Article

Planning for industry's Top 3 funding emergencies

Emergencies can have a severe impact on a restaurant's business, so being prepared for them is key.

October 24, 2013

By Scott Griest

American Finance Solutions

Emergencies can have a severe impact on your business. Many restaurants in the Northeast were flooded or battered last year when Hurricane Sandy struck the coast, for example. However, all businesses suffer from unexpected emergencies, such as broken equipment or damage to their building. Also, one unexpected but good "emergency" is a sudden spike in customers.

The biggest problem restaurant owners face in these situations is having the cash flow to cover emergencies. Many owners must look at outside finance options to help their business pull through a tough time. Unfortunately, traditional bank loans are not often an option. Approximately seven out of 10 bank loan applications are rejected. The average loan amount of approximately $15,000 is usually considered a microloan, thus too costly for banks to underwrite.

The good news is that there are many alternative lenders on the market that approve healthy businesses within two to three business days and for amounts ranging from $5,000 to $250,000.

Below are three common emergencies restaurants face, as well as the recommended steps they should take to move forward when faced with these problems:

Unforeseen emergencies

Unfortunately, bad situations can happen to good restaurants. The list of unpredictable emergencies is endless. For example, landlords sometimes sell their buildings and existing leases may not renew, which requires an expensive move. Plumbing pipes could unexpectedly burst, but insurance checks might take a long time to get cut. Lastly, payroll or sales tax payments could get delayed for uncontrollable reasons, but still have to eventually be paid. It is important for a restaurant to always think about potential setbacks and be prepared to handle any worst-case scenarios.

Updates and Remodeling

The most lucrative restaurant owners are those that offer a premium experience — not just food. Owners must be mindful that their customer experiences start the second they pull into the parking lot. With up-to-date dinnerware, appliances and facilities, a restaurant's customer base will continue to pay for a high-quality experience as compared to the competition.Many restaurants need significant capital expenditures every 24 months, at the least, to deliver first-rate offerings to their clients. Updates and remodels pay off in the long run because if customers are constantly pleased, the business will prosper.

Growth

To save money in today's economy, many families are opting to limit either expensive meals or big-ticket vacations and instead enjoy staycations. Consequently, fast casual, local restaurants are experiencing substantial growth. To cater to these surges of sales, many restaurants have expanded their existing locations or are opening new ones. Growth is always important when trying to meet the desires and needs of your customers. If you do not have the necessary space and services to satisfy your clients, your restaurant will soon face an emergency.

When running a restaurant, emergencies are bound to happen. Try to have a plan in place and funds set aside before an emergency happens. If you do not have the funds to cover the emergency, look for an alternative lender such as a merchant cash advance that allows you to get funding quickly and re-pay it in a time structure that best works for your business.

Scott Griest is founder and chief executive officer of American Finance Solutions. Some of his current franchised clients including Dominos Pizza, Wingstop and Subway.