If you’re a café or coffee shop owner, you’re probably thinking about capital—or the lack of it. The truth is that owning a café or coffee shop requires a lot of money plus hard work. From operating capital to equipment, furniture, and employee salaries, sometimes you need a cafe or coffee shop business loan to fund every aspect.
Depending on your situation, you’ll likely find a suitable loan to help fund your business. Below are the most common ways to get business funding for your café business.
Small Business Administration – SBA Loans for Coffee Shops & Cafes
An SBA loan is one of the best business loans you can use to get off the ground. While lenders, primarily small banks, offer these loans, they are guaranteed by the Small Business Administration Federal Agency. The agency works in collaboration with lenders to finance small businesses and doesn’t lend funds directly.
The Small Business Administration loans offer fixed-rate financing at reasonable terms and rates, making it an excellent option for your café or coffee shop. However, the application process is lengthy with a lot of paperwork and may also require a high credit score and collateral. The SBA loan;
- Provides varying interest rates; 4 to 7 percent
- Does not limit on loan uses
- Has the repayment term ranging from 3 – 25 years
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Cafe & Coffee Shop Equipment Financing
Equipment business loans for cafes and coffee shops is sophisticated and can be extremely costly. Whether you want to purchase an Espresso machine, refrigerator, ice machine, commercial dishwasher, or other equipment, the equipment financing loan is an ideal solution.
In this case, lenders decide based on your credit score and the company’s financial status. Also, the equipment becomes the collateral for the loan. The equipment financing loan allows you;
- To make monthly payments
- To take a term loan or lease
- Simple application process
- Minimal paperwork
- Repayment period between 1 and 5 years
Merchant Cash Advance
A merchant cash advance is a type of financing where a lender provides an upfront lump sum of funds to a company in exchange for an agreed-upon percentage of future debit card or credit card sales. Repayment is usually made daily or biweekly for 6 – 18 months based on your company’s future sales. Merchant cash advance has several benefits that include;
- Payment is based on future sales, allowing you to control the profit margin.
- You can access financing even with a poor credit score
- Flexible repayment terms
- Does not discriminate against subprime credit
Bottom Line
When it comes to financing your café or coffee shop, you must explore your options. Many lending institutions offer both short-term and long-term business financing. Evaluate your needs and find a small business loan to help achieve your goals and grow your business the best way possible.
