Best Bar Financing Options - Features Comparison
Here are the top loan types that can serve you before the opening date and during the operation of your bar.
||up to $6 million
||8.99% - 10% |
||Depends on the lender
||Depends on the lender|
||up to $500,000
||0.25 - 25%|
||$5K - $150K
||4.66 - 8.99%|
||8% - 25%|
How to Choose the Best Loan for Your Bar
When it comes to choosing the right loan and lender for your small business, there are a number of unique factors that you should consider.
- Application process: Each lender has a different application process. You want to look for one that doesn’t take very much time and that you’re able to do entirely online.
- Variety of loan options: Choosing a lender with a variety of loan options allows you to find the best type of loan for your business and your unique needs.
- Interest rates and fees: A loan isn’t just free money. You pay for the convenience of a loan through the interest rate and fee. You’ll need to find a loan product with a low enough interest rate to be affordable.
- Qualification process: Your business is as unique as you are. This means that you must find a lender that’s able to work with your unique qualities. Lenders have specific requirements for small businesses that they work with, such as time in business and annual revenue requirements.
- Customer support: When you have questions about your loan, you’ll want to be able to reach the right person.
- Online user reviews: Be sure to read online reviews of the different lenders to learn more about the pros and cons of each before choosing which lender to work with.
How Much Does it Cost to Open a Bar Business?
As a bar owner you may find that you are often struggling to cover the costs of rent, expensive drinks, utility bills, and marketing. Bars may not suffer from seasonality, as much as a hotel on the beach does, but a bar does often experience changes in pace during the course of a year.
Savvy managers may have money put aside for at least six months, however, most bar businesses primarily rely on the money they get from their customers.
Let’s take a look at some of the expenses bar owners will have to incur.
- Rent or real estate purchase: You'll either be renting or buying your bar location. Although renting adds a substantial amount to your monthly expenses, buying will require a huge amount of starting capital.
- Construction or renovations: Not all spaces come as you imagine them. Chances are that you'll need to do at least some renovations and construction work. As such you will also need to pay for permits, materials, and workers.
- Sound and lighting: A bar business should have a wow factor to set you apart from the competition. Sure it can be a topical or design element, but having professional lighting and sound equipment is often necessary for bars.
- Taxes, licenses, and permits: When you serve alcohol and food you will need to pay a fee to the local authorities. Learn what these fees are and include them in your financial plan.
- Utilities: Utilities will be one of your largest recurring payment categories. You will also need to account for heating and cooling during the warm and cold seasons.
- Payroll: While you might need to consider contractor payments when you are starting out, your basic payroll will be predictable and constant.
- Marketing: While word-of-mouth and events might help you with your advertising, don't forget to invest in your online presence. Use social media ads to expand your audience and promote your brand.
- Inventory: Drink mixers, cocktail glasses, and attributes all cost money. These are part of your brand, so you might want to spend a little on these items. Alcohol and soft drinks purchases may take up a large bulk of your resources, both in the initial stage and during operation.
Cash Flow Tips for Bars
While a loan can help you to fill a cash flow gap or to purchase a new piece of equipment, the day-to-day operations of your bar are dependent on your ability to manage your cash flow. Here are a few tips.
- Prepare for unexpected expenses: Whether it’s a piece of equipment needing repair or hiring and training a new employee, unexpected expenses are always popping up for small businesses. Have a small slush fund ready for these expenses.
- Sign up for a business bank account: A business bank account is necessary for you to get business financing and separate your business and personal finances.
- Get a business credit card: A business credit card can help you to manage small cash flow gaps by paying for large expenses over time.
- Use a business savings account for emergencies: A business savings account allows you to set aside some slush funds to help you pay for emergencies. Keeping this money in a savings account makes it just a little bit harder to spend without planning ahead.
- Financing affects your cash flow: If you do plan to get a loan or financing for your small business, be sure to look 12 or more months into the future to see how that will affect your cash flow.
No matter what business you operate, getting a loan can be a time-consuming activity. And, it can be challenging to get approved. Luckily, getting bar financing is just a little bit simpler because selling alcohol is considered recession-proof. No matter what’s happening in the economy, people will continue to drink. Seeking financing for a bar makes it just a little bit easier to find a loan than it is for other businesses.
Frequently Asked Questions (FAQs)
Now that you know a little bit about the different lenders who offer bar financing and the different types of loans that are available, you might still have some questions.