Careers Business Ownership Open a Restaurant With Little Money Share PINTEREST Email Print Alexander Spatari / Getty Images Business Ownership Industries Restauranting Retail Small Business Real Estate Nonprofit Organizations Landlords Import/Export Business Freelancing & Consulting Franchises Food & Beverage Event Planning eBay E-commerce Construction Operations & Success Becoming an Owner Table of Contents Expand Costs of Opening a New Restaurant Based on Your Tax Structure Angel Investors Have a Business Plan Ready Consider Operating a Food Truck Start With a Catering Business By Lorri Mealey Lorri Mealey Twitter Lorri Mealey has nearly a decade of restaurant experience, including owning and operating her own restaurant in Western Maine. Learn about our Editorial Process Updated on 12/01/20 There are ways to open a restaurant when you don't have much money or if your credit has taken a hit. If you have a fantastic idea for a restaurant but lack the funds to get your dining concept off the ground, don't fret. Even if your credit rating is low, it doesn't mean you should give up your dream. Banks may not be willing to finance your dream, but others may agree with your hot new idea and be interested in making an investment. Short of finding a non-traditional investor, a willingness to rethink your restaurant idea into a different concept can also help you get started. By starting out small with a food truck or self-catering company, you can demonstrate to the banks, investors, and the world at large that you're serious about food and have what it takes to be a success. Costs of Opening a New Restaurant Opening a new restaurant can cost hundreds of thousands of dollars. Those are the figures for a small restaurant such as a café or diner. If you don’t have enough money to fund the start-up costs, you have financing options. Funding Based on Your Tax Structure The first and most important consideration is how you will be structured as a taxable entity: a sole proprietor, limited liability company, or a corporation. Once this is established, you can determine the financing approach to take. A sole proprietor would focus on borrowing, while a corporation can borrow or issue equity/ownership. For example, you may be able to borrow on the equity of your home or other property as collateral or you can apply for unsecured borrowing. Unless you make a compelling business case, traditional banks are probably not going to finance your restaurant dream if you have bad credit. However, others may look beyond your credit score and offer you financing at significantly higher lending rates. Some institutions offer loans to those with poor credit. No-credit-check loans, such as short-term cash advance or "pay-day" loans, come with high-interest rates, as the lender takes on a higher risk of not being paid. Many experts recommend that you avoid these types of loans or at least read the fine print of the lending agreement carefully, as the loans may be predatory in nature and can lead the borrower into a long spiral of debt. Personal installment loans, which come with credit checks, are the simplest type of financing to repay, as they allow monthly payments over longer periods on more budget-friendly terms. Lastly, you can look into obtaining a revolving line of credit, which is an open-ended line of credit that the lender makes available to the borrower. This type of loan is similar to a credit card, where the lender may increase the loan amount if the borrower makes consistent, timely payments. Angel Investors The term "angel investor" refers to a person or company who helps finance an idea or business plan. Traditionally, an angel investor will give you a certain amount of money for your business venture in exchange for ownership equity. Despite the angelic name, these types of investors don’t give money away because they're nice. These investors see the value in your business idea and think that they will get something in return for their investment. Because angel investors have their fingers in a lot of pies, they don’t always provide cash. For example, an angel investor might help you offset the cost of launching your startup by refinishing space in a building they own. In return, you sign a long-term lease with the investor, ensuring that they have a long-term tenant in the building that might attract other tenants. Have a Business Plan Ready It there's a well-known businessperson in your area who invests in real estate or other ventures, think about reaching out. Just make sure you're prepared before you make the contact. Have a well-thought-out written business plan ready that outlines your concept, target audience, start-up costs, and projected sales. This should include the type of restaurant you want to open, your identified target audience, and a detailed budget. Also, include your own qualifications as a business owner. If you don’t have any restaurant experience, think about what other kinds of experience you bring to the table, including any pro bono work. On the other hand, you might be a seasoned manager, you're great with numbers and have experience keeping books, you're a phenomenal chef, or you're an outgoing individual who can work the front of the house and function as a gracious host. Remember, you aren’t just selling your restaurant idea. You’re also selling yourself, and you need to demonstrate that you're capable and knowledgeable with a skill set to offer. Consider Operating a Food Truck A little less daunting than opening a new restaurant is starting your own food truck. Food trucks require an initial investment of between $5,000 to $25,000 for a used truck to over $100,000 for a new truck. The beauty of a food truck is that there's virtually no overhead. You don’t need to pay rent or electricity. You don’t need to keep a fully stocked bar of liquor or hire a bunch of cooks and servers. Marketing can be done exclusively on social media, negating the need for a website and other traditional advertising material. Food trucks are still a lot of work and require the same attention as any small business, but the initial start-up costs are far less than a traditional restaurant. Start With a Catering Business Opening a new restaurant requires a lot of planning and implementation, not to mention an infusion of cash. An easy way to test-drive owning a restaurant is to do some self-catering jobs. Catering events, even small home parties, require all the elements of running a restaurant including menu planning and pricing, marketing, budgeting, food preparation, customer service, insurance, and bookkeeping. After a couple of catering jobs, if you still feel excited and committed to opening your restaurant, then go ahead and take the plunge.