Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Loan for Business > How to get a business loan for setting up a restaurant in India?

Loan for Business

How to get a business loan for setting up a restaurant in India?

How to get a business loan for setting up a restaurant in India?

Food sure is the way to win hearts! Starting a restaurant or café, let alone successfully running one, opens a whole new game of juggling acts. Experiences go beyond the food to ambience, seating, and much more that set the mood for cravings.

But, behind the charm of running a restaurant in India, owners often struggle with a funding crunch. A problem usually answered by a convenient business loan.

Fortunately, there are innumerable loans at their disposal for restaurateurs to build their culinary empire.

Here we will list the types! But first, you will need to:

  • Establish the enterprise framework, decide the kind of funding you require, and register your business.
  • Devise a business plan to help investors decide. Therefore, it is advisable to sit with a professional and get your analyses and models right.

Types of restaurant business loans in India

  • Asset-based

These are long-term loans calculated using a business loan EMI calculator, particularly for equipment and property purposes.

  • Term-based

These loans offer large amounts of financing for longer tenures, typically for 1 to 10 years. They consolidate investment capital for enterprises.

These offer sums for shorter terms, typically within a year, for organizations. They fund everyday expenses met by businesses.

  • Government schemes

Government-run financial institutions like the Small Industries Development Bank of India (SIDBI) offer a competitive business loan interest rate. Nationalized banks also offer SME loans. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) under the Micro Small and Medium Enterprise (MSME) – a government initiative, facilitates funds within hours.

To obtain a loan for opening a restaurant, you need to fill out an application and submit the following documents:

  • An Income Tax Return for the last three years
  • PAN card
  • ID/Address proofs
  • Other documents as required by the lending institution

Eligibility criteria for restaurant business loans

  • Guarantor

A guarantee is mostly necessary for loan approval. It helps the lender balance losses in cases of repayment failures.

  • Down-payment

A percentage of the total loan amount paid initially builds trust in the borrowing-lending relationship. Many institutions require entrepreneurs to fund a part of the project, with the rest backed by a loan.

  • Collaterals

Some lending institutions require an asset for security purposes. Until the loan amount is repaid entirely, hypothecations become mandatory.

  • Experience and expertise

Ability attracts finances, especially when it is recognized. Borrowers must either demonstrate or hire a workforce with the skills required for running their restaurant business.

  • Credit rating of a borrower

Credit scores indicate the creditworthiness of the entrepreneur. Lending institutions require a minimum rating to issue the loan. It demonstrates repayment capacity and potential incomes along with current standing in the market.

How to get a restaurant business loan: Step-by-step process

To secure a restaurant business loan, you must prepare carefully and have a clear understanding of the lender’s expectations.

If you want to know how to get a loan to open a restaurant, follow the step-by-step guide below:

  1. Determine your funding needs

The first step is to understand how much money you need. Calculate the amount of capital you require and the ways in which you will use the funds. Banks and financial institutions assess the purpose and usage of your loan before approving it.

  1. Collect the required documents

Documents are an essential part of your loan application. If you have all the required documents ready, the approval happens faster, and your chances of getting the funding increase. Go through the list of documents and keep them ready in your file before applying.

  1. Develop a solid business plan

A solid business plan comprises every detail of your restaurant’s concept, operations, and financial strategy. It gives lenders assurance of your need for the loan.

  1. Compare lenders

To get the best business loan for a restaurant in India, you must carefully compare all options based on your financial situation, business needs, and urgency to secure funds. Gather information from online lenders, banks, credit unions, and SBA-approved lenders.

Documents required for restaurant startup business loans

The documents you require to get a business loan for opening a restaurant include:

  • Business plan: You will need a comprehensive written plan with details about the nature of the business, target market, and financial projections.
  • KYC documents: The business owner and authorized representatives’ identification documents are required.
  • Financial statements: You must submit the balance sheets, profit and loss statements, and tax returns for the past 2 to 3 years.
  • GST registration: To apply for an MSME loan for a restaurant, you must have a GST registration.
  • Collateral: You may need to pledge assets as collateral to be eligible for some restaurant business loans.

Tips to improve restaurant loan approval chances

  1. Improve your credit score

Your credit score plays an important role in loan approval. Lenders will always assess your personal and business credit reports to determine your ability to repay the loan. Make sure you lower credit utilization, pay bills on time, and track and rectify any errors on your credit report.

  1. Lower existing debts

Borrowers with a high debt-to-income ratio are considered risky by lenders. Remember to clear off existing credit lines and loans to assure lenders that you can pay off additional debt responsibly.

  1. Maintain consistent cash flow

You must have solid financial records highlighting your restaurant’s cash flow stability and profitability. Such records give lenders the guarantee that you can repay the loan without delay.

How to calculate loan EMI for a restaurant business?

To calculate the EMI for restaurant startup business loans, you need to know the loan amount, interest rate, and loan tenure.

The EMI calculation formula is as follows:

EMI = [P × R × (1 + R)ⁿ] / [(1 + R)ⁿ − 1]

where,

P = loan amount (principal)

R = monthly interest rate

n = loan tenure in months

If you’d like to calculate the EMI instantly, you can use a restaurant business loan EMI calculator online.

Conclusion

It’s better to grab financial opportunities to start your restaurant business as soon as they come. That’s where Tata Capital pitches in- our minimal documentation processes and flexible business loan repayment features will ensure problem-free finance flows to your culinary business dreams.

Before applying for finance for your restaurant with us, you can also use our business loan EMI calculator to figure out your potential monthly installments.

So, get ready to find your muse with us today!

Apply Now

Give Your Business the Right Boost: Apply for a Business Loan Today

Apply now
Popular Searches
GST Calculator Business Loan Prepayment Business Loan Forclosure Business Term Loan Merchant Credit Advance What is Business Loan Business Loan in Chennai Business Loan in Pune Business Loan in Mumbai Business Loan in Hyderabad Business Loan in Bangalore
More About Loans
Business Loan Business Loan Interest Rate Documents Required for Business Loan Business Loan EMI Machinery Loan MSME Loan Small Business Loan Business Loan for Professionals Business Loan for Women Working Capital Loan

FAQs

Can I get an MSME loan for opening a restaurant in India?

Yes, you can get an MSME loan to open a restaurant in India if you meet the eligibility criteria. You must register your business and have a clear business plan.

What documents are required for a restaurant business loan in India?

The common documents needed for a restaurant business loan are identity proof, address proof, business registration, bank statements, income tax returns, GST details, projected financials, and a simple business plan.

How much loan can I get to open a restaurant in India?

The loan amount you can get to open a restaurant in India depends on your plan, costs, and profile. Generally, the loan amount can range between Rs. 5 lakh and Rs. 2 crore.

Are unsecured loans available for restaurants in India?

Yes, unsecured loans are available for restaurants in India. However, they have higher interest rates and depend strongly on your credit score and business stability.

How do I boost my approval chances for a restaurant business loan?

Yes, unsecured loans are available for restaurants in India. However, they have higher interest rates and depend strongly on your credit score and business stability.

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Home Loan EMI Calculator

Business Loan EMI Calculator

Used Car Loan EMI Calculator

Two Wheeler Loan EMI Calculator

Loan Against Securities Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download