Business Loans for Cafes and Deli’s

Consumer tastes can be fickle. Today’s local hit cafe or deli can be next month’s memory as customers move to whatever is new. That means cafes and delis need to keep an eye on changing trends, keep their decor appealing as well as ensuring all their equipment is well maintained and staff are paid on time – an important issue in the hospitality industry today.

Establishing a new cafe or deli, or buying an existing business requires a lot of preparation. A big part of that is coming up with a solid plan for how you’re going to finance the initial capital outlay for kitchen equipment, furnishings and stock. Then there are the ongoing challenges of rent, utilities, staff and other recurring expenses.

All those things need to be covered. And that can be difficult in the early days when cash flow is still building as your business kicks off. That can lead to lots of stress if you don’t have a well-considered finance strategy.

When you look at your business finances and consider taking out a loan through a reputable lender, there are several different factors to consider such as the type of loan you take out, whether the lender understands the needs of businesses and deliver the funds you need promptly without requiring a stack of complex forms to be completed or needing you to access masses of potentially hard to find documentation.

When it comes to loans, there are two main types.

A secured loan uses an asset, such as a property you own or some object of value, to help the lender offset their risk. Typically, secured loans offer a lower interest rate and, depending on what you secure the loan against, you may be able to borrow a higher loan amount.

In contrast, an unsecured loan doesn’t require an asset to be used to secure the loan. But, as the risks are different for the lender they may offer a higher interest rate and lend smaller amounts.

Think of these as being like a home loan and a credit card. Mortgage interest rates are lower because the risk of a loss on a home is relatively low. But credit card rates are higher as the risk of a non-payment or default are higher for banks.

During your business’ establishment, you’re likely to need a substantial cash injection to buy new equipment, update the decor, buy new stock or perhaps even set up everything from scratch. That’s where a secured loan can be valuable. You’re probably planning to be in business for several years. That means a secured loan could be a great option. Assuming you have something of value to use as security for the loan, you’ll have a lower interest rate and the ability to borrow enough money to create the deli or cafe you’ve always dreamed of.

After launching your business, you’ll need to turn your attention to operational tasks. Recurring expenses like power bills, salaries, insurance, GST and cleaning services never stop – even when things are quiet. If your cafe or deli is in a regional area, seasonality might impact your cash flow and ability to pay those bills. Or perhaps you have to shut down over holiday periods. Or you might have to tend to a personal issue and need to close your doors for a few days. Perhaps there’s an equipment failure that requires a repair or replacement. Any of those things, and myriad others, can impact your cashflow.

That’s where an unsecured loan can be useful. You can borrow a relatively small amount and use to keep things going when times are tough. Although the interest rate might be higher than the rate you paid when setting your business up, if your planning is realistic, you can look to pay it back when cashflow resumes and before the interest payments become too high.

In those cases, you probably need fast access to funds. Many traditional lenders have long processes that can take days, or even weeks, to complete. But lenders that have a focus on the needs of businesses make it easy to apply with rapid approvals and funds in your account in quick time.

Starting a business is exciting and daunting. But choosing the right type of finance with the right partner can make the journey far less scary.

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