Know All About Business Loans For Restaurants: Interest Rates, Eligibility, And Repayment

Aug 13, 2020

Know All About Business Loans For Restaurants: Interest Rates, Eligibility, And Repayment

As per a report published by FICCI, India’s Food Services Market had a market size of about Rs. 3.37 Crore in 2017. With a projected CAGR of 10% over the next five years, it can reach about Rs. 5.52 Crore by 2022. Standing in 2020, it is safe to conclude that this is one of the few sectors in the country which has been minimally affected by the ongoing economic slowdown.

As a result, investing in setting up a restaurant, a cafe, or even a dhaba can be an extremely prospective business opportunity in today’s market. Initially, you can start off with a small food joint and then expand gradually.

However, like with all other businesses, prospective restaurateurs must also consider the substantial investment they have to undertake at the onset. This is where a business loan for restaurants comes into the picture.

Nonetheless, before delving further into the types of loans one can avail to set up a fully functioning eatery like a dhaba or even a fast food joint, first, take a look at the costs associated with starting the business.

Expenses of Setting up a Small Restaurant – 

Before availing a loan for hotel construction in India or to set up the restaurant business, it is important for entrepreneurs to ensure that they have an accurate estimation of the amount they have to invest for it.

The cost to start a restaurant in India can depend on several factors –

  • The city where it is located.
  • The type of eatery one has in mind.
  • The scale of the venture.

These are primarily the most important parameters that can help one estimate the cost of setting up a small eatery in India. Taking such factors into consideration, an individual’s initial investment for business can range up to Rs. 20 Lakh or more.

While the above are the determinants that help one to estimate their budget for setting up an eatery, following are some of the avenues where one has to invest in when starting a dhaba or small restaurant. A business loan for restaurants can help entrepreneurs finance these requirements –

  1. Plot – Purchasing the plot for business. In this respect, it is always better to invest in an already constructed building than having to set up the structure from scratch.
  2. Infrastructure – The next use of the commercial loan for restaurant will be for its infrastructure, designing it, getting the required equipment and so on.
  3. Licenses – Acquiring licenses can take up a substantial chunk of the total investment corpus. Some of the most important licenses that one has to avail for a cafe or a restaurant include company and GST registration, trade license, FSSAI license, eating house license, environmental clearance, etc.
  4. Staff – An eatery cannot function without an efficient staff, comprising cooks, helpers, servers, etc.
  5. Working capital – Setting up a functioning eatery is not a matter of a one-time investment. One has to consider costs of procuring raw materials, paying staff salary, maintaining the space, etc. while availing a business loan for restaurants.

These are but a few of the avenues which require a substantial investment while setting up a restaurant. Availing a loan for dhaba or a restaurant is an effective way to finance them. Following is a look at the types of loans that can be availed to fund these expenses.

Types of Loan for a Hotel Business in India

Financial institutions across the country have made several types of business loan for cafes, restaurants or dhabas available for entrepreneurs, like –

  1. Personal loans – These are unsecured advances that usually come with high interest rates. With such advances, one can mostly avail limited funding and has to undergo a lengthy documentation process owing to the unsecured nature of the loan.
  2. Business loans – These loans are exclusively offered to entrepreneurs to fund their businesses. While availing such a business loan for restaurant can be useful, they come with repayment conditions, which can be difficult to keep up with.
  3. Government MUDRA loans – While these loans to strengthen the MSME sector of the country are immensely useful, not every aspiring entrepreneur can avail them. These impose stringent business loan for restaurant eligibility criteria which have to be mandatorily fulfilled to avail them.
  4. Gold loans – Gold loans have quite a lot of untapped potential when it comes to financing any business endeavours. These loans, offered by Rupeek Fintech Pvt. Ltd. are high-value, easily accessible funding options which can be utilised to finance any requirements.

Following are a few merits of a gold loan offered by Rupeek for setting up a restaurant business, which makes it one of the most comprehensive financial solutions.

Reasons to Avail a Gold Loan to Fund Setting Up a Restaurant

Several factors contribute to making gold loans the best option to finance a restaurant business. Some of them include –

  • High loan to value (LTV) and attractive interest rate

Gold loans are secured advances offered based on RBI’s directives towards their LTV. In this respect, Rupeek offers the highest LTV against gold pledging, allowing one to finance their business venture with ease.

LTV or loan to value ratio is a part of the pledged asset’s market value that a lender can provide as loan at maximum. Offering the highest LTV, this lender thus maximises your chances of availing a high loan amount.

  • Ease of access

Gold loan is also easy to apply online with a simple application process similar to the online application process of a business loan for restaurant. Borrowers need to apply through Rupeek’s app or send an application through its website, after which a loan manager is appointed to carry on the formalities.

As a first-in-market feature, Rupeek provides doorstep loan service to further ease the process of availing gold loan. The loan manager arrives at the borrower’s house at a scheduled date, completes the application and registration processes, and values gold for approval.

  • Instant disbursal with minimal documentation

To avail the gold loan, one does not need to undergo a complicated registration process. Once gold’s valuation is completed by the loan manager, you will receive the loan amount in your bank account. From gold valuation to disbursal, it takes only 30 minutes to complete.

  • Security of asset

The gold pledged as collateral is securely deposited in the nearest partner bank’s safety vault, until the time the borrower can re-possess it. Also, any risk of theft or loss during transportation from your home to the vault is eliminated as it is carried in a GPS-trackable bag.

The pledged gold is also insured to further reduce any stress of financial loss emerging while the asset is in the lender’s possession.

  • Easy repayment

Similar to repaying a business loan for restaurant, paying off your gold loan is extremely easy, in fact easier. While with other loan options, one has to pay a monthly instalment comprising both the principal and interest components, gold loans only demand the borrower to pay the monthly interest amount.

The rest of the borrowed amount can be repaid through a bullet payment after the tenure of 6 months or 1 year is completed. Or, one can also opt to pay the total loan liability at the tenure’s end and buy some time to arrange necessary finances for repayment.

With such benefits and more, gold loans, especially the ones offered by Rupeek, make for the best option when it comes to financing a small restaurant business in India. The fact that this advance does not impose any stringent eligibility criteria and can be availed without having to set foot outside one’s house certainly contributes to its long list of attractive advantages.

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