How a business loan could help your catering business
For many catering businesses income can fluctuate widely.
It can be hard to predict cash flow, and even harder to make sure you have the funds available to cover your expenses during quieter periods.
Fixed costs like PAYG instalments, insurance, and vehicle registration and maintenance have to be paid on time, even when jobs are few and far between.
Unless your clients pay in full in advance, you may also have to cover the cost of ingredients, wages for your kitchen and waiting staff, and the hire of any specialised cooking equipment before each job.
Financing the gap between this up-front investment and payment of your invoices could put a major strain on your working capital, but a business loan could give you the financial back-up you need.
A business loan could help you meet another major challenge of running a catering business – finding and attracting customers. Marketing is critical, and with the funds from a loan you could hire a PR expert to help you brand your catering business and grow your reputation with your target market, through traditional and online marketing campaigns.
If you’re ready to take your catering business to the next level, you could use a business loan to purchase extra equipment and vehicles and hire more staff so you have the capacity to take on more jobs or cater larger events.
What are the requirements for getting a business loan?
Getting a business loan can be easier than you think.
While you can still expect to be knocked back by the big banks unless you have a solid trading history, a top-rate credit rating and collateral to offer, there are plenty of alternative lenders out there willing to offer business loans to restaurants.
Each lender will have their own criteria when it comes to things like credit rating, how long you’ve been in business, and how high your turnover is.
If you’re higher risk (e.g. if your credit score is low) you may still be able to get a business loan, although you can expect to pay a higher rate of interest to compensate for that risk.
The most important factor ALL lenders will look at is your capacity.
Lenders need to know that you will have enough cash – after all your expenses – to cover your loan repayments.
How to apply for a business loan
If you are applying to an alternative lender for a business loan, the process is usually quick and easy:
1Create a business case to check how much you can afford to borrow.
2Prepare your supporting documents – expect to be asked for:
3Choose your lender and loan product – be sure to shop around, because costs, terms and conditions vary. Be sure to find out about hidden fees and compare all the costs of each product, not just the interest or factor rate.
4Complete a simple online application form and upload your supporting documents. Most lenders will respond within days or even hours. Some will even give an on-the-spot decision.
Grow your catering businessSee if you qualify
What options are available to catering companies?
There are several types of small business loans you could consider, to support or grow your catering business.
Unsecured small business loan
A short-term option, unsecured business loans are usually for between 3 months and 2 years.
You can use the funds for any purpose. Many lenders will let you set a repayment schedule to suit your trading patterns.
There are several types of business car finance you can use to buy your work vehicles, including car loans, hire purchasing and leasing.
While your work vehicles are under finance you will not be able to sell or upgrade them.
A specific-purpose business loan secured on equipment you are buying, such as kitchen equipment.
The term will often be tied to the lifespan of the equipment. You will not be able to sell or upgrade the equipment until you have repaid the equipment finance.
Business line of credit
A business line of credit is similar to an overdraft facility, giving you access to cash up to an agreed limit, often with the right to draw, repay and redraw funds as you need them.
You only pay interest on what you borrow, but there are often set up and admin fees.
Business credit card
Business credit cards are great for covering day-to-day expenses and making purchases, but unless you clear the balance each month the cost can be extremely high.
Before entering in to any business loan agreement, be sure to seek professional advice. It’s also important to ensure you understand all of the costs (including all fees). You can get a head start by using our business loan calculator.