Restaurant Financing: Four Things You Must Know

Despite the uncertain economic times, some service industries are doing remarkably well. As consumer save more cash, they’re able to spend more on entertainment--meaning it just may be the right time to start an eatery. Here are four things you must know about restaurant financing.

1. Restaurants Can Beat The Recession
According to a new survey by Franchise Times, 9 of the Fast 55-- the 55 fastest growing, young companies-- are sit-down or fast food restaurants. The list was compiled using the percentage of growth experienced over the last fiscal year. The surprise showing by these restaurants echoes expert opinions that restaurants opened in the right location and serving the right market can resist the negative impact of a lingering recession.

2. The Start-up Capital Search Isn’t Easy
QSR Magazine has some sobering news for those looking to acquire restaurant financing for start-up or expansion. Getting the needed capital requires a strong history of performance and the right numbers on the balance sheet. These standards are forcing newer restaurants to investigate less traditional financing vehicles, such as merchant cash advances and internal liquidation sources.

3. Obama’s Legislation Will Affect Restaurant Financing
Larry Summers, director of the US president’s National Economic Council, relays the developments within the Obama legislation that will affect restaurant financing in the coming four years. In an interview with Financial Times, Summers points out that fixing the current banking system requires tougher management of credit. This partly explains the difficulty some restaurateurs will experience in securing financing.

4. Franchises May Be The Way to Go
Morningstar reveals the recent tendency of large franchises to convert corporate-owned resources into more locally-owned franchises. This could be an opening for potential restaurateurs to move into management with established companies.