Best Bakery Financing Options — Feature Comparison
Company
|
Min. Credit Score
|
Min. Time in Business
|
Min. Annual Revenue
|
Loan Amount
|
Interest Rate
|
Biz2Credit
|
575
|
6 months
|
$250,000
|
$25,000 to $2 million
|
7.99% and up
|
Fora Financial
|
None
|
6 months
|
$144,000
|
$5,000 to $750,000
|
1.1 to 1.3 factor rates
|
BlueVine
|
600
|
6 months
|
$120,000
|
Up to $250,000
|
4.8% and up
|
FundBox
|
600
|
6 months
|
$100,000
|
Up to $150,000
|
4.66% to 18%
|
Torro
|
600 for new businesses
|
None
|
None
|
Up to $500,000 ($150,000 for new businesses)
|
5.99% to 12.99%
|
SmartBiz
|
650
|
2 years
|
Sufficient cash flow
|
$30,000 to $5 million
|
4.75% and up
|
What Are the Costs of Running a Bakery?
The average startup investment for a bakery is between $10,000 and $50,000, according to restaurant software company Toast. The costs will depend on the size of your bakery, but here are some estimates, according to ZenBusiness:
Business registration, licenses, and permits: $1,500 to $3,500
Insurance: Around $2,000
Advertising and website: Around $9,000
Space rental: Varies by city and size, but around $2,500 per month plus a deposit
Utilities: Varies, but around $1,000 to $2,000
Furniture, improvements, and decor: $5,000 to $25,000
Bakery equipment: Around $20,000
Ingredients for baked goods: $5,500
Staff wages: $8,000 to $13,000
Point of sale technology: About $1,000 plus monthly costs
Franchise fee: Varies by company, but around $30,000 to $100,000
How to Use Bakery Financing
You can use bakery financing for almost any business need. That includes things like:
Launching your business
Acquiring a retail space
Renovating, furnishing, and/or decorating the space
Hiring staff
Paying for bakery equipment
Paying for food/inventory
Everyday operations
Refinancing an existing business loan
Expanding your business
How to Qualify for Bakery Financing
To improve your odds of getting approved, take the following steps:
Check your personal credit score at AnnualCreditReport.com. Look for and dispute any errors, and pay down your debt balances as much as possible before applying for financing.
Narrow down your options. Most lenders disclose their minimum requirements, so you can eliminate any options you don’t qualify for.
Pre-qualify with two to three small business lenders. This will give you an idea of whether you’ll be approved, but it’s not a guarantee.
Make sure to follow the instructions and include all the necessary paperwork. Leaving anything out could slow down the process, and loan denials sometimes occur when an applicant doesn’t provide sufficient documentation.
How to Apply for a Bakery Business Loan
- First, decide what type of bakery financing will be best for your business. Determine whether you’d like a line of credit, secured equipment financing, funding for commercial real estate, or something else.
- Gather the necessary documents, including your business plan, income tax returns, financial statements, accounts receivable and accounts payable, and any legal documents that may be required.
- Check your rate with two to three lenders that offer a product you can qualify for.
- Submit a formal application with the lender of your choice.
- Read the fine print and make sure you understand the full cost of borrowing and the terms of your agreement with the lender. If you’re happy with your offer, go ahead and sign and accept.
- Wait for the funds to be deposited into your business bank account.
Financial Growth Tips for a Bakery
- Offer more product choices: Provide your customers with a range of portion sizes to choose from, and consider offering healthy, gluten-free, or vegan treats to reach more customers.
- Offer more services: Consider offering custom baked goods or delivery to reach more customers.
- Differentiate your bakery: Ensure your bakery stands out from the competition. Whether that’s having a theme, offering nostalgic products, or doing something different with the decor, give your customers something unique to talk about.
- Invest in new marketing strategies: Send coupons via direct mail or try social media advertising. Reach out to media outlets if you’re hosting an event or offering a promotion. Vary your strategy to reach the most people.
- Cut costs: Find ways to cut costs, whether that’s buying in bulk, investing in efficient energy solutions, or something else.
- Encourage customer reviews: Make sure your bakery has a presence on Google, Yelp, and TripAdvisor. Encourage happy customers to leave a review.
Conclusion
It’s possible to generate a lot of revenue from a bakery, but most bakery business owners will need some help with financing along the way. Bank business loans are always an option, but for those who can’t qualify or want funding faster, the options on this list provide a great alternative. Some are better for new business owners or those with poor credit than others. It’s a good idea to compare two or three lenders before formally applying. Aim for the least costly loan that you can qualify for and that meets your repayment needs. And make sure the application and repayment process is convenient. That way, you can focus on what you do best — baking sweet treats for others to enjoy.