How to Get a Loan to Renovate a Commercial Kitchen
Not all commercial kitchens in restaurants are set up or have the tools to handle current food service demands well. Commercial kitchen renovation loans can cover some or all of the cost of your renovation so your restaurant can be more efficient and prepare better dishes. To receive one of these loans, you must do a substantial review of your records, get written information and estimates from those who'll work on the renovation, and put together an excellent proposal that shows the potential return on the investment and how you'll repay the loan.
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Instructions
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Consult with a renovation architectural design contractor. Have the contractor come to the kitchen and provide some rough ideas for how the kitchen can be renovated based on your needs. Make a list of the types of materials and supplies each renovation idea requires. Have the contractor provide you with a written summary of the concepts and make copies.
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Contact local construction contractors and vendors to get written estimates on the materials and appliances suggested for each renovation idea, as well as a projection for how long renovations might take. Get an overall idea of the project's cost, longevity and efficiency. Make copies of the estimates.
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Analyze each renovation idea for its practicality, cost, time to finish and aesthetic appeal. Narrow your choices down to the best renovation concept.
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Make a list of all the ways in which the renovation you've selected will help your kitchen and overall business. For example, if the renovation replaces all of your old appliances with energy-efficient models, estimate how much your business will save on electricity costs. Those appliances also might allow you to prepare different foods, which would impact your menu, potentially attract new customers and generate more sales.
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Gather all of your financial and sales records, including those related to your current business credit. Review the records to determine how you might repay the loan. Consider how you'll manage the downpayment and what collateral you'll use. Depending on which lender you approach and what your business credit is like, the value of these two required items can be significant, as restaurants have a fairly high failure rate and therefore are more risky for lenders and investors. Make copies of these documents.
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Look for banks and other financial institutions that offer business loans. Contact these agencies, get information on their application requirements and request application forms. Review your options through the Small Business Administration, as well -- it has commercial business renovation and "green" loans available, both which are applicable to a kitchen renovation. The SBA does not provide loans directly to loan applicants, but it guarantees the loans other banks can give to you, which means you may qualify for an SBA loan if you can't get a traditional version.
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Prepare your proposal package. The proposal should summarize the intent and benefits of the renovation, explain your expertise in culinary arts or restaurant management and include how and when you want the renovation to occur. Include a detailed itemized list or a chart that explains all costs. Address how you'll minimize potential risks such as the inability to get particular materials, or flood and fire damage. Show the potential profit margin and how you'll repay the loan. Use your copied documents as supplemental appendices.
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Write a cover letter to accompany your proposal. Address it to a specific loan officer at the lending agency you've selected.
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Fill out your loan application.
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Submit your application, along with the cover letter and proposal, to your selected lender. Send it via certified mail or drop it off in person. Submitting in person can be advantageous because it offers a chance to introduce yourself to the loan officer face-to-face and demonstrate your professionalism quickly.
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Negotiate the details of the loan -- such as the interest rate and the right to inspect the renovation area as work progresses -- if the lender and the underwriting company it uses approves your application. Sign the paperwork and, based on when the lender can get the money to you and when you want the renovation to happen, contact the necessary workers to start the renovation process. If your loan is denied, submit your proposal to additional lenders until you're approved, personalizing your cover letter for each submission.
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References
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