With the many challenges facing restaurant owners opening new businesses, from finding qualified employees to supply chain issues, it’s almost certain that everything will cost more than anticipated on the road to opening doors. Owners’ ears perk up when they hear this word: Financing. The topic is brought up often on our Accelerate networking meetups for restaurant owners.
Luckily, owners don’t have to go at it all alone. The financial experts at Henry+Horne have been in business for 65 years, helping entrepreneurs find success and financial stability.
Before you get stuck in a financial rut, read through these helpful pieces of advice from the tax and accounting specialists at Henry+Horne.
Here are five tips for weighing your restaurant financing options:
- Get your accounting process in order
Before you approach a new source of funding, make sure your processes are up to standard for the road ahead. As a small restaurant business,you have likely relied heavily on do-it-yourself methods of accounting. Be sure you have your financials on an accrual basis of accounting, either tax basis accrual accounting or on a GAAP basis (Generally Accepted Accounting Principles). The financial statements you should have ready to provide to a potential funding source would be a balance sheet and income statement. Bonus: a statement of cash flows is a plus.
- Work with a CPA to strengthen your restaurant finances
No matter what avenue you explore for funding, you’ll want to be sure your accounting is top notch. It’s never too early to seek outside tax and accounting assistance and an outside CPA can help you clean up your monthly financial statements and upgrade your systems.
- Look for tax credit opportunities
If you’re a restaurant that’s been in operation since 2020, you have probably found that most pandemic funding sources (except for potentially the employee retention tax credits) have dried up by 2022. However, you can still take advantage of the Work Opportunity Tax Credit which gives employers a credit of up to 40% on $6,000 of wages paid per employee who meet certain criteria. An organizational tax structure is another helpful strategy that a CPA can help you with as you look to bring on additional investors.
- Assess loan options
If you’re looking to scale your business with multiple locations, you may consider a Small Business Administration (SBA) loan. While the maximum loan amount taps out at $5 million, SBA loans offer longer terms and smaller monthly payments than a standard bank loan. SBA loans are made for businesses like yours but they require careful documentation. The more prepared you are ahead of the application process, the better for securing your preferred loan for your business.
- Find the right partners: Banker, CPA, Attorney and Private Equity Partners
Finding the right partners, advisors, and financing sources will be essential to your continued success and stability for yourself and your employees. Being organized and structured is a must that will allow you to move seamlessly into the next stage of your restaurant’s development.
When looking at private equity, giving up some ownership usually comes with the territory but you will have the potential to increase your speed of growth. Private equity could be a viable option to bring reliable funding to your concept to open additional units. Do you have your corporate overhead and structure in place to start multiplying your concept? If not, having the right partners that understand the restaurant industry will be valuable in getting the right structure in place.
What Now Media Group shares daily restaurant news in 15 US cities and counting, but we’re also dedicated to the continued support of brands as they grow in this busy market. We pride ourselves in knowing the best in the biz when it comes to restaurant industry experts. Whether you’re opening a new restaurant or growing an existing one to multiple locations, What Now’s Preferred Partners can help you every step of the way.
Henry+Horne specializes in finance-to-table services and education for your restaurant business while offering accounting and CPA services to franchisors, franchisees, breweries, and independent restaurant groups operating locations throughout the United States.
Visit their Website which offers educational resources tailored to your specific needs in the restaurant industry.