A New Financing Option: Restaurant Crowdfunding

Steve O'ConnorCapital Advance, Cashflow, Funding Options, Marketing, Merchant Cash Advance, Restaurant, Small Business Financing, Small Business TrendsLeave a Comment

Crowdfunding as a form of financing for restaurants is certainly not a new concept. Many restaurants now offer food and beverage as a form of repayment on investment, which, if done correctly, can provide your restaurant with the necessary capital without giving up any equity.

Crowdfunding has been gaining popularity in the last 10 years as a way to provide start-ups with necessary capital to start their business. Starting a restaurant requires a large amount of upfront capital to secure a space, buy kitchen equipment and fixtures, and initial inventory in order for the restaurant to begin serving customers; websites like Kickstarter allow the average individual to provide small businesses and restaurants with necessary capital.

Crowdfunding is certainly not a new concept, and not one that will disappear any time soon. However, you may not have considered a new system of crowdfunding that has emerged and, if done correctly, can allow restaurant owners to acquire the necessary capital to start their company without needing to give up any form of ownership. Some restaurant owners have started crowdfunding campaigns that offer food and beverage as repayment, as opposed to the traditional form of trading ownership in the company. “BeerDisneyLand” has started a new crowdfunding campaign that, for a $20 investment, offers four pints of beer.

Trading perks (ranging from personalized thank you notes and free desserts to private dinners or menu items named in the investor’s honor) is not a wholly new concept to crowdfunding restaurant start-ups. But the concept’s growing popularity could alter the progression of restaurant funding as a whole. Contributing to crowdfunding’s growing popularity is the changing mindset of the average American citizen to want to focus time and energy on small and local businesses, and to turn away from large corporations.

Daniel Smith of FSR Magazine noted in an article discussing crowdfunding’s effect on the restaurant market: “Seemingly a tool best suited for hipster-filled urban environments, crowdfunding […] offers tremendous potential for restaurants in small and mid-sized towns where people are hungry for new dining options and excited to see a new restaurant enter the market.”

As with any financing option, there is no one solution to completely fund every endeavor a restaurant owner may want to pursue. Finding the best balance between financing options, whether it is with crowdfunding, capital advances, or traditional bank lending is crucial to a start-up’s success in the market. Ensure you keep up with cash flowing in and out of your restaurant in order to have the necessary capital to continually restock inventory, make sure equipment is up to date and running smoothly, handle any mechanical difficulties that can come up in your establishment, and meet your payroll obligations.

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