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Whether you’re operating a new or existing restaurant, your business can benefit from having extra funds. For restaurants, it can be difficult to secure traditional loans, since they are often considered high-risk by banks. Thankfully, there are alternative options, such as SBA loans. The Small Business Administration (SBA), is a government agency that offers loans designed specifically to help small businesses, including restaurants. With SBA loans,

What can an SBA loan be used for?

One of the greatest benefits of SBA loans is that the loan is flexible in terms of what it can be used for. There are several ways you may choose to utilize an SBA loan to better your restaurant. Some examples include:

  • Updating equipment: SBA loans can be used to make big, infrequent purchases like ovens, ranges, fryers, and freezers, as well as smaller, regular expenses, such as utensils, bar rags, and dish towels.
  • Repairing existing capital: You can use SBA loans to update operating equipment, such as POS systems or commercial vehicles. 
  • Opening a new location: Whether you’re paying for an existing building or buying land for new construction, SBA loans can help to pay for the physical space your restaurant occupies.
  • Refinancing debt: SBA loans can be used to consolidate your debt and reduce your interest rates, which can help you to free up more capital to invest back to your restaurant.
  • Hiring more employees: The best way to bring in quality employees is by offering attractive rates. Having extra funds with SBA loans can give you the ability to better your payroll.

Benefits of an SBA loan

Why should you choose to get an SBA loan rather than more traditional forms of financing?

  • Low down payment: SBA 7(a) loans can have down payments as low as 0%, depending on the size of the project.
  • Long repayment term: Depending on the use of funds, SBA 7(a) loans can have a repayment term of up to 25 years.
  • Competitive interest rate: The average interest rates for SBA loans are lower than most alternative financing options.

How to get an SBA loan

The process of getting an SBA loan for your restaurant can be broken down into 5 simple steps:

1. Create a business plan

A business plan summarizes the key aspects of your business and how it intends to achieve its goals. A good business plan should cover financial projections, marketing plans, sales strategies, competitor analysis, etc. Most lenders will require this document as part of the loan application process. It’s also a helpful tool in ensuring that you have a clear understanding of what parts of your business require funding.

2. Determine your funding needs

When applying for SBA loans, you need to have a clear understanding of what the funds are going to be used for and how much money you’re going to need. 

3. Find out if you’re eligible

SBA loans have broader eligibility requirements than most traditional lending options, though it’s important that you’re still considering your qualifications before undergoing the application process. For more information regarding SBA eligibility, refer to our past blog on the topic.

4. Gather commonly requested items

To get approved for a loan, you’ll need to present a variety of financial documents pertaining to your business. Commonly requested documents include:

  • Three years of personal and business tax returns
  • Year-to-date (YTD) profit and loss (P&L) statements
  • YTD cash flow statement
  • YTD balance sheet
  • Most recent three months of business bank statements
  • Copies of business bank statements

5. Find a lender

SBA loans are issued through private lenders. At Grasshopper Bank, applying for an SBA loan is more efficient and easier than ever thanks to our new digital application. Combined with our SBA Preferred Lender status and the support of our experienced SBA Lending team, we can provide a more efficient, flexible, and streamlined loan process and help you achieve your funding goals sooner.

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