Catering Business Financing - Loans, Investors Or Grants?

It is possible to start a catering business with very little capital investment. However, if you want to start out with a reasonably professional operation and you don't have any savings then you will need some kind of external financing. Here are some of the catering business financing options that you might consider.

Independent Funding

The catering industry can be entered for a reasonably low investment if you avoid setting up your own commercial premises and kitchen. You can cut costs by starting out from your home or renting equipment instead of purchasing it. For these reasons it is wise to save up and fund your catering startup yourself instead of going into debt right from the start.

Things may not go as planned in your first year in business or you may need financing to expand. For these reasons you should try to leave your financing options open for later when you may desperately need them.

Family and Friends

Hitting family members and friends up for a loan is one option that many entrepreneurs try. Be careful here though as you could cause damage to relationships that are important to you if you suddenly find that you are unable to make repayments on schedule.

Bank Loans

Banks offer a variety of loans or lines of credit to entrepreneurs wanting to start or expand small businesses. To increase your chances of qualifying, approach a bank that you have a good account history with. Let them know that you are willing to fund at least some of the startup costs and only need a loan for the remainder.

You will increase your chances if you have a well written business plan to present to them. Having assets that you can use as collateral or someone who can guarantee your loan could also be a necessity.

Investors or Partners

If catering business startup costs seem too daunting then why not split them with one or more business partners. It is even possible to get an investor who will provide you with funding in return for an ownership interest in your business.

Try to make some connections in the catering community either near your home or online and you may find someone who is keen to work with you. Be prepared to sell your idea to partners or investors though as they will be skeptical. You should have a strong catering business plan to show them and you could even go as far as preparing some sample dishes for them.

The downside with this kind of funding is that you lose control. Partners or investors may want to be involved with management decisions and you might find that they want to take the business in a direction that you are not happy with. If you do take this route then make sure that everyone involved knows where they stand right from the start. Get everything in writing if possible.

Government Loans and Grants

Other options for financing a catering business include government loans or grants. The Small Business Administration in the US is a good place to start your search. You must be eligible though and prepared to go through a lengthy application process. Even if you do qualify for this kind of financing then you might face strict controls as to exactly how you can use the funds.

Credit Card Financing

Many entrepreneurs these days are starting businesses by taking out a number of cash advances on their credit cards. While this method is not advised due to the high interest rates involved it may be worth considering if it is your last option. Before going for this method you should be pretty sure that you can start making repayments within a reasonably short period of time.

In reality there may not be one single silver bullet for your funding problems. You might need to combine two or more of the options mentioned above to get to the amount that you need.

No matter which catering business financing options you decide to go with just make sure that all of your startup capital is used wisely.