the same.
