A nightclub and bar is an exciting, lucrative venture. However, you must understand that you will have to invest long hours, deal with unruly customers, and pay close attention to detail. Also, this business venture can be quite expensive, which means you will probably need business financing. A nightclub loan will give you the funds you need to start, operate, and grow your business.
In this article, we’ll take a look at 7 loan options for a nightclub and bar.
7 Loan Options for Nightclubs and Bars
If you are considering opening a nightclub or bar, you have several financing options to choose from. It’s important to note that they’re not all created equal. You’ll want to make sure to do your research before committing to one. Below are the 7 loan options for your nightclub or bar.
Term Loan
You can obtain a term loan through a bank, credit union, or online lender. Once approved, you’ll receive a lump sum upfront, which you will pay back a fixed amount each month over a specific term, spelled out in the agreement. Term loans come with competitive rates and flexible terms, but can be challenging to keep up with, especially if you’re a new nightclub or bar owner.
SBA Loan
SBA loans are partially guaranteed by the SBA. These loans have low-interest rates and extended payment terms that you won’t find elsewhere. Depending on your situation and the loan program, you may be able to get up to $5 million and have up to 25 years to pay it off. SBA loans are beneficial for nightclub and bar owners, but the application process is extensive, and you need to have good credit.
Equipment Loan
Once you have a space for your nightclub and bar, you will need equipment such as:
- Tables/chairs
- Ice boxes
- Draft lines for beer
- Brewing tools
Even when you opt for used equipment, it’s not cheap. An equipment loan can help you get the funds you need to buy the equipment. Since the equipment is the collateral, you may be able to qualify, even if you have bad credit.
Business Line of Credit
Just like every other business, your nightclub/bar is likely to face seasonal dry spells or emergencies. A business line of credit can give you access to cash to help with those times. A line of credit is a lot like a credit card, but with higher limits. You will be given access to a set amount that you can use as much or as little of as you need. You only pay interest on what you use instead of the full amount. This is a great way to cover any unexpected expenses without using your cash reserves.
Commercial Real Estate Loan
You’ve been told that business is all about location and it’s especially true with a nightclub/bar. In order to attract the right clientele, you need to be in the right location. A nice space in a trendy area can cost hundreds of thousands of dollars and since most people don’t have access to that much cash, a commercial real estate loan can help. It can be used to buy a location or to renovate your current location.
Merchant Cash Advance
A merchant cash advance is a great option if you already own a nightclub/bar. A lender will give you a cash advance against your future credit/debit card sales. A percentage of those sales- usually daily- will be paid to the lender until the balance plus fees is paid off. Compared to other loans, a merchant cash advance is much easier to get and you get the funds faster.
Invoice Factoring
Invoice factoring is a form of financing in which you sell your unpaid invoices to a factoring company. This is unsecured financing, so your assets are not at risk. Most of the time, a factoring company will only advance up to 80% of the invoice. Then, once the customer pays them, they will give you the rest, minus their fees. Even with bad credit, you could still be approved for this type of funding.
How Should You Use Your Nightclub and Bar Funding?
On average, it costs between $240,000 to $840,000 to open a nightclub/bar. It is also expensive to run and grow. Nightclub/bar funding can cover expenses including:
- Startup costs
- Equipment
- Permits/licenses
- Food
- Alcohol
- Expansion
Conclusion
It’s not easy to own a nightclub/bar, but it is rewarding. These loan options can help you start or grow your own nightclub/bar, just make sure you weigh your options and choose the one that best meets your needs. If you need help, contact Hemmingway Financial Group.