What is a bakery small business loan?
A bakery small business loan is an installment loan that is designed to help you cover the costs of starting or expanding your bakery business. Installment loans are repaid in fixed monthly payments over a set period of time called a loan term or loan repayment period. They offer many advantages over credit-based forms of financing. Business loan interest rates are typically fixed while credit card rates are often variable, loan amounts are typically higher than credit card limits, and monthly payments are typically lower than using lines of credit.
How does a bakery business loan work?
A bakery business loan works by requiring business owners to submit an application and go through an underwriting process before receiving a lump sum payment of cash that can be used for their business expenses. That lump sum is then repaid in equal monthly installments. There are different types of business loans so the specifics as to how they work can vary. Make sure you fully understand what you are signing up for before committing.Â
To obtain a bakery business loan, you will typically need to show the lender that you have the tools needed to successfully repay the loan. This generally involves submitting a business plan and other information regarding the financials of your business. The lender will also check your credit score and will typically have a required minimum credit score that you will need to meet.
The funds from your bakery business loan can be used to cover everything from new kitchen equipment to staffing needs.
Business owners should always shop around to compare rates, fees, and terms before applying for a bakery business loan or other type of small business loan.
Can bakery business owners obtain business financing?
While personal loans, credit cards, and even home equity lines of credit can be used to fund business expenses, typically the best option for business owners is to use business financing.
Bakery business owners can benefit from obtaining small business financing from a variety of sources including banks, credit unions, and online lenders. Any small business owner with a business plan, solid financials, and a good credit score can expect to be approved for a small business loan.
For the best rates and loan features, look for a loan that is backed by the Small Business Administration. SBA loans open up access to financing to all business owners with a variety of loan programs including microloans, disaster loans, general small business 7(a) loans, Real Estate & Equipment (504) loans, and more. While the SBA does not finance loans directly, they guarantee loans that are generated through its nationwide network of lending partners.
The downside is that SBA loans can take a while to fund and be hard to qualify for. Some may not have the time, patience, or qualifications to get an SBA loan. If you find yourself in this situation, consider a traditional business loan or personal loan instead.
Benefits of bakery financingÂ
Small businesses in the food service industry - including bakeries – take on a big risk when they choose to start their new business. However, there is also a great possibility for success. Demand for baked goods is growing and there is an especially good opportunity for niche bakeries to seize market share.
Financing your new business endeavor can help you jump right in without needing to wait to save up the funds to cover all of your start-up (or expansion) expenses. Financing can also help your existing business get a boost and cover the cost of new equipment purchases or upgrades.Â
Small business loans with good terms, low fees, and low rates are the ideal way to cover the costs of your business needs and spread out the repayment of those expenses over time.
Types of bakery business financing options
There are several different types of small business financing available to bakery owners:
- Online business loan lenders: Online lenders offer some of the best deals on many types of financing, and business loans are no exception. Entrepreneurs can expect to find low rates, low fees, high loan limits, and lenient credit score requirements from online lenders. Likewise, funding can occur much quicker from an online lender vs. a traditional bank which can take months to fund your loan.
- SBA loans: SBA loans can be obtained through a partner network of financial institutions that work with the Small Business Administration. The SBA does not offer any loans directly, but rather it guarantees those loans generated by participating banks.
- Bank or credit union loans: Not all small business loans offered by banks and credit unions are backed by the SBA. Small business owners can take advantage of other financing options offered by their local bank or credit union. However, it can take several weeks to get approved for funds when applying through a traditional bank.
- Merchant cash advance: A merchant cash advance is a short-term form of financing that allows bakeries and other small businesses to borrow against future earnings with no collateral or down payment needed. While it can be a great option for applicants with poor credit, interest rates are high and repayment periods are short, making it a slightly riskier option for obtaining business financing.
How to choose the best loan option right for your business
Business owners have many options when applying for a small business loan.
To choose the best loan option for your business, you will need to compare rates, loan terms, fees, and other features of the loan. Research the minimum credit score requirement, cash flow requirements, and other qualifying factors from several different lenders before making a decision. Find out about any prepayment penalties, late payment grace periods, and if/when the lender can demand full repayment of the loan balance.
In general, SBA-backed loan programs offer the best deals to business owners with competitive rates and fees, low down payments, flexible requirements, and continued support. They are also less likely to require collateral. The Small Business Administration does not provide the loans directly, rather it guarantees the loans originated by its partner lenders.
Other sources of small business loans include credit unions, banks, and online lenders. Be sure to thoroughly review each of your options in order to get the best deal.Â
Who can use bakery business loans?
There are many different forms of bakeries that can take advantage of small business financing.Â
Whether you have a retail bakery, a home-based bakery, a baked goods store, or even a bakery school – you can benefit from a bakery business loan. In addition, wholesale bakery providers can use bakery business loans to cover their business expenses.
Any small business with the right financials, credit history, and business plan can apply for and expect to receive small business financing.
Common uses of bakery business financing
Some of the most common uses of financing for bakery business owners include equipment upgrades, marketing and advertising expenses, software & point of sale systems, and the purchase of new types of equipment needed to expand the business. Other important business needs that can be covered by a small business loan include real estate purchases, renovations, staffing needs, and the replenishment of inventory.
Start-up bakery businesses can benefit from using small business financing to cover all of their new business start-up costs from equipment to inventory.Â
Existing bakery business owners may want to use a business loan to expand by hiring more staff, purchasing additional equipment, expanding their physical location, purchasing a delivery truck or catering equipment, or purchasing a new location.
Tips for starting a new bakery business
When starting any new business, it is important to have a solid business plan and a good idea of how you plan to generate income and cover your business expenses. Starting a new bakery business is no exception. Starting a business in the food service industry, such as a bakery, can be especially risky. Business owners should evaluate current market trends and demand for bakery services in their area. Obtaining financing can help you cover all the necessary start-up costs from staffing to marketing. It is important to start off strong, so be sure to look for a small business loan that will be easy for you to repay and does not subject you to a host of unnecessary fees or high interest rates. Always shop around for the best deal for any loan.
What do I need to qualify for bakery financing?
In order to qualify for bakery financing for your small business, you will need to meet the requirements set forth by the lender you choose for your small business loan. While the exact qualifications will vary, in general most lenders will expect to see a business plan, solid financials, and a good credit history for you and your business. Online lenders and credit unions may be more likely to approve applicants with a less than stellar credit score, so be sure to shop around in order to find the best options and lowest interest rates for your business.
How to get a bakery loan for your business
To obtain a bakery loan for your business, you will need to find a lender that offers a small business loan and apply either online or in person. The lender will likely request some additional information and supporting documentation from you about your business including a business plan, financial projections and possibly even collateral - so be prepared for this during the application process. Lenders will also run your credit to find out more about your credit history and current credit score. Once you have been approved, you can expect to receive the funds within a few business days.
One of the fastest and easiest ways to find the best bakery business loan offer is PrimeRates. At PrimeRates you can shop and compare offers within minutes. Fast Tracking the prequalification and shopping process can save you time and money that is better spent on your business.Â
Rise to the top. . . apply for bakery business financing today!
