Best Financing and Loan Options for Coffee Shops
Once you’ve determined that financing is what your business needs, consider what factors are most important to you. Are you looking for fast funds? Do you need to borrow a large sum? What repayment terms are you seeking? To help answer these questions, here’s a breakdown of a few coffee shop funding options.
Lenders providing loans backed by the Small Business Administration (SBA) are able to offer some of the most competitive interest rates and repayment terms. This is because the SBA guarantees a certain percentage of each loan, up to 85% in some cases. Repayment terms can vary, depending on the specific loan.
SBA 7(a) loans, for example, can be used for virtually any business need and loans used for working capital can be repaid in 10 years, while loans used for commercial real estate can be repaid in 25 years. Additionally, the maximum loan amount for 7(a) loans is $5 million, although funding could take a few months.
If you need faster access to funds and your coffee shop financing needs don’t exceed $350,000, consider an SBA Express. With this type of SBA loan, you could receive your coffee shop funding in as little as 30 days.
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If you need funding only to get appliances or machinery for your business, consider equipment financing, which is available to help you lease or buy equipment. Depending on the lender, you could be able to get financing to cover 100% of the equipment cost. Repayment terms typically don’t exceed the useful life of the equipment.
Additionally, with an equipment loan, the equipment serves as collateral for your financing. Because lenders can seize your equipment for non-payment, this type of financing is often considered less risky.
If you’re a small business owner looking for a business loan for your cafe, consider a term loan. With this type of funding, you receive a one-time injection of funds that you can use for any business expense. Depending on your lender and loan amount, you’ll either pay back your loan with daily, weekly or monthly payments, and terms can vary from 1 year to several years. Loan limits may be available up to $500,000.
Business Line of Credit
A business line of credit is a flexible funding solution that could provide you with several hundred thousand dollars of credit, available when you need it. Similar to a credit card, you pay interest only on the amount you use, and typically, as you pay down your debt, your business credit line is restored.
Merchant Cash Advances
If you’ve been in the coffee industry for a bit you know the business can have its ebbs and flows. Merchant cash advances provide you with funding based on your future sales. You pay back your advance on a daily or weekly schedule, committing a portion of your sales to your lender. Payments can be fixed or vary depending on your actual revenue. Additionally, repayment terms can range from a few months to more than a year.