Restaurant Loans - Credit Crisis

As you may have guessed restaurant loans are taking a severe beating the credit crunch today. A year ago, and even 6 months ago there were many options. In fact, 30 years fixed mortgage programs restaurant where an option, stated income commercial loans, if available, borrowers with very low or zero net profit and a decent restaurant could still get loans. Even borrowers with other issues such as bad credit loans may find the restaurant.

Now almost all of these creative options and have frozen or are simply gone. What remains are the traditional loans. Mainly commercial and SBA loans a few, scattered, and only for borrowers with very strong, conventional commercial mortgages. With these types of options, the restaurant owners are going to have to start planning for the future and be more conscious of playing the traditional game. In other words, you've got to show some income! If you do not show any of your income tax returns do not plan to get a loan.

For example, if you know you have a ballooning loan early or if you are in the process of expansion locations you've got to tell your CPA now starting to show some income. Yes, you could increase the amount of the fee must be paid, but the alternative could be much more expensive.

We get calls all the time from borrowers who have had a balloon loan restaurant, and now have not only been able to get a new loan. They go to multiple banks and lenders and they all say the same thing "that does not show that you make money, I'm sorry." Their existing lender starts the foreclosure process and the borrower continues to make purchases with no luck. The existing bank hiking their rates in an effort to further "motivate" and find another bank to cover their risk. It goes on and on and gets uglier by all.

Bottom line, despite enjoying the hospitality business of money-related, you're going to have to start playing the game to ensure traditional SBA loans and conventional loans. In addition, most banks want to see a debt coverage ratio of 1.3 on restaurant loans, then you must show a fair amount of cash flow ....