The restaurant business is often started up with the help of some saved capital, or loans taken from friends and family. If the first restaurant venture does well, then restaurateurs often look to expand their business. The revenues of an average restaurant are often just enough to cover their own expenses. Therefore, restaurateurs resort to raising funds from external sources to expand or renovate. However, getting finance from banks is not an easy task. Banks need collateral or guarantee of repayment of the loan.
There are several Fin-Tech start-ups such as Loanframe, Lendingkart.com, Capital Float, Impact Guru, etc, that solve the problem of acquiring funds. However, getting finance from these start-ups isn't as easy we think. It is very critical to know your numbers and do the solid homework on your restaurant business before you look out for money. You should be aware of finances of your restaurant businesses such as rent, labor, food cost, the cost of equipment and all of that as a percentage of total sales.
Who are these FinTech Companies? What do they do?
Some of the top finance companies that provide loans in India are-
Capital Float: It is an online finance company providing that provides working capital finance to small medium enterprises (SMEs) in India. Capital offers flexible, short-term loans that can be used to service new orders, renovation of existing set-up and optimize cash cycles. At capital float, borrowers can apply online in minutes, select a repayment term and get the desired loan in three days. As of now the company has disbursed close to over Rs 250-300 Cr and has more than 1,000 borrowers in 40 locations PAN India. The interest may vary from 16-19 percent.
Lendingkart: Lendingkart is a technology based finance company which helps SMEs to get short and long term loan. It was found in 2014 by Harshvardhan an ISB Hyderabad alumnus and Mukul Sachan who has passed out from IIM Banglore. The Fin-Tech company has joined hands with online marketplaces and trade associations to service the financial needs of both online and offline companies. The company offers loans starting from Rs 50,000 to Rs 10 lakhs depending upon the need and profile of the borrower.
LoanFrame: Loan Frame is a Fintech company that aims to become the largest SME lending marketplace in the sub-continent. The company is backed by leading global private equity and venture capital investors. It provides loan against property, unsecured business loans, working capital loans, cash and non-cash loans and equipment loans catering to various prominent sectors.
Assessing Your Financial Needs
Restaurateurs should invest time in accurately gauging the funds they need. One should have a clear idea of how many customers he needs daily to break even with an estimated average ticket size (total sales/ total number of orders), what would be the food cost, etc, down to the last detail. After having all the figures in hand, one should be ready with the plan expand the business.
Many restaurants such as Box8, Dana Choga Kitchen (DCK), WOW! Momo and Foodlink restaurant have raised money for expansion. Most of them have been successful in expansion and even getting PE investors on board in their later stage of expansions.
Applying for Loans
With the help of Fin-Tech companies, restaurants can either raise fund for the next outlet or get money for the renovation of the existing outlet. "Getting access to finance from banks or NBFCs for MSME ventures is extremely difficult," with banks normally reluctant to do the due diligence of such small businessmen, said Harshvardhan Lunia, CEO of Lendingkart in a leading newspaper report.
These Fin-tech companies can lend from Rs 2 lakh to up to Rs 1 crore with nominal interest rates. They process data to check the credit worthiness of customers with the help of technology. The entire process is online; one can get their apply through their website, and fill up form with the relevant documents (below is the list of required documents). After the application, an ID is generated and sent across to your mail for further tracking. You can follow with that id to know the status of your loan. Your application is then processed, and if accepted, the loan is given.
List of Mandatory Documents and Information to Be Submitted While Applying For a Business Loan
1. Registration Certificate
2. Incorporation document such as Partnership Deed for a partnership firm and incorporation certificate for a private limited firm. In case of sole proprietorship, any registration with government body such as Shop establishment act can be deemed at Incorporation document for that firm
3. Financial Documents The following documents are required and acceptable as financial documents
- Business PAN Card
- Audited Financials (P/L & Balance sheet) for FY15 and provisional FY16.
- Bank Statements of 6 months
- Latest ITR (Income Tax Return)
- Address Proof
- Existing loan details along with copy of sanction letter(s)
- Address Proof (utility bills/driving license/passport/voter ID) along with Ownership proof (utility bill/property tax receipts etc)
- CIBIL Score (if known)
4. Disbursement Information: Information required of a bank account that can receive funds for your organization, such as Bank Name, Branch Address, Bank Account Number, Bank IFSC code, Scanned copy of canceled cheque
5. Organization Name
6. About the Organization (400 characters or less)
7. Causes of Interest
8. Geographic Focus (Nationwide, particular state)
9. Organization Contact Information
10. Organization Email
11. Telephone Number/Mobile
12. Key Individual/Partners/ Directors Contact Information
– Registration Number / Date
– PAN of both business and individual
– Audited accounts of last 1 year (Balance Sheet/Income & Expenditure / Receipts & Payments/ Statutory Auditors’ Report/ Schedules) / annual report
– Income Tax Return filed for last 1 year