If you’re an individual artist, stay-at-home parent, senior citizen, have a unique product or services to offer or someone with restricted mobility, starting a small business, whether home-based or not, is a good option. For a start-up business, the initial cash outflow can be huge in terms of rents, utilities, furnishing, publicity, hiring staff, raw material purchase, initial running costs etc.
There are several ways to finance your small business and one great option is to consider taking a bank loan or an SBA (Small Business Administration) loan if you’re based in the USA. Bank loans are considered safer, don’t generally demand profit-sharing options from the borrower and have lower rates of interest. However traditionally banks prefer to finance existing, running businesses and rarely start-ups. An SBA loan can be availed through a government agency which will stand guarantor to the loan.
Less regulated lines of credit like personal loans, unsecured small business loans, merchant cash advances etc. are also an option for small business loans.
The main difference between secured and unsecured loans is the rate of interest and the payback time allotted. Unsecured loans attract higher interest rates. They are generally given on the basis of personal credit rating and generally do not require specific collateral or assets as security. Paperwork is also relatively easy as compared to banks. Small business fund managers may not require you to produce licenses or business plans. Under the SBA, you can avail of the large range of loans on offer: there are special categories like Historically Under-utilized Businesses, micro-loans, disaster recovery area, etc.
The SBA in USA offers value-adds like counseling, tips and classes on managing small businesses, training etc.
One point to consider while taking a small business loan is how much financing is involved. Many banks offer only part-finance leaving you to raise the rest on your own. On the other hand, an unregulated lender is not subject to strict federal or state government laws. Another factor that plays a big role in getting unsecured loans is that the personality of the borrower comes under very close scrutiny. Credit-worthiness, experience, knowledge-base, nature of partnerships if any – all these are deemed to be extensions of the borrower and hence subject to analysis.
Current trends in the small business loan category are peer-to-peer loans, smaller banks, crowd-sourcing through social networking sites and approaching local credit unions for really small businesses and start-ups.
You will have to carefully weigh your options before you choose the best type of Restaurant Loans for your small business.
