There are many sectors in which the mom-and-pop business structure is a thing of the past. Why would you go into a small, family-owned hardware store when you can go into a big-box retailer that has several times the choices – and charges significantly less for each item? When a business deals in products that are available in large quantity and require little in the way of personalization, then a large business chain can outperform a small business. However, when personalization is an important part of the product or service, then a small business can compete – and outdo the big chains.
One example of this type of industry is the bakery. If you walk into a major retailer, such as a grocery store, or even a big-box retailer like Wal-Mart, you will likely find a bakery department. While there, you can order a cake and even have it personalized for a birthday party. You might even be able to get such services as a photograph scanned and screen-printed onto the icing.
However, those cakes are generally baked with inexpensive ingredients and with recipes designed for mass repetition. If you can make a delicious cake and take the time for decorative extras, there is a market out there for small businesses to thrive. If you are just getting your business up and running, you may need some financing to pay for your initial equipment.
So what are the financing options for bakeries and bake shops?
There are some basic requirements that all lenders will have – whether you use the Amansad Financial lending network or not. You should have been open for business at least 12 months in most cases in Canada or the United States.
Why do you need to have been open for at least a year to apply for a business loan for a bakery?
To be frank, lenders want to see that you have already put together some success before they will extend you that sort of credit, particularly without any collateral. When you have been open for at least a year, that tells the lender that you have not only put together a solid business plan, but you’ve had some success putting that plan into action. So many people put together business plans and then see those plans go up in smoke, because they don’t have the business sense to put matters into practice. If lenders gave unsecured business loans for bakery type businesses right at their opening, they would see a lot more of those notes go into default, simply because so many businesses go under that quickly. It might be a function of poor location, or a mistake identifying the degree of market saturation, or it might even be an illness that causes the owner to stop running the business. When you have 12 months of operation under your belt, even if the first few months were choppy and unprofitable, a lender will see that you have been able to right your own ship and that the loan is not simply good money going after bad.
How would a merchant loan for bakery equipment work? Are there alternative bakery loans?
If you take out small business loans for a bakery, you can use it for just about anything that will benefit your operation. So, if you want to buy new bakery equipment, if you want to buy a new computer system to manage your inventory, if you want to buy a property and use it as your location, you can do all those things.
You can use your merchant loan for other items as well. Perhaps you’ve gotten to the point where your business is large enough to move out of your own kitchen, and you want to rent a small retail location that already has the utility connections that you need. Perhaps you want to upgrade your oven, or you want to purchase a van that you can use to deliver your creations, because you’re tired of using the back of your SUV or sedan. Perhaps you want to upgrade your social media presence or hire some additional staff. Merchant loans can help you with all of these expansion plans, and you pay yourself back with the revenue that comes in as a result of your increased capacity.
I’ve heard of the possibility of a merchant cash advance for bakeries. How would that work?
If you look at some websites to read about small business loans for a bakery, you might read about a product called the merchant cash advance (MCA). These advances are usually available very quickly, which can come in handy if you are looking for quick money that can quickly benefit your business, and don’t want to jump through the hoops that some funders require you to jump through. Ideally, it’s suggested you explore your traditional options with your bank first. If your bank is unable to assist, get in touch with us for fast funding. The difference between a merchant cash advance and a traditional loan is that you pay the advance back at a set percentage of your daily sales. So if your sales go up, you pay off the loan faster; however, if your sales don’t grow as fast as you had anticipated, you’re not facing a fixed monthly payment that could blow a hole in your cash flow. The fees associated with an MCA are higher than the interest that you would pay for a traditional business loan, but the risk that you take on in terms of paying the advance back are smaller as a result.
How to Get Funded Fast through Best Bridge Capital
Below is a short list of general items required with a completed application to secure you the right MCA for your business:
- Copy government issued ID for all principal owners
- Business Articles of Incorporation
- Business License
- 3 to 6-month Merchant Statement History
- A void cheque with your company name
- Copy of Business Property Lease (if you rent) Most Recent Mortgage Statement & Copy of Land Title/Deed (if you own the property)
Note: Business Financials and Profit Loss Statements are required for advances over $75,000.