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Updated: July 22nd, 2021
While no small business has gone untouched by the COVID-19 pandemic, it’s fair to say that the restaurant industry was hit especially hard. From fast food to fine dining, establishments were turned on their heads when lockdowns and social distancing requirements were implemented, forcing restaurant owners to rethink and overhaul their own business models in order to survive.
However, those restaurants that managed to make it through the worst of the pandemic have emerged stronger than ever. Patrons have proven their willingness to support their favorite take-out spots, and those sales have gone a long way for entrepreneurs who could have easily thrown in the towel when the going got tough.
Now that the worst is seemingly over, small business owners (and restaurant owners in particular) are looking ahead to the future — even if that future looks a bit different than it did before the pandemic first hit. Within this changing landscape, restaurant owners must continue to adapt their models to move forward — a shift which will naturally require fresh cash flow. That’s where financing like business lines of credit can come in.
Used judiciously, a business line of credit could be the very thing that provides much-needed breathing room for restaurant owners as the economy continues to gather steam. Let’s discuss some of the best ways for restaurant owners to put a potential line of credit to use.
Equipment can be a considerable expense in any industry, but this is especially true for restaurant owners. Whether you need to purchase a new piece of kitchen equipment or cover day-to-day repairs, the costs can quickly add up, depleting your working capital in the process and leaving nothing for other expenses such as vendor invoices or payroll.
Considering that most kitchen equipment doesn’t give you a hint that it’s about to go on the fritz, a business line of credit may be an ideal solution when you need short-term financing to cover unexpected expenses and emergencies. This can be doubly true, as with a business line of credit, you won’t start paying interest until you draw on the credit line, and you’re only responsible for paying interest on the amount you use.
Many restaurants can be largely seasonal—or tourism-focused—businesses, and as the economy continues to regain steam, so too is tourism expected to rebound, which may lead to increased demand on your establishment.
This would make it a perfect time to tap into a business line of credit to prepare for the rush.
In this case, a business line of credit provides great flexibility in the ways that you direct funds. This way, you could use them for anything from purchasing more produce each week to hiring seasonal staff.
It’s also worth noting that if your business line of credit is revolving in nature, your approved amount will become available to you to draw upon again once it’s been repaid plus interest, allowing for sustaining flexibility once the busy season returns.
Does your restaurant run its own deliveries? Now might be the time to start. Considering that many people have yet to return to indoor dining, delivery could add additional revenue to your restaurant’s businesses.
While there are many third-party delivery companies operating in the market, they have been known to take a percentage of each order, which can eat away at profits. An e-commerce site designed to process deliveries might be just the thing your business needs.
Rather than sacrifice your bottom line to build out this system, a business line of credit could help you handle the expenses of its implementation, including hiring a web designer, delivery personnel and customer service representatives for any issues.
All business owners learn to expect the unexpected, and never is this more true than when you’re planning to expand. Whether you’re ready to open a new location or simply add value to an existing restaurant, it’s likely that unexpected expenses are going to pop up along the way.
That’s when it’s wise to have a business line of credit in your back pocket. Its flexibility makes it the ideal solution for business owners who may not need funds right away, but want to stay prepared, just in case.
Whether structural (like building repairs), maintenance (refinishing floors or updating a kitchen space) or or marketing-focused (purchasing advertising to introduce or reintroduce your business to the community), expansion is an exciting venture for your business, and a business line of credit could be just the thing to help you expand with peace of mind.
Choosing the right business line of credit all comes down to your specific needs. If you think that a business line of credit might be right for you, apply today to see how Funding Circle can help take your business where you want it to go.