(February 2022) My career began as a banker – on the other side of loan applications for everything from first time homebuyers to small business dreamers.  Making aspirations a reality was the heart of the job as a lender, especially in a coastal community where we knew many of our customers from other walks of life.  That experience also left me with a
keen understanding of what a winning loan application needs. Many restaurant loan applications – like others – will fall short as
applicants fail to pull together the right materials to make their case.

The past few years, I’ve transitioned from banker to the trenches of the hospitality industry. The Coastal Hospitality team works exclusively with restaurants large and small in optimizing their bottom line. Never has that been tougher than the last 24 months+ of COVID-19.  We’ve helped dozens of restaurants navigate applications for COVID-relief.

Restaurants Are Ready to Rebound

Not surprisingly, perseverance is the hallmark of any small business entrepreneur. That quality is multiplied when it comes to the restaurant owner.  Not only have many overcome the pandemic crisis of closures, staffing, masking and spacing policies as well as their own health challenges, but they’re ready to grow.  I’m inspired by the number of our clients ready to renovate a current store, open a new location, or build a franchise. As the economy recovers, expansion and reinvestment are on the menu. That means debt financing and securing capital.  

The National Restaurant Association continues to lobby for Congress to re-fund restaurant relief programs that quickly tapped out last year. While a flurry of non-traditional online funding options from Kabbage to crowdfunding like the Barstool Fund have gained buzz,  banks still remain the primary source of financial capital.

 

Your Application Checklist

Ensuring you have the right documents and materials is essential before you approach a potential lender.  Here’s a checklist to get you started in your restaurant loan application:

 1. Financial statements

Take it back to basics.  A lender will need to review your past and current financial position. Ideally, plan on three years of historical financial statements up to the current period, including a balance sheet and P&L (profit-and-loss) statement to provide a consolidated, unit-level presentation.

2. Store list

Next, tell the story of your restaurant holdings. Lenders will want to see a summary of all current stores, including the following
information:

Addresses

• Details on brands (if you have multiple brands, identify which brand is associated with each location)
• Opening or acquisition dates 
• Property type (whether leased or owned)
• Lease expiration dates
• Franchise expiration dates

3. Overall capital expenditure plan

Be granular on your long-term needs and aspirations.  Do you have a clear timeline and detailed cost of projects?  Reflect on these three questions and document the answers: 

• Looking to build new stores: What is the expected timing and cost of each project? 
• Planning acquisitions: What’s on the radar right now?
• Remodels on the way: What is the expected timing and cost of each?

4. Overview of your organizational structure

Lenders want to understand as much as possible about your organization.  How do you operate? Who else is involved?  The more detail the better. Document the following:

• Operating entities (if you have multiple entities, identify which stores are held in each entity)
• Real estate entities 
• Management companies 
• Holding companies 

5. COVID support

Finally, summarize any support your business received throughout the pandemic, including: 

• Paycheck Protection Program (PPP) funds: How much did you receive, and have you been granted forgiveness?
• Rent relief from landlords: Which stores and when did you receive the support? Are you now current on rent payments?
• Relief from franchisors or other vendors: What were the terms and conditions?
• One-time COVID expenses: Did you provide any ‘hero pay’ to employees?

Tell Your Story

A lender will want to get to know more about you and your team as well. Consider adding professional bios of managers, owners, and partners for your business.  Who is running your business – what are their strengths and focus areas?  These extra details in your restaurant loan application can work strongly in your favor in building a sense of depth off the bench in your organization.

Bottom line? Organization, details, and planning can take the sweat out of dealing with a bank.   Our accounting and back-office support can provide the financial menu you need before making that application. We’re here to help.

Ward Hieronymus – CEO Coastal Hospitality