Finance guide to buying a restaurant

Cooking up the right finance for a restaurant

Owning a restaurant is not for the faint of heart; the long hours, the long list of regulations, being an employer, managing an array of suppliers all the while ensuring that what your offering works for target customers; but it can be hugely rewarding. It is a sector that is driven by passion, but a business can’t only run on this, it needs sound financials as well to truly thrive.
You’ve got to get to know the answers to the following; is it in a high enough footfall location (or allied to good parking)? What’s the reputation of the restaurant? Are you entering into a property transaction, either for a lease or freehold? And, perhaps the most important, why is it for sale?

So, when it comes to raising finance for a restaurant, what do the lenders look at?

Well, as you’re trying to buy a business, they’ll look at you. They’ll also need to see the key financials of the restaurant that has captured your eye. Potential revenue, the value of equipment and whether it is being rolled in to the sale. The annual turnover of the establishment, profit margin and potential property value are key considerations, as is just what food sector the restaurant resides. Is it high end AA Rosette level cooking; which will impact both the costs of your ingredients and staff costs, due to a higher level of training being needed or a ‘burger joint’. 

But what if you’re looking at the finance market to give yourself a guide on how much you can borrow? Although this can greatly help your research for buying a business in other sectors, it’s probably not too helpful in this instance. The level of finance you can achieve are directly impacted by, not just business you’re looking to acquire, but also your experience.

Lenders will want to know if you have any previous experience in running this type of business, as they would with any application for finance. If you don’t have direct experience in the restaurant sector you’ll need showcase your transferable skills that can apply to running a successful restaurant.

Opening hours will have a direct impact on any cost benefit analysis that you or a lender will make. Opening all day for seven days a week is a very different proposition, both in terms of effort and cost, to opening for five days a week for just dinner.

If you have a passion and a flair for food and service, buying a restaurant can be an avenue to a rewarding lifestyle, albeit knitted to hard work. Any lender will want to your application for finance to cover the plan for your business and the historic financials. It can pay to utilise the skills of a specialist to help get your restaurant open in a faster, simpler, better fashion.

ASC Finance for Business are Commercial Finance Brokers with 50 years’ of arranging small businesses faster, simpler, better business finance.

To speak to your local ASC Regional Director about getting finance for your new restaurant, click here.

Finance guide to buying a restaurant