Pizza Shop Loans: Funding Options To Grow Your Pizza Restaurant

Business loans for pizza restaurants are largely available and dependent upon the specific loan request that is being made. Pizza restaurant operators typically rely on banks and lenders for conventional loans, SBA loans and asset based loans to fund their existing business or for the start-up of a restaurant. There are various loan purposes to consider as a borrower depending on whether the pizza shop owner is looking to purchase an existing business, obtain start-up financing for a new location, seek leasehold improvements, remodel, or acquire real estate. When it comes to pizza restaurant loans, operators will face several decisions in regard to loan product and lenders to choose from.

Which Loan Product Is Right For My Pizza Shop?

There are several loan and funding programs that have been used to finance pizza restaurants. Traditionally pizza shops have received fairly competitive loan rates and terms, with current interest rates generally ranging between 4.25 and 8.75 percent across most types of financing and structured as fixed, variable or fixed-to-float. There are quick close products, like a merchant cash advance that have higher effective interest rates. The term and amortization of a pizza restaurant loan is often structured anywhere between five and twenty-five years, depending on the assets being financed with the loan. Financing for hard assets, such as real estate generally receive terms between fifteen and twenty-five years, while a loan for working capital or inventory could have a term of one to ten years. There are several loan products that borrowers should consider for pizza restaurant financing, including:

Revenue Based Loan

A revenue based loan could be your businesses lifeblood and provide it with several financial benefits. When your business is growing, chances are you'll need an injection of cash to continue its growth. Bank loans are often times too restrictive and near impossible to obtain these days. In this situation, a revenue based loan may be the best solution. If you use it wisely, a revenue based loan could do wonders for your business. 

Merchant Cash Advance

A Merchant Cash Advance (MCA) can provide business borrowers with an upfront fixed amount of cash in as little as 24 hours. The funding amount is based upon a percentage of the businesses credit card receivables or daily cash balances using historical credit card receipts and bank statements to determine the initial advance. The business pays back the advance, plus a percentage, often referred to as a discount factor, from a portion of their credit card receivables or cash available plus a percentage which is often referred to as a discount factor. The remittances are drawn from the business customer on a daily, weekly or monthly basis until the obligation has been met. An MCA is not technically a small business loan and as such MCA's are not limited in what rates they charge or what terms they establish and therefore often have high interest rates. For this reason it is very important for a business owner to be completely aware of how the MCA product works and how it could affect their business. MCA's are good options for small business owners who may not have strong credit but have lots of credit card activity and need financing quickly.

Cash Flow Loan

Even if your small business is growing, you may find yourself needing extra cash to cover day-to-day expenses such as payroll, rent and inventory, or to pay for short-term projects that could grow your revenue in the long run. Uneven cash flow is one of the biggest challenges of small businesses throughout all industries.

For this type of business financing, lenders provide you funds and use your future expected cash flow as collateral for the loan. You’re essentially borrowing from cash that you expect to receive in the future by giving the lender the rights to a predetermined amount of these receivables. These are primarily used for working capital or take advantage of short-term ROI opportunities. Your credit scores will usually be checked, but they play less of a role. As the name indicates, the lender is more concerned with inspecting your cash flow (usually bank statements) to approve your application. Turnaround time is another great feature of a cash flow loan, as funding usually takes place in a matter of days.

Term Loans

Fully amortizing up to 4 year terms. Ideal for businesses with large single purchases or need to refinance debt. Fund marketing efforts, open new locations, or purchase equipment; all while building your business credit.

SBA Loans

The Small Business Administration's (SBA) 504 and 7(a) loan programs are both popular alternatives to traditional financing options. A percentage, typically 75% of the full loan, is backed by the SBA so banks and lenders assume less balance sheet risk on the loan. However, all lenders utilizing SBA loan programs have to adhere to stringent loan eligibility requirements and SBA Standard Operating Procedures for loan underwriting including the pricing and terms for the loan. For the SBA 7a product, loan pricing can be priced using the Prime lending index plus a maximum spread of 2.75% - which is maximum allowable rate. Lenders may use variable rate pricing so as the Prime rate goes up or down the interest rate on the loan will move up or down as well. Terms are structured based on the assets being financed.

Asset Based Lines of Credit

Pizza restaurants operators may use asset based lines of credit for an array of business uses. Asset based financing for pizza restaurants can be either revolving or term loans secured by assets such as accounts receivable, or real estate.

Unsecured Business Line of Credit

Unsecured credit refers to loans or lines of credit where there is no collateral to back the loan. Although this type of lending is possible for a pizza bar it is considered risky for lenders. The borrower's personal financial strength as well as the business cash flow needs to be strong in order to qualify for an unsecured line or loan.

What is the economic impact of the pizza industry?

Pizza is often referred to as the nation's number one meal choice as approximately 93% of Americans eat at least one pizza per month. Although the recent recession has affected most restaurant and retail businesses the low cost of pizza has allowed families to continue to eat and enjoy the great tasting cheese, break and sauce combo (as well as other ingredients).

Pizza restaurants represent over 17% of all restaurants in the United States and produce revenues of over $40 billion dollars. Within the franchising industry alone there are over 65,000 pizza shops in the country.

What are some common issues pizza shop owners face?

Pizza restaurants endure the same competitive pressures as most other restaurants. However, because pizza is limited to three main ingredients: wheat for dough, cheese and tomato's for sauce, pizza business owners are more susceptible to swings in the prices of these ingredients when compared to other restaurant operators who can substitute menu items. During the recent recession the cost of cheese and wheat went up, creating the perfect storm as less people decided to dine out. Pizza business operators were forced to pass some of the cost on to their customers but also used coupons and discounts to sell more pizza's to survive. These same operators turned to the internet and social media outlets to promote their brands and drive more customers to their restaurants.

Why LVRG for Pizza Shop Loans? 

A single loan request through LVRG is the most efficient way to seek a pizza restaurant loan. Many banks or lenders can start the loan process, but LVRG helps pizza shop owners by creating lender competition for their business, presenting an array of funding options, pricing and terms. Ready to grow your pizza business? Call LVRG today! (855) 998-5874