How to Get Financing for a Bar

What can a bar business loan be used for?

A bar business loan can be used for a variety of things related to running a successful bar, for example:

• Inventory
• Technology
• Hiring seasonal employees
• Software
• Renovations
• Expansion
• Marketing
• Working capital

Some bar business loan types will specify what the loan can be used for, but most are much more flexible.

Can you get a loan to finance a bar?

Securing funding to open a bar is tough, and especially difficult if you are looking for a start-up loan to open a brand-new bar.

However, it is possible to get a loan to open a bar, particularly if you have good to excellent credit and have had some experience in the industry.

Best Options for Financing a Bar

The best bar business loans include:

• Balboa Capital - offers small business loans up to $500,000, equipment financing, and franchise financing
• BlueVine - offers business lines of credit
• Credibly - offers small business loans, SBA loans, and lines of credit
• First Home Bank - offers a range of small business loans
• Funding Circle - offers small business loans, SBA 7(a) loans, and lines of credit
• Headway Capital - offers business lines of credit
• OnDeck - offers fast funding for short term business loans

How much money do you need to start a bar?

If you are looking to open a brand-new bar, you will need to secure more financing than were you to take over an existing bar. This will require purchasing or renting a location, renovation, updating and upgrading utilities if necessary, licensing, inventory, and hiring costs. This can be an average of anywhere between $20,000 to $850,000 depending on the type of bar you want to open and where it is. Opening a bar in New York will have very different costs to opening one in Vicksburg, Mississippi.

It is important to be aware that it often takes several years to start turning a profit when opening a bar, so you need to have a strong business plan in place before taking on a business venture of this size.

Types of bar business financing options

There are several different business loans available to choose from:

• SBA 7(a): This is the most popular SBA loan program, with loan amounts of up to $5 million which can be used for purchasing real estate, working capital, refinancing existing business debt, and purchasing inventory and equipment. There is a lot of competition for SBA loans among small business owners, and with strict qualification requirements, they can be difficult to secure. However, with high loan amounts and desirable terms, it is well worth applying for this type of bar business loan.
• SBA 504 loan: If you are just looking for financing to purchase property for your new bar, you could consider an SBA 504 loan. With loan amounts up to $5 million with terms of 10, 20, or 25 years and a low interest rate, it is a very affordable option. You will need to offer a down payment of around 10% to secure this type of loan.
• SBA Microloans: If you are looking to obtain a smaller financing amount, you may want to think about an SBA Microloan. This loan program offers loan amounts of up to $50,000 (although the average is $13,000) for small businesses to start-up, expand, or improve. Exact requirements will depend on the intermediary lender, but you will likely be required to put up collateral to secure this loan.
• Bank Loans: A bank loan is the most low-cost option for financing, no matter what business you are in. However, they are particularly hard to obtain without an excellent credit score and strong financial history. The application process and time to fund can also be lengthy.
• Term Loans: A good alternative to a bank loan is a term loan from an alternative online lender. Like a bank loan, you are provided with a lump sum which you pay back over a set term with added interest, but you will still be able to qualify with less than excellent credit. Loan amounts, interest rates, and loan terms vary by lender.
• Business Credit Card: If you are looking to cover smaller, regular costs, you could use a business credit card. This gives you the flexibility to make purchases as and when you need, but you should aim to take advantage of a 0% APR introductory offer or rewards card, otherwise high interest rates can make business credit cards costly.
• Equipment Financing: If you are just looking to cover the costs of equipment, you may want to take advantage of equipment financing. The lender will purchase the equipment for up to 100% (although it is typically 80%-90%) and you are required to pay them back with interest. Once the balance is repaid you can purchase the equipment at a fraction of the price. Since the equipment itself acts as collateral you only risk losing the equipment if you are unable to make your repayments.
• Business Line of Credit: If you are unsure how much you will need and when you will need it, you could consider opening a business line of credit. This provides you with credit that you can draw from as and when you need to, only paying interest on what you use. This is a good option for you if your bar goes through seasonal financial changes.
• Personal Loan: If you are looking to open a bar and are still working in another job, you could take out a personal loan to get your business up and running. A personal loan lender will consider your personal finances and credit score, and it is unlikely that you will need to put down any collateral. The main downside to this type of loan is that you may not be able to qualify for a large enough amount of money for your bar and so you will have to look to obtain more financing elsewhere as well.