Raising Hospitality Equipment Finance

Most entrepreneurs find funding the most daunting aspect of opening their own hospitality business.

Once you start factoring in all the expenses the initial thought of starting up your own hospitality business it can be a lot to absorb initially.

The most important thing to consider is the source of finance and what type of hospitality equipment finance you really need.

There are a number of ways to raise funds and the easiest way is to use your own savings.

It doesn’t matter if you decide to purchase brand new or used hospitality equipment if you have the cash you can easily decide on what you need.

However, not everyone has the financial backing needed to start up a hospitality business.

The next logical step to take is to approach your current bank and find out your hospitality equipment finance options.

Find a good accountant, before you even think about setting up a business.

Ask friends and colleagues for advice.

Open a business bank account immediately and always keep your personal finance separate from your business.

There are a number of potential sources for raising hospitality equipment finance.

For you to be able to borrow hospitality equipment finance from a bank you will need to convince them that the business is viable and that it can pay any interest and make the capital repayments as they fall due.

They will also look for some kind of security for any loan.

Once the business is set up, an overdraft can usually be arranged, although it should only be taken out as part of a tightly controlled cash flow plan.

There are a number of pitfalls associated with borrowing from friends and family; on the positive side, such borrowing arrangements can often be made on more attractive terms than might otherwise be available from a more formal source of funding.

It may be possible to borrow either without any form of security against the loan and it may also be possible to borrow at either a lower rate of interest or even interest‐free.

Repayments may also be possible over an extended period of time and a detailed business plan may not be necessary.

It is best to keep any arrangement formal, however, and to give your benefactor as much financial information as possible upfront.

You will be responsible for their money and as such, it is in everyone’s interest to manage your money effectively.

There are a growing number of venture capital firms that are looking for small hospitality businesses to invest in.

If you are simply looking to run a sweet little cafe, the best you could hope for would probably be a local businessman keen to invest.

But if you are looking to launch a new concept restaurant with potential for rapid expansion, venture capital funding may be valuable to you.

If you choose a venture capitalist, make sure you maintain control running your business.

The Costs Involved in Setting Up a Hospitality Business

There is no cast iron answer to this question as each hospitality operation is different.

Here are the most common start up costs associated with developing a new restaurant:

  • Obtaining a lease and professional fees
  • Premises refit
  • Kitchen fit out, ovens, refrigeration etc
  • Staff recruitment and uniforms
  • Furniture, crockery, table cloths, flowers, pictures etc
  • Signage
  • Initial stock of food
  • Launch marketing fund
  • Working capital

Remember there are also a multitude of expensive ‘hidden’ costs involved with setting up a hospitality business or a restaurant that many people do not consider.

Make sure you have sufficient funds in reserve to provide you with six months of working capital?

Many hospitality businesses fail because they are undercapitalized.

Hot Tip: Keep your start up costs as low as possible. The recession will end shortly. Normal business will resume, investors and banks will start throwing money at start ups again. Great, not necessarily so. There have been way many businesses that would have a viable business if they weren’t crippled by their start up costs.

So many restaurant owners asking themselves a year after opening, about what went wrong?

Buying your hospitality equipment right out, paying for it in cash will be your biggest expense when starting up your hospitality business. You can always consider buying second hand hospitality equipment.

You Might Find that Another Businesses Trash Can be Your Treasure

A failed hospitality business ends up in a lot of debt, as a business owner and an entrepreneur you need to know how to recover finances by selling their second hand hospitality equipment quickly and it is often far less than what you would pay for normally.

Use this opportunity to get the equipment you need‐‐and only what you need‐‐at a fraction of the price.

Look in the newspaper and online on classified ad sites to find where these auctions are happening.

Most would‐be entrepreneurs find this the most daunting aspect of opening their restaurant.

There are a number of potential sources for raising finance.

Not everybody has savings to purchase hospitality equipment but if you do, they are a good place to start. If you don’t have savings yet, now is a good time to start.

Your timeline for starting your business may be six months to a year anyway, so if you start putting money away now, you’ll have at least a starting point from which to raise more cash.

Starting a business is about sacrifice and so you should cut down your lifestyle as far as possible and save the cash – you’ll be glad you did.

There are a number of pitfalls associated with borrowing from friends and family; on the positive side, such borrowing arrangements can often be made on more attractive terms than might otherwise be available from a more formal source of funding.

Final Words

For you to be able to borrow hospitality equipment finance money from a bank you will need to convince them that the business is viable and that it can pay any interest and make the capital repayments as they fall due.

They will also look for some kind of security for any hospitality equipment loan.

Get a Hospitality Equipment Finance to Cover Business Initial Expenses

Are you thinking about opening your very own hospitality business?

You then need to understand that providing good service and having great staff won’t be enough to survive the industry.

Starting a hospitality business requires a fair bit of cash similar to any other business start up.

Let’s just say that you are interested in purchasing a franchise business – you can expect to pay at least up to hundreds of thousands and that does not include development fee and royalty fees.

On the other hand, if you’re not buying a franchise and decided to start one up yourself, you still need to come up with a lot of money to get going with your newly start up business.

What are the typical expenses for start-up a hospitality business?

Aside from franchise fees (if applicable) and rent, you can expect to spend thousands of dollars on kitchen equipment and fixings.

You will have to pay for stoves, freezer units, kitchen refrigerators, dishwashing machinery, steam tables, and other equipment.

In addition, you will have to invest on high quality chairs and tables for your customers.

You will also need hospitality software and other IT technology to ensure your business runs efficiently.

There are a few other expenses that you need to look into; such as labouring fee for shopfitters and interior designers.

Also put in the cost for hiring and training wait staff, hostess, kitchen hand, chef and kitchen hands.

You may also have to pay to train your staff.

Other fees that other people forget to factor in include government fees.

No matter what country you are in, no matter what kind of food or product you serve, and no matter how big or small your hospitality business is, you can be assured that you’ll be paying government fees in form of licenses and permits.

There will be health department inspections, property upgrade inspections, etc. Another expense that you need to consider is insurance.

You would want to make sure that should there will be fire in your restaurant or robbery, you have the right coverage.

Restaurant Financial Projections

There are a lot of things to consider when making financial projections for your restaurant.

General expenses will include building renovation, rent/mortgage repayments, furniture, and kitchen equipment.

Depending on the type of business you wish to open and the profile of your target market, these expenses can easily reach thousands and that’s before you’ve made your first $1.

Other expenses will include advertising, accounting, insurance, legal and professional fees, licenses, maintenance supplies, office supplies, property tax, salaries, utilities, etc.

Typically, business owners take out hospitality equipment loans from banks to cover these initial expenses.

Final Words

For you to be able to borrow money and get a hospitality equipment loan from a bank you will need to convince them that your hospitality business is viable and that it can pay any interest and make the capital repayments as they fall due.

They will also look for some kind of security for any hospitality equipment loan. Once the business is set up, an overdraft can usually be arranged, although it should only be taken out as part of a tightly controlled cash flow plan.