Why Don’t Banks Approve Restaurant Loans?

Why Don’t Banks Approve Restaurant Loans?

restaurant loans

There are a number of reasons why banks don’t give loans to restaurants, bars, ghost kitchens, and catering companies.. Let’s take a look:

1. Inconsistent Cash Flow

The potential to repay a company loan while still managing routine business costs and having a cash buffer is determined by cash flow. If your restaurant's cash flow falls too low, some funding choices may be tough to approve (bank loans, for example) resulting in the bank refusing to give money, you may then need to look into alternate business funding solutions.

2. Financing Restaurants is Risky

Some banks may refuse to lend loans to restaurant startups because they are too risky. As mentioned earlier, the restaurant business is a low-margin business and is thus volatile. And even if you fulfill the general criteria for a business loan or line of credit, you are still at the risk of being left out in the cold.

3. Insufficient Credit

Most banks and finance programs look at the business owner's personal credit, as well as the company's credit. The higher the credit criteria, the fairer the rate and conditions of the business finance product you're seeking for.

Ghost Financial does not carry out a credit check before granting you a restaurant loan. This means that, whether you’re new to the business or expanding your restaurant business, you can easily apply for a loan.

4. Collateral

Loan applications often contain a request for a valid form of collateral is needed to finalize the transaction and get money. So, SMBs without sufficient collateral are unable to acquire finance. For huge corporations with real estate or other high-value assets, this isn't a problem. However, for small firms, this can be an impenetrable obstacle.

5. Insufficient Operating History

What company finance options can be supplied depends on how long you've been in business and how much money you've made.  After all, they don't want to invest in a company that has been there for a while but lacks a particular level of success and trustworthiness. In order to secure finance, banks want a proven long history of making profits over a particular time period. Many standard business credit programs are not open to you if you have been in the company for less than three years. However, there are other company finance options to explore.

So what’s the solution?

Ghost Financial: The All-In-One Restaurant Financing Option

Ghost Financial not only offers a charge card that gets the owner a 1 percent cash back on their inventory expenses but also provides a low-risk way for emerging restaurants and ghost kitchens to enter a market and effectively expand afterward. 

Final Word

Understanding why banks don’t give loans could be quite a challenge. Nevertheless, it is a must especially when the business wants to expand or optimize operations. Loans are hard to secure.

That is where Ghost Financial comes in.