How to Start a Restaurant with Little to No Money
Table of Contents
Starting a commercial food business is an expensive affair and involves several expenses. The costs of starting a full-service restaurant can exceed $300,000 – a number that can seem daunting for several aspiring entrepreneurs. While smaller business models can help you cut down startup costs, these expenses still involve fairly large amounts of money.
So how can you start a restaurant business with little to no money? There exist a variety of options that can help you gain the requisite amount of funds you require to set up and start your restaurant business. We help you consider viable funding options and list the main expenses encountered by a commercial food business during operations in the upcoming sections.
How to Get Financed When Starting a Restaurant
Here are some methods you can consider when you’re looking to start your restaurant but are falling short of the required funds:
1. Look For a Partner to Invest with
The fastest way to raise funds for your venture is to find potential investment partners that will be willing to invest in your business model along with you. You can pitch your business plans and ideas to friends and family that might be looking to invest their money.
However, it’s important to present a realistic outlook to potential investment partners so that they don’t expect instant returns on their investment, apart from understanding the risks involved in the food industry.
2. Apply for a Bank Loan
A straightforward method of obtaining funds for your business is by applying for a small business loan at the bank. The bank often sanctions loans based on their assessment of your business model and its concept. You will have to show the bank that your business plan is foolproof and will be profitable.
Banks also take into account credit scores and other financial parameters before they’re ready to lend you money. Bank loans often come with a variety of terms & conditions, so be sure to go through them thoroughly before borrowing money from the bank.
3. Find Angel Investors
Angel investors are wealthy individuals or businessmen that look to invest in up-and-coming enterprises. They often expect an equity stake in exchange for the money or other forms of capital they invest in your startup restaurant.
Prepare a top-notch sales pitch and detailed business plan before you approach angel investors to convince them to invest in your business idea. Investors might also offer you spaces and other forms of capital, so it’s important to understand that money is not the only offering on the table.
Crowdfunding is a great option to secure funds for your business. The expansion of digital payment options has simplified crowdfunding, and you can choose from several crowdfunding websites to help potential donors fund your business venture.
Since you will be choosing to start a restaurant business, incentivizing the donation by offering a free meal on opening day, or discounts might help you make the deal sweeter. Ensure word about your crowdfunding initiative travels far and wide to help you secure the maximum amount of donors possible.
5. Apply For a Government Grant
The government supports small businesses and potential entrepreneurs by either offering them a grant or by connecting them to private financiers. You can avail this option to raise much-needed money from trustworthy sources. Federal, state, and even local governments have funding programs in place that seek to aid small businesses with financial necessities.
Five Costs to Consider When Starting a Restaurant
Below are mentioned five expenses that will form the basis of your operational costs:
Commercial leases on spaces will be one of the core expenses for your business once you start operating. It’s important to negotiate with the lessor to help your business get a good deal on the monthly rent/lease amount you will be paying. Be sure to read through all the lease terms and ask if your lessor offers tenant improvement plans to cut down your expenses when renovating the space.
2. Permits & Licenses
Commercial food businesses require several licenses and permits to open up for business. These licenses are issued by local, state, and federal authorities. It’s important to make a note of how much these permits & licenses cost before you prepare your budget. Not procuring these permits will lead to hefty fines that can throw off your finances and affect profit margins.
Investing in the right restaurant equipment is integral to the success of your operation. Purchasing quality equipment requires sufficient capital so that there’s no compromise. Be sure to choose from the best pieces of machinery to ensure your restaurant always remains at the forefront of offering high-quality, safe, and delicious food.
4. Design & Interiors
Renovating the space you want to set up shop in, alongside interior design will take up a fair chunk of your starting capital. You will have to design your kitchen and front house space intuitively to support seamless operations at your restaurant. Be sure to set aside a sufficient amount of money from your budget to spend on redesigning the commercial space.
5. Operating Costs
You will need to account for about 12-14 months’ worth of operational costs and a little extra to offset emergency expenses. Calculating your operating budget must be a meticulous exercise as this directly affects the margins you make from running your business. Any lapses will lead to losses and affect the margin amount on your balance sheet.
How to start a restaurant with little or no money?
While starting a restaurant business can be an expensive affair, there are a variety of options you can choose from when you need money to use as starting capital. Be sure to draw up detailed business plans, projections, and marketing strategies before you head out to seek financial aid from potential investors.
Need a small Business loan for your restaurant business? Whether you want to upgrade your equipment, hire more staff, or open a new restaurant location, we can help. You can get access to the necessary funds in just three steps. Check out Capital for Business funding solutions or apply for a business loan today.
Author BIO: Damon Shrauner, Senior Sales Consultant and VP of B2B Sales at CKitchen working in the food service equipment sector since 1994. With his expertise in market analysis, product placement, sales, and project management, he will always tell you what to do for the best of your business.
Read this next: 8 Tips for Finding Your First Business Location
Recommended For You