How To Get Restaurant Financing

Sep 2017
Camino Financial Blog

Finding the right restaurant financing option is crucial and can make all the difference in getting off to a successful start.

This post describes the steps you need to take to get the funds you need, the different types of loans available to restaurateurs, and investment ideas to strengthen your business.

Table of Contents
1. What is restaurant financing
2. Types of restaurant business loans
3. How to prepare your restaurant for a successful business loan application
4. How to get restaurant financing in 4 steps
5. Best restaurant loans
6. How to compare and evaluate lenders
7. Why you should apply for restaurant financing
8. How to invest funds in your restaurant business
9. Alternative restaurant financing options
10. FAQs

What Is Restaurant Financing?

Restaurant financing refers to the process of obtaining funds or capital to start, expand, or sustain a restaurant business. It usually comes in the form of a loan.

It is crucial for these types of businesses because they often require a significant upfront investment for various expenses such as:

  • leasehold improvements
  • equipment purchases
  • inventory
  • staffing
  • marketing
  • working capital

Types Of Restaurant Business Loans

SBA Loans

SBA 7(a) Loan

The SBA 7(a) loan is the most popular type of SBA loan, and you can use it for starting or expanding a restaurant.

The maximum loan amount is $5 million, and the interest rate is typically lower than other types of loans.

SBA 504 Loan

The SBA 504 loan is for businesses that want to purchase or improve commercial real estate, such as a restaurant. The maximum loan amount is $5 million, and the interest rate is typically lower than other types of loans.

Equipment Financing

If you need to purchase equipment for your restaurant, you may be able to get financing through a lender that specializes in equipment loans.

The interest rate will depend on the type of equipment you’re purchasing and the creditworthiness of your business.

Working Capital Loans

A sudden drop in sales or an unexpected expense can quickly put you in the red, and that’s why having access to working capital is so important.

Small business owners can use a working capital loan to get the funds they need to cover short-term expenses and keep their businesses running smoothly.

Whether you’re looking to purchase inventory, make repairs, or tide yourself over during a slow period, a working capital loan can give you the flexibility and breathing room you need.

Business Credit Cards

Business credit cards can be a good option for financing your restaurant if you have good credit and can pay off the monthly balance.

The interest rate on business credit cards is usually higher than other loans, but there’s no need to put up collateral.

Invoice Financing

If your restaurant has unpaid invoices, you may be able to get funding through invoice financing.

With this loan, you borrow against the value of your invoices and typically have to pay a fee, plus interest, on the amount you borrow.

Personal Loans

If you’re starting a restaurant, you may be able to get a personal loan from a bank or online lender.

The interest rate on personal loans is usually higher than other loans, but there’s no need to put up collateral.

Merchant Cash Advances (MCA)

A Merchant Cash Advance is not a loan but an advance on your future sales.

That means you don’t have to worry about making fixed monthly payments- instead, your repayment will be a percentage of your daily credit card sales.

So, if the business is slow, you won’t have to worry about falling behind on your payments.

You know that cash flow is everything if you’re a restaurant owner. Without it, you can’t keep the doors open, let alone make improvements or expand your business.

This option can provide the influx of capital you need to keep your restaurant running smoothly.

Business Line of Credit

A line of credit for restaurants can be a great way to finance your business.

It can provide the capital you need to purchase equipment, inventory, or make repairs and improvements. A line of credit can also help you manage cash flow and keep your business running smoothly.

Business Loans

Banks, credit unions, or other financial institutions typically offer traditional business loans.

The amounts available vary depending on the lender and your business’s creditworthiness. Interest rates for traditional loans may vary based on factors such as the loan amount, repayment term, and your restaurant’s financial health.

One advantage of traditional business loans is that they often offer competitive interest rates compared to alternative financing options. Additionally, these loans provide a structured repayment plan, allowing you to make fixed monthly payments over a predetermined period.

Business loans provide stability and predictability, making them suitable for restaurant owners who prefer a conventional financing approach.

Apply for a business loan today

How To Prepare Your Restaurant For A Successful Business Loan Application

Preparing to get restaurant funding requires careful planning and organization. Here are some steps to help you prepare for the process:

Develop A Business Plan

Create a comprehensive business plan that outlines your:

  • restaurant concept
  • target market
  • competitive analysis
  • marketing strategies
  • financial projections
  • funding requirements

A well-prepared business plan demonstrates your understanding of the industry and ability to manage a successful restaurant.

Organize Financial Documents

Gather all relevant financial documents, including:

  • tax returns
  • bank statements
  • financial statements
  • any existing business loans or debts

Lenders will want to assess your financial history and ability to manage funds.

Improve Personal And Business Credit

Check your personal and business credit scores and take steps to improve them if necessary.

Some things that can strengthen your creditworthiness are:

  • paying bills on time
  • reducing outstanding debt
  • resolving any credit issues

Research Funding Options

Explore various restaurant funding options like:

  • online loans
  • bank loans
  • SBA loans
  • crowdfunding
  • investor partnerships

Research each option’s specific requirements, terms, and interest rates to determine which best suits your needs.

Create A Pitch Deck

Develop a compelling pitch deck highlighting your:

  • restaurant concept
  • market potential
  • financial projections
  • funding requirements

This concise presentation should capture the interest of potential lenders or investors.

Prepare Financial Projections

Generate realistic financial projections that outline your expected revenues, expenses, and profitability over a specific period, typically three to five years.

These projections should demonstrate the potential return on investment for lenders or investors.

Review Legal And Licensing Requirements

Ensure that your restaurant complies with all necessary legal and licensing requirements.

Potential lenders or investors will want assurance that your business operates within the law’s bounds.

Seek Professional Advice

Consult with a financial advisor, accountant, or lawyer specializing in restaurant financing.

They can:

  • offer valuable insights
  • help you navigate the process
  • provide guidance on legal and financial matters

Know What You Will Use the Loan Amount For

Understanding the purpose and intended use of the loan amount is crucial. Having a clear plan and allocating the funds wisely is essential to maximize their impact on your restaurant’s success.

By identifying the specific areas where you can use the loan, you can align your financial goals and allocate the funds accordingly.

By having a well-defined purpose for the loan, you can accurately estimate the required funding amount and structure repayment terms accordingly. This knowledge also demonstrates your preparedness and commitment to lenders, enhancing your chances of securing the loan.

Additionally, the lender will want to know what you’ll use the funds for, and the answer may impact your application.

Calculate the amount of funding you require by considering what you need to invest in, for example:

  • start-up costs
  • equipment purchases
  • leasehold improvements
  • working capital

Be realistic and ensure your funding request aligns with your business plan and financial projections.

Strengthen Your Cash Flow

Getting the best restaurant business financing can be difficult since lenders know many restaurants fail.

However, the failure of so many restaurants is not the lack of customers or profits but the lack of cash flow.

Whether you are considering applying for a loan or not, your cash flow should always be in good health.

Invest Your Own Money Too

Banks need to know that their business will succeed.

One way to do this is to tell them the amount of the investment you have made from your own funds.

The higher your own stake, the greater the likelihood of getting your loan.

For example, if you buy restaurant equipment, you could put up 30% to 40% of its cost. Most lenders would be willing to finance the remaining amount.

Some lenders will probably deny your request if you ask for 100% financing.

Keep Your Credit Report Ready

The lender will access your business credit score directly. But, you need to familiarize yourself with the report.

The first step is understanding the difference between your personal and business credit.

Then you need to know how to read your credit report.

Also, if you have delayed payments in the past, you should be able to explain the reasons.

The loan officer will be particularly interested in knowing how eventually resolve the problem.

Your chances of getting your loan approved increase with a higher credit score. A good score is 650 or more.

However, a lower score will require you to better convince the lender about your creditworthiness.

How To Get Restaurant Financing In 5 Steps

Here are some basic steps to get a loan with traditional and online lenders.

Decide the Type of Funding

Determine the specific type of financing that suits your restaurant’s needs.

This can include options like bank loans, SBA loans, equipment financing, lines of credit, or even personal investments.

Consider factors such as interest rates, repayment terms, and the amount of funding available.

Research Lenders or Financing Options

Explore different lenders or financing options that cater to restaurant businesses.

Look for institutions or programs that specialize in restaurant financing.

Research their requirements, eligibility criteria, interest rates, repayment terms, and any other relevant details.

This will help you identify potential lenders or financing sources that align with your needs.

Prepare the Necessary Documents

Gather and organize the required documentation to support your loan application.

This typically includes your business plan, financial statements, tax returns, licenses, permits, lease agreements, and any other relevant records.

Ensure that your financial documents are up to date and accurately reflect your restaurant’s financial health.

Get Your Paperwork In Order

You can reassure lenders if you can produce documents that substantiate your claims.

  • It is a good idea to keep your tax returns handy and show them to the lender.
  • You should prepare copies of your tax returns for the last three years.
  • Make sure your bank statements are in order. They provide proof of your sales volumes and expenses.
  • If a significant portion of your sales is in cash, you can show the deposits you have made into the bank and tie up these figures with your sales records.
  • You might also have to provide a business plan, resume, and profit and loss statements during the loan application process.

Start Your Application

Begin the application process with your chosen lender or financing source.

Submit your application along with the supporting documents.

Provide all the necessary information and be transparent about your restaurant’s financial status, projections, and any collateral you may have.

Respond promptly to any additional requests for information or documentation from the lender.

8 Best Restaurant Loans

Camino Financial

  • Loan Amount: Up to $35,000.
  • Payment Terms: 24 to 36 months.
  • Interest Rates: Depends on your credit score.
  • Credit Score: We accept applicants that have no existing credit history.
  • Requirements: 9+ months in business, 9 months of bank data, $2,500+ monthly revenue, no collateral required.

Apply for a business loan today


  • Loan Amount: Up to $250,000.
  • Payment Terms: 6 to 12 months.
  • Interest Rates: Starting from 4.8%.
  • Minimum Credit Score: 600.
  • Requirements: 6+ months in business, $10,000+ monthly revenue, no specific collateral required.

Funding Circle

  • Loan Amount: Up to $500,000.
  • Payment Terms: 6 months to 5 years.
  • Interest Rates: Starting from 4.99%.
  • Minimum Credit Score: 620.
  • Requirements: 2+ years in business, $150,000+ annual revenue, no recent bankruptcies or tax liens.


  • Loan Amount: Up to $150,000.
  • Payment Terms: 12 or 24 weeks.
  • Interest Rates: Starting from 4.66%.
  • Minimum Credit Score: 500.
  • Requirements: 6+ months in business, $50,000+ annual revenue, connected business bank account or accounting software.


  • Loan Amount: Up to $500,000.
  • Payment Terms: 3 to 36 months.
  • Interest Rates: Starting from 9.99%.
  • Minimum Credit Score: 600.
  • Requirements: 1+ year in business, $100,000+ annual revenue, no recent bankruptcies or tax liens.

Small Business Administration (SBA) Loans

  • Loan Amount: Up to $5 million.
  • Payment Terms: Up to 25 years for real estate loans or up to 10 years for working capital loans.
  • Interest Rates: Varies, but typically lower than market rates.
  • Minimum Credit Score: Requirements vary, but most lenders prefer scores above 650.
  • Requirements: SBA loan application, personal and business financial documents, business plan, collateral (if applicable), and down payment.


  • Loan Amount: Up to $400,000.
  • Payment Terms: 6 to 18 months.
  • Interest Rates: Starting from 9.99%.
  • Minimum Credit Score: 500.
  • Requirements: 6+ months in business, $15,000+ monthly revenue, no recent bankruptcies or tax liens.

Rapid Finance

  • Loan Amount: Up to $1 million.
  • Payment Terms: 3 to 60 months.
  • Interest Rates: Varies based on creditworthiness and financial profile.
  • Minimum Credit Score: 500.
  • Requirements: 3+ months in business, $5,000+ monthly revenue, no specific collateral required.

How To Compare And Evaluate Lenders

When comparing and evaluating restaurant financing options, consider the following factors to make an informed decision:

Interest Rates And Fees

Consider whether the lender offers fixed or variable rates. Also, consider any associated costs, such as origination fees or prepayment penalties.

Lower interest rates can lead to significant savings over the life of the loan.

Loan Amount And Payment Terms

Examine the repayment terms, including the duration of the loan and the frequency of payments.

Longer terms may result in lower monthly payments but potentially higher interest costs.

Eligibility Criteria

Assess your own credit score and determine if you meet the criteria.

Additionally, consider other eligibility requirements such as time in business, minimum revenue thresholds, and any specific collateral requirements.

Funding Speed

Determine the time the lender takes to approve and fund the loan.

If you need funds quickly, opt for lenders that offer expedited processing and quick disbursement of funds.

Repayment Flexibility

Evaluate the flexibility offered in repayment options. Some lenders may allow early repayment without penalties, while others may have restrictions.

Consider your ability to make prepayments or adjust payment schedules per your restaurant’s cash flow.

Total Cost Of Financing

Evaluate the total cost of financing by considering the interest paid over the loan term and any associated fees. Compare the total costs among different lenders to determine which option is the most affordable in the long run.

Why You Should Apply For Restaurant Financing

Getting funding for a restaurant is vital because it is a costly venture.

You can associate many expenses with opening and running a restaurant, including:

  • rent
  • equipment
  • supplies
  • labor

It can be challenging to cover all of these costs and make a profit without adequate funding.

Additionally, restaurants face stiff competition from other businesses. To succeed, they must stand out and offer something unique to attract customers.

Having adequate funding can help a restaurant achieve this by allowing them to invest in marketing and advertising and improve its overall operations.

4 Signs That You Need A Restaurant Business Loan

How do you know when it’s time to ask for a loan? Here are four signs that it might be time to consider a restaurant loan:

You’re Consistently Busy, And Your Profits Are Growing

If your restaurant is consistently busy and you’re seeing a steady profit increase, it might be time to consider taking out a loan to expand your business.

Whether you want to add another location or need extra funds to cover expansion costs, a loan can help you make your growth plans a reality.

You’re Facing Unexpected Expenses

Even the most well-run restaurants can face unexpected expenses from time to time.

These unexpected bills can seriously dent your budget, whether a sudden spike in food costs or an unplanned repair.

If you don’t have the cash on hand to cover these unexpected expenses, a loan can help you get the funds you need to keep your business running smoothly.

You Want To Take Advantage Of A Business Opportunity

Sometimes, the best opportunities come at the worst times.

If you’re presented with a business opportunity that could help your restaurant grow but you don’t have the cash to take advantage of it, a loan can help you make it happen.

Whether you’re looking to buy a new piece of equipment or need some extra funds to get started, a loan can give you the boost you need to seize the opportunity.

You’re Struggling To Keep Up With The Demand

If your restaurant is popular and you’re struggling to keep up with demand, it might be time to consider financing to help you expand.

Whether you need to hire more staff or need some extra funds to cover the costs of expansion, a loan can help you meet the needs of your growing business.

Taking out a loan is a big decision, but it might be the right choice if you’re facing financial challenges or have an opportunity to grow your business.

If you’re unsure whether a loan is right for your restaurant, ask your accountant or financial advisor for more information.

How To Invest Funds In Your Restaurant Business

Funding for restaurants allows you to grow your establishment. Some common examples include:

Working Capital

Often, restaurants need access to working capital to cover operational expenses such as inventory, payroll, and marketing.

A loan for a restaurant business can provide the necessary funds to keep the business running smoothly.


If your restaurant is doing well and wants to expand, you can use a loan to finance the expansion.

This could include opening a new location, adding more seats to the existing restaurant, or expanding the menu.


Over time, restaurants may need to renovate to stay fresh and appealing to customers.

Loans for restaurants are the perfect way to finance any necessary renovations, such as updating the décor, installing new equipment, or making repairs.

Debt Consolidation

You can use financing to consolidate the debt into one monthly payment with a lower interest rate if a restaurant has high-interest debt from multiple sources.

This can save the business money and make it easier to manage debt.

Equipment Financing

If a restaurant needs new equipment, such as kitchen appliances or furniture, a small business loan can help purchase it.

This can help the business save money by making necessary purchases without depleting cash reserves.

Seasonal Financing

Some restaurants experience seasonal fluctuations in business, such as during the summer or holiday seasons.

Restaurant loans can provide the necessary funds to help the business through these slower periods.

Start-up Financing

You can use a loan for opening a restaurant using start-up financing.

This is essential in getting the business off the ground, so you can finance equipment purchases, lease a space, and hire staff.

Bridge Financing

If a restaurant is in the process of selling, you can use a loan as bridge financing.

This type of financing can help the business meet its financial obligations until the sale is complete.

Alternative Restaurant Financing Options

Some ways to finance a restaurant don’t involve going through traditional restaurant lending. Here are a few options:

    Raising Money

    Raising money from friends and family can be a great way to get started, but ensuring everyone is on the same page about the loan terms is essential.

    You don’t want to put your relationships at risk by not being able to repay the borrowed money.

    A Credit Card

    Using a credit card can be a quick way to get the money you need, but knowing the potential dangers is important.

    If you’re not careful, you could end up with a lot of debt you can’t afford to repay.

    Angel Investors

    Finding an angel investor can be a great way to get the funding you need, but you’ll need to give up a portion of the equity in your business.

    Make sure you are comfortable with this before moving forward.


    Crowdfunding can be an excellent option for some businesses, but ensuring a good campaign strategy is vital.

    You can use strategies to attract investors, such as giving away a portion of your profits.

    Personal Savings Or Family Funds

    You can use personal savings or money saved from the business itself.

    Using savings does not require borrowing money or taking on debt. However, ensuring enough money is set aside to cover all the necessary expenses is important.

    Otherwise, the business may quickly become overwhelmed by debt.

    Another option for financing a restaurant business is to borrow money from friends or family.

    This can be a good option because it does not require taking out a loan from a bank. However, it is crucial to ensure that the loan terms are clear.

    Getting A Loan As A Restaurant Owner Is Possible!

    Remember that Camino Financial loans can help you.

    Many of our clients are restaurant owners: we are familiar with your business’s singularities and understand your needs and challenges like no other lender.

    Our small business loan application is simpler and shorter than bank applications. We also have easier-to-meet requirements.

    So if you need restaurant funding, consider completing an application with Camino Financial.

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    What are restaurant business loans?

    Restaurant business loans are financing that you can use to help with the costs associated with starting or expanding a restaurant.

    These loans can come from various sources, including banks, private lenders, and government programs.

    How do you get approved for a loan for a restaurant?

    You’ll need to do a few things to get approved for a loan for a restaurant: have a detailed business plan, have good personal credit, improve your cash flow, and have some collateral.

    What kind of loans are there for restaurants?

    The most common type are small business loans, SBA loans, and merchant cash advances.

    What do I need to get a loan for a business?

    Generally, you must provide documentation about your business, such as your business plan and financials.

    You will also likely need to have a good credit score. Additionally, the bank may want to see that you have some personal assets you could use as collateral for the loan.

    How much can the average person get for a business loan?

    The average person can get a business loan of between $5,000 and $1 million.

    However, it isn’t quite so simple. Many factors can affect how much you can borrow, including the type of business you’re running, your personal creditworthiness, and the amount of collateral you have to offer.

    Is it hard to get a loan to buy a restaurant?

    Several factors come into play when lenders assess loan applications for restaurant purchases.

    These factors include the borrower’s creditworthiness, business plan, experience in the industry, collateral, and the financial health of the restaurant purchased.

    While the process may involve some hurdles, with thorough preparation, a solid business plan, and a strong financial profile, securing a loan to buy a restaurant is possible.

    Working with experienced lenders specializing in restaurant financing can also significantly increase your chances of success.

    How Much Does It Cost To Open A Restaurant? Breaking Down Restaurant Startup Costs

    Sep 2017
    Camino Financial Blog

    How much does it cost to open a restaurant?

    Maybe you’re planning on starting your own business in the food industry. Or perhaps you’re ready to improve your profits by reducing expenses.

    How much should you spend on food purchases? Should labor costs be at par with other similar restaurants? Can you avoid overspending on some items? Here we will address these questions.

    If you need to improve your restaurant’s cash flow, a small business loan could be exactly what you’re looking for.



    Restaurant Startup Statistics

    One thing you can count on is that eating food is something everyone does. That’s why the restaurant industry is so successful.

    The National Restaurant Association reported that in May 2021, eating and drinking places sales surpassed pre-pandemic sales volumes (Feb 2020) by 1.66%. This may not seem like much, but it is a huge post-COVID accomplishment.

    This shows that despite all odds, the industry has a bright future.

    But, an average of 17% of restaurant owners close their businesses in the first year of operation.

    According to the U.S. Bureau of Labor Statistics, the main reasons businesses fail are:

    • not having enough financing
    • misjudging the local market trend
    • having the wrong location

    A restauranteur can make a good living as long as they know the restaurant startup costs upfront and plan accordingly.

    Restaurant Startup Costs Breakdown

    Here you’ll find average startup costs for restaurants.

    To better help you understand them, we’ve divided them into one-time, fixed, and variable expenses.

    One-Time Costs

    Here, you’ll find a breakdown of expenses you’d ideally only have to make once.


    Before starting your own restaurant, you should know that equipment costs will likely eat up a big chunk of your restaurant business budget.

    Prepare to spend on various gadgets like stoves, steamers, fryers, and freezers. You’ll also need dishwashers, a coffee machine, and cooking utensils. Finally, don’t forget about plates, spoons, knives, and furniture.

    The list is almost endless.

    A mistake that many restaurant entrepreneurs make is to overspend on cooking equipment. They think that nothing but the best will do.

    Their line of reasoning is that everything they buy will last for years. Yet, this is the wrong attitude. Instead of splurging on kitchen equipment, it’s advisable to conserve your funds.

    How can you cut down on restaurant kitchen costs? First, explore the possibility of buying second-hand items. You can look for bargains with a simple Google search. Additionally, you don’t have to buy the most expensive item in each category.

    Lease Security Deposit

    Three things matter in property: location, location, location.

    The same could be true about restaurants. But, again, if yours is in a place with higher footfalls, your chances of success are much greater.

    But prime commercial space commands more rent and building fees. Balance finding a suitable place and paying the least possible rent for it.

    You can expect to pay a security deposit fee averaging $2,000 to $12,000. A restaurant’s size and location are the main factors determining how much the building owner charges.

    Buying The Location

    To buy an existing commercial space for your restaurant, the average per square foot price is $178. However, this estimate goes up or down depending on the location.

    Other variables such as the size and the quality of the materials used to construct the building affect the square foot price.

    If the building needs large-scale renovations, your square foot price could be as high as $800.

    #CaminoTip Keep in mind that you might have to spend on remodeling costs if the existing building doesn’t have the correct facilities. You should also consider the construction costs if you want to build it from scratch.

    Professional Services

    Consultants can point you in the right direction. It doesn’t matter if you need help with legal, accounting, marketing, or renovation advice.

    These costs will vary depending on how much hands-on help you need.

    On the low side, professional services cost anywhere from $1,000 to $50,000. But they could climb as high as $250,000 when making extensive renovations to a larger restaurant.

    Decor, Building Improvements, And Renovations

    The cost of decorating your dining room can vary widely depending on your restaurant concept.

    You may need to change the floors and the lighting, add wallpaper or hang some art on the walls.

    Even if you don’t want anything complex, you might still need to give the space a new coat of paint. This can cost from just a couple hundred bucks to $40,000.

    And let’s not forget the exterior. Your restaurant will look more inviting if you spend on landscaping, awnings, shutters, patio dining, or exterior paint. Exterior costs average $1,000 to $40,000.

    For example, an upscale restaurant will be more expensive than a traditional diner.

    There are also other expenses you should consider:

    • Accessibility for disabled persons: You will need a ramp and bathrooms to accommodate the needs of disabled diners. That can cost upwards of $30,000. For that reason, some startup owners opt to initially only take out orders.
    • Signage: You should budget between $3,000 to $10,000 for a logo design, exterior sign, or window decals to advertise your restaurant.

    Tables, Furniture, And Tableware

    Restaurant startup costs gravitate upwards of $80,000.

    That’s a lot, isn’t it?

    But it actually may vary depending on how much you spend on quality furniture and tableware and other item purchases.

    Contingency Funds

    Growing a restaurant takes time before having a steady stream of regular diners.

    Set aside at least six months of expenses to cover leaner times.

    This can range between $20,000 to $250,000.

    Restaurant Technology

    A POS system (point of sale) simplifies the ordering and payment process.

    • Hardware costs start at $799. It can include a router, terminal, handheld device, card reader, kitchen display system, and printer.
    • Extra printers and routers average $400 each.
    • Software charges run between $79 to $150 per month, with monthly interchange fees averaging 1.3% to 3.5% plus 5 to 10 cents for each transaction.
    • Payment providers also charge credit card assessment fees between 0.13% to 0.15% and may charge a flat rate or subscription price.

    Business License And Permits

    One of the first expenses you make is business licenses and permits.

    Costs vary based on city licensing fees and liquor and compliance permits.

    Local permits can cost between $100 to $300 each.

    Need A Loan To Start?

    Restaurant Fixed Costs

    These ongoing expenses will always be the same, so they’re easier to budget around.

    Labor: Employee Salaries

    After food, the most significant startup costs would be the employee wages. Total payroll costs should not exceed 25% to 30% of food sales for most restaurants.

    A restaurant that spends more on its workers could find it challenging to make a profit.

    Plan to pay an annual salary of $28,000 to $55,000 for a restaurant manager. A weekly amount of $1,300 to 1,800 for each head chef. $575 to $650 per week for cooks.

    You can pay the minimum wage for waiters, though, since the service staff keeps any tips they earn.

    And don’t forget about your salary as a business owner.

    Rent / Lease

    How much should you pay for rent?

    That depends upon your luck in finding the right place and your negotiating skills. However, the conventional wisdom is that rent should not exceed 6% of sales.

    Of course, if you include property-related expenses like real estate taxes, common area maintenance, and occupancy expenses, the figure can go up. Still, it should not be more than 10%.

    Marketing And Advertising

    At a minimum, a restaurant needs menus, fliers, social media marketing exposure, and advertising.

    Marketing costs run between $100 to $35,000. The amount will depend on whether you do the work or hire a marketing and advertising consultant.

    Restaurant Insurance And Permit Renewals

    These overlooked costs are very important.

    You need to purchase a business owner’s policy, worker’s comp, and liquor liability insurance. For all of this, you could pay an average of $4,300 per year, which varies based on coverage choices.

    Permit renewals pricing varies per state and location, but business, food service, liquor, and food handler’s license renewals begin at $50+ each.

    Licensing Costs

    You may be thinking of opening a restaurant franchise. If so, you’ll also need to consider licensing costs. It can cost from $10,000 to $50,000 (or even more) to buy a franchise.

    Variable Restaurant Expenses

    These are the recurring costs that will be different every time. Thus, these restaurant monthly expenses might be harder to budget around.

    Restaurant Food Cost

    Every new restaurant owner should keep a close watch on food expenses. As a general rule, the restaurant startup costs of food should not exceed 28% to 32% of total food sales.

    If you spend more than this percentage, you must reconsider your purchase practices.

    You may want to renegotiate prices with suppliers or look for an alternate option. An excellent tool is the restaurant food cost formula. It’s the best way to keep your expenses under control and know how much you should spend on food.

    Repair And Maintenance

    Although buying equipment is a one-time expense, consider repair costs.

    You must maintain your restaurant’s equipment in good condition. This will ensure that your appliances perform efficiently.

    Preventive maintenance will also help to extend the life of your kitchen equipment. In other words, you will have to make replacements less often.

    It’s advisable to set some money aside to cover unexpected repair expenses. For example, if a freezer stops functioning, you may have to pay a significant amount to repair it.

    How much should you budget for repairs and maintenance? About 1% to 3% of sales can be enough.


    Electricity costs, phone bills, and internet expenses can eat into your restaurant’s profits. As the owner, you should set an example and try and cut these expenses. Here are some examples:

    • Switch off the lights when you don’t need them.
    • Change over to energy-saving light bulbs if that’s possible.

    For most restaurants, utility costs add up to about 5% of sales.

    #DidYouKnow If you want a big restaurant opening event, you should spend around 20% of what you plan to spend annually on marketing.

    Find out how to buy cheaper and better kitchen equipment

    Startup Costs Vary Greatly With the Type of Restaurant

    Keep in mind this average restaurant startup costs breakdown may vary. This is because every different type of establishment will have a unique cost structure.

    For example, a food truck can have lower costs and save money, especially when it comes to worker expenses. But, if you run an establishment with table service, expect higher payroll expenses.

    Regardless of the type of restaurant you run, you must keep strict control over your expenses. Even seemingly insignificant sums can add up over a period.

    Thus, cut down on unnecessary expenditure wherever possible. It will help you compete with other restaurants and remain profitable.

    Your business model will also affect costs and profits. For example, a fast-food restaurant might have fewer expenses than a french restaurant that has to import most of its ingredients.

    How Much Does It Cost To Run A Restaurant? Profits vs Spending

    If you open your restaurant, you must keep track of your profitability. The best way to do this is to add up your sales for a certain period, a week or a month, and then deduct the expenses connected with those sales.

    Consider this example:

     Restaurant expenses structure and estimated profit for one week of a restaurant’s operations$Cost as a percentage of sales
    Weekly sales$10,000100%
    Weekly food purchase cost$3,00030%
    Payroll for the week$2,50025%
    Gross margin$4,50045%
    Amount set aside or spent on repairs and maintenance$3003%
    Rent inclusive of property-related expenses$1,00010%
    The amount remaining for miscellaneous expenses and profits$2,70027%

    This example shows that food and payroll expenses eat away almost half the sales revenue. The restaurant owner makes a gross margin of $4,500 on sales of $10,000. As a percentage, the gross margin is 45%.

    The table above also considers several other expenses — repairs and maintenance, rent and related costs, and utilities.

    After accounting for these, the amount that remains is $2,700. That’s 27% of sales revenue, which could pay for miscellaneous expenses.

    The remaining amount will be profit.

    Remember that there will be little money left to pay for other expenses if you have an insufficient gross margin. So, your profits would fall.

    If expenses continue to mount, you could be looking at a situation where you would be making losses.

    A business loan can help you improve your cash flow, invest in your business growth, and strengthen your finances.

    Get Approved For A Loan Today

    How To Raise Funds For Restaurant Startup Costs

    There are a few different ways to get the capital you need to start your business.

    • Small business loan. Contact the SBA, local banks and credit unions, and online lenders for microloan or small business loans. Camino Financial can help you finance your business venture. We offer minimal requirements and competitive rates.
    • Grants. Search available small business grants for restaurants available on, the SBA, or find ones offered in your state.
    • Business partners or investors. Be on the lookout for a business partner or investor with experience in the restaurant industry. They may provide funding for restaurants in your area.
    • Friends and family. People close to you want to see you succeed. They need to be comfortable lending you money, knowing that your startup restaurant could potentially fail. Treat them as you would any investor and put the conditions in writing.
    • Credit cards. Start with a small credit amount in your business name that you can comfortably repay each month. This will help you build a credit history to qualify for a future small business loan.

    How Can I Cut Down On My Restaurant Costs?

    A restaurant with a steady stream of customers and a good reputation can be a source of great satisfaction. This success results from careful planning, hard work, and the ability to pay attention to every small detail.

    But high sales volumes do not necessarily guarantee an adequate level of profit, especially if you spend too much.

    If you want to increase your profitability, you can decrease food costs or reduce the amount you spend on your workers.

    However, cutting the other expenses is more complicated, and the impact on your profit will be relatively lower.

    Here are some ways to reduce restaurant costs and improve profitability:

    • Do clients return any dishes regularly? Maybe there is a problem with the preparation, but probably you just need to strike that dish off your menu. Learn here how to do a menu audit.
    • Are you making your food purchases in the correct quantity? Of course, you need to buy enough to maximize the bulk discount, but you also need to ensure that food does not become stale.
    • It’s possible to learn how to reduce your production costs in any business. In the restaurant industry, even a slight reduction in food costs can result in significant savings. That’s because your food purchases account for a large portion of your total restaurant business budget.
    • Do your workers have enough to do? Consider giving them neglected tasks when it’s not rush hour.
    • Focus on how to reduce your labor costs. It’s possible to save on the salaries and wages you pay without compromising the quality of service you provide to your customers. Consider outsourcing some tasks. Is there any way that you can cut down on your overtime expenses?

    Tips To Start A Successful Restaurant Business

    Use these tips to successfully start a restaurant and maximize growth potential.

    • Make a business plan. Write a business plan to include long-term ways to improve your restaurant, a sample menu, business goals, a description of the restaurant, and how you intend to get new customers.
    • Make financial forecasts. Base your projections on market research for your location,  actual expenses, and predicted income.
    • Don’t overspend on equipment. Buy good, used equipment to maximize your business’s profit margin. New equipment depreciates the moment it’s purchased.
    • Pay attention to contracts. Always review employee, lease, supplier, and contractor agreements. Ensure they clearly define the business arrangement and your expectations.
    • Follow your restaurant business budget and don’t overspend. Follow predetermined amounts set aside for food, remodeling, technology, and marketing costs. Then, when you establish your restaurant and it’s profitable, you can add expenditures.
    • Don’t overhire. Regularly evaluate your staff needs and hire prudently based on sales growth and restaurant trends.
    • Let quality and quantity drive your sales. People keep coming back for good food. Notice what foods they leave on the plate and which menu items are top sellers. It’s better to have 10 items that drive sales than 20 not-so-popular choices that cause sales to tank.
    • Streamline your menu. If a menu item isn’t selling, research what food types sell in your location. Then, you can make adjustments to your menu to cater to what your customers want.
    • Find a lender that understands your vision. It’s true, like anyone else, lenders are in business to make money. However, some go the extra mile to guide small business owners in the right direction to succeed. Camino Financial is one of those lenders.

    A Business Loan Can Help You Finance The Average Start-Up Cost For A Restaurant

    Experienced restaurant owners know that accessing funds can give their business an advantage.

    You may get a new opportunity to increase your level of operations.

    But this expansion could involve buying additional equipment or hiring more personnel. Or maybe your restaurant needs an urgent cash injection to purchase inventory or pay for furniture repair.

    Where will you turn to for cash?

    At Camino Financial, we specialize in restaurant loans. Many of our members are new restaurant owners, and we have a high degree of expertise in this segment. So if you need money quickly, request a quote today for a business loan.

    We can offer you the best financing solution for your needs.

    Compared to other lenders, we have fewer requirements that are easy to meet. Your restaurant should have been active and registered for at least nine months and generating sales of at least $30,000 annually.

    If you are eligible, we can provide funds in two to ten days.

    Apply now!



    How to reduce expenses in a restaurant?

    Invest in a restaurant food cost calculator to track which foods cost more and work with suppliers to reduce pricing.

    Use the first-in, first-out method to use older ingredients first, and be mindful of ways to reduce overall waste.

    Remove low-profit items from your menu and proportion ingredients ahead of time to speed up service and avoid running out of ingredients.

    Use energy-efficient lighting and appliances and only run a full dishwasher to save on energy costs.

    How to cut labor costs in a restaurant?

    Labor startup costs can eat away at your restaurant business budget if you hire too many employees. Therefore, it’s essential to know your slow and rush hour periods to schedule the correct number of employees to cover those situations.

    Also, hire people who are willing to learn, excited about what they do, and don’t mind growing alongside you as your business growth accelerates.

    How to determine food costs for a restaurant?

    The best way is to use the food cost formula:

    Beginning inventory, plus food purchases, minus ending inventory, divided by food sales. Multiply that result by 100 to determine your food cost percentage.

    The result should average 28% to 32% or less of your total food sales.

    How much does a restaurant cost to open?

    According to Sage, an accounting software company, the median cost per seat is $3,046 for a leased building and $3,734 for owning the building.

    Is it profitable to open a restaurant?

    Yes, it can be very profitable if you know how to keep your costs down. For example, restaurants’ average net profit margin is 15%, and the gross margin is 67%.

    Can you start a small restaurant with 10,000 dollars?

    It is possible to start a restaurant with limited funds. The best way to do so is to buy used equipment and find an affordable location. You should also consider starting a restaurant with no in-dining options, only takeout and delivery.

    How hard is it to open a restaurant?

    It can be. There are so many things to consider, and things can go wrong. But if you have a business plan that works like a planned route, the process could be considerably easier.

    How much money do you make when you own a restaurant?

    Depending on the type of restaurant and the size, you can make around $30,000 to $150,000 per year.


    How To Set Your Restaurant Apart

    Oct 2017
    Camino Financial Blog

    Keeping up with the competition is one of the greatest challenges that restaurant owners have to face. There are tons of restaurants and fast food chains all around the country. Did you know that you can find more than a hundred food destinations close-by in most metropolitan areas? That’s why it is very important to set your restaurant apart in some way. But how can you make your food business unique? Read the following tips that will surely grab and keep, your customers’ attention.

    4 Areas To Set Your Restaurant Apart

    Tasteful Food and Unique Recipes

    A significant way to set your restaurant apart is with food taste and unique dishes. If your food tastes better than your competitors, you will be well on your way to a successful business. Research some of your local competitors and see what their themes and dishes are. If you can provide a new point of view (that tastes good) you could get a leg up. Your customers simply have to get the tastiest thing they have ever eaten. 

    Appropriate Entertainment

    Another way to bring in more business is to offer entertainment during meals. Things like karaoke, trivia, comedy shows, and live music, give your customers something fun to do while eating. The kind of entertainment provided should match the feel and climate of your restaurant. If you are a fine dining establishment, you probably don’t want something wild like a comedy show or karaoke night. Background music, like smooth jazz, would be much better suited for that kind of atmosphere. On the flipside, if you are known as a fun local pub, it might be a good idea to have things like trivia or karaoke. Obviously, these things will cost money. Chances are though that they will pay off in the long run.

    Excellent Service

    The service customers receive will make or break any restaurant. You could have the most delicious food in 100 hundred miles, but if you have staff that is rude and ignores your guests, you won’t be getting many customers coming back. Having a friendly, personable staff, will do wonders for your business. It will ensure that guests are served promptly and efficiently. If something goes wrong in the kitchen, guests might be more forgiving if they like the service they have received. It also creates an overall friendly atmosphere, which tends to attract a majority of restaurant goers. Make sure to properly vet and keep an eye on your staff.

    A Variety of Drinks

    Unless you are specifically aiming to be a family-oriented restaurant, a bar, and good bartenders are great. A lot of people want to unwind after a stressful day of work with a beer or a glass of wine. This is why most restaurants tend to have a bar, or at least, serve alcohol. Ideally, your beer and wine list would be comprehensive and feature a variety of brands, but we understand that may be difficult due to the cost. Still, partnering with a local brewing company or winery could get you a few more customers and provide you a major boost in income.

    Final Thoughts

    Our advice to set your restaurant apart will help you out, but you have to prioritize on what your customer wants and work around that. Think about what you want out of your restaurant, what your community needs and wants, and which of the above factors fit your goals and vision. Give your customers a reason to come back, by offering them a unique and memorable experience. Think about what makes your business different, stand out from the competition, and emphasize that. 

    The Best Practices to Do a Restaurant Inventory

    Sep 2017
    Camino Financial Blog

    A restaurant inventory is crucial in any food business since a restaurant’s food budget can account for a significant portion of its total costs. Just think: most establishments spend about 30% of their total sales on food purchases.

    If you are able to successfully bring down your food costs, it will have a direct impact on your profitability. One way to achieve this is to pay more attention to the manner in which you monitor your food and restaurant inventory.

    Ask yourself the following: Do you throw away significant amounts of ingredients because the expiration date has passed? Are you constantly running short of certain items forcing you to make emergency purchases? Does your existing food inventory differ by a significant amount from your records?

    If you have answered yes to any of these questions, it is probably time to review the process you use for monitoring your restaurant inventory. Just follow these simple tips.

    4 Steps to Do Your Restaurant Inventory

    1. Use the right amount of people

    How many people should carry the task of doing your restaurant inventory? Two people can handle the task of monitoring your restaurant’s food inventory. When possible, the business owner or the manager should supervise the process.

    Why two people? They can count the items separately and then you can see if they have obtained the same result. In the event of a difference, a recount should be done. If the manager or the business owner checks this practice every once in a while, it will ensure that the employees are doing a complete job.

    In other words, allocating the work to two people instead of one will result in greater accuracy and will also reduce the chances of records being deliberately changed.

    2. Use the first-in, first-out rule

    How should the food items be used in the kitchen? When it comes to selecting a food item to be used or cooked in the kitchen, does your cook simply grab the first can or packet that comes to hand? If this is the case, it is likely that you will have large quantities of food inventory that will reach their expiration date.

    To efficiently manage your restaurant inventory, you must follow a first-in, first-out (FIFO) policy. Your staff must be trained to store those items that were received earlier in the front. By doing this, they will be used before the fresh stock.

    Here you can read more about this useful method and check an example.

    3. Calculate your food cost

    Monitoring and controlling your food cost is a key part to help you with your restaurant inventory. To achieve it successfully, you can use a food cost formula. A food cost formula is a simple and efficient way to keep an eye on your food expenses, prevent them from escalating, and thus help you do your restaurant inventory. Simply put, a certain percentage of your total restaurant expenses will go towards food purchases. Have in mind that this is usually in the region of 28% to 32% of your total food sales. The food cost formula goes like this:

    FOOD COST PERCENTAGE = beginning inventory 
    + food purchases
    – ending inventory
    ÷ by food sales

    Learn here all you need to know about the food cost formula.

    4. Use these simple rules

    Are there any other effective rules to follow? Sure! When it comes to optimizing your restaurant inventory a greater degree of efficiency and accuracy can be achieved if you follow these 3 rules:

    1. Don’t combine the process of receiving a new shipment and counting your existing food inventory. If you do this, it can lead to double counting and confusion. Inventory must be taken before a new shipment arrives
    2. If you take inventory every week, do it at the same time and on the same day on a regular basis. Following this practice will enable you to avoid fluctuations in weekly figures
    3. When there is wastage, the reason must be recorded

    Monitoring your restaurant inventory on a consistent basis and then taking the necessary corrective action can yield positive results. For instance, you may notice that there is greater wastage of items sourced from a particular supplier. You could then discontinue or reduce purchases from that person or organization.

    Well planned and effectively implemented food and restaurant inventory practices will result in lower wastage, a greater degree of cost-effectiveness, and higher profitability. Want more restaurant practices that will grow your business and your profits? Learn here how to grow your restaurant business.


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    Tools & Resources for Restaurant Business

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    Best way to track your food cost in the restaurant business in the so-called food cost formula


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