Loan Deals in 2015
Funding your new restaurant business can be costly, to say the least. While a well-designed kitchen and layout can save you in the long-run in terms of efficiency, labor costs, and value, most folks will still need to utilize a loan in order to fund their new business. Fortunately, there are many loans available now that are low-cost and helping to fuel the market! With 2015 just around the corner, it seems that acquiring a loan may be easier as the turn of the year marches forward.
Valuations have been driven to a recent high, and restaurants are seeing an increase of 8% in 2014 alone. “The industry is not having the greatest year, but valuations are having the greatest year,” said Nick Cole, an executive vice president in the corporate banking group at Wells Fargo & Co. “In recent auctions, the valuations have gotten ahead of business performance.”
So what’s driving these loan valuations up? An increase in loan availability as well as an influx of lenders have made a fiercely competitive market that, in the end, benefits those who are searching for a loan. “There are 10 lenders for every borrower,” said Armando Pedroza, restaurant finance and banking leader at Citizens Commercial Banking. “It’s a hot market.” Also, buyers tend to be more knowledgeable and really push for that ‘better deal’.
Still, many buyers are hesitant to jump into the lending pool. National Restaurant News reports:
Still, there is some concern that the market has become too hot in some cases. Some experienced franchisees have backed off auctions recently after prices climbed.
“A lot of private equity firms are struggling to make the valuations make sense even if the lending is available,” Daniel said.
At the end of the day, it seems that loan sales will continue their brisk pace into 2015 as low-cost and readily-available. It’s a great time to renovate your kitchen or make that extra push towards becoming HACCP certified! When you’re looking for loans, know that this competitive market means that a little haggling can go a long way. Here are some tips from All Food Business:
1. Shop around for the best interest rate and terms.
2. Get your financing before you negotiate your lease.
3. Get your loan agreement in writing.
4. Hire an accountant or lawyer to review your agreement before signing.
5. Make sure there is no prepayment penalty.
6. If you choose a venture capitalist, make sure you maintain control running your business.
7. If you get a construction loan, make sure you only pay interest on the commitment as you use it.
By hiring me as your designer, you’ll be able to develop a solid plan on how much you’ll need to acquire through a loan - and you can plan accordingly. Lenders want to know that you aren’t simply estimating a cost with no solid background, and a design plan is the perfect way to prove that you’ve thought your goals out completely.
E Friedman Associates