Financing for Bakeries up to $400,000
Many people dream of owning their own bakery, whether they specialize in cookies, cupcakes, or artisanal baked goods. But Starting your own bakery business takes more than a passion for sweet treats- you need money to get started! We can approve you for up to $400,000 within 48 hours, so apply now!
Like any successful business, if you’re planning on starting a bakery, you will need the right financing to get through the beginning stages. Generating over $30 billion in yearly revenue, bakeries are among the most popular industries for small businesses, so there are many success stories to get some advice and inspiration from.
This guide includes helpful information on getting the right financing for your bakery. The following sections will cover the essential tips to keep in mind when getting your business up and running.
What Is a Bakery Loan?
A bakery loan can prove essential in the early stages of your business’s growth because it can provide much-needed stability. However, before you start thinking about going out and buying equipment, hiring staff, and looking for ways to grow your business, you’ll need the proper funding.
Thankfully, a loan can come from many places, and acquiring one is not difficult if you understand how it works and where to look for it. However, knowing what type of loan you want is more challenging.
You can opt for a secured loan where you’ll have to offer up an asset as collateral or choose to have an unsecured loan if you have a high enough credit score. You’ll also want to consider the interest rates for whatever type of loan you choose to get, as different loans have different rates.
Uses for Bakery Loans
Bakery financing has many uses such as:
- Hiring staff
- Equipment and Supplies- pans, sheet pan racks, electric stand mixers, dough proofers, dough sheeters, bread slicers, ovens, cooling racks, work tables, mixing bowls, utensils, knives, dry storage, refrigerators, fryers, display cases, etc.
- Ingredients- flour, butter, sugar, chocolate, vanilla, nuts, vegetable oil, etc.
- Marketing- virtual, print, radio, television
You should also consider your niche. Do you want to set up a cafe bakery where you serve small cakes and tartine? Will you specialize in a cake bake shop? Or will you provide baked goods for everything in between- breakfast, lunch, dinner, delicious bagels, sweet treats, maybe a specialized sandwich menu.
If your bakery predominantly focuses on selling bread made from scratch, you’ll want the right equipment for the task. Whereas if you were going to bake cakes, cake shops require different equipment from what you’d buy for making bread.
Do you plan on offering catering services? Funding can help your bakery business purchase and maintain a work vehicle for delivery purposes. A work vehicle can also be used to pickup supplies and ingredients needed for your next event.
Similarly, bakers tend to specialize in certain areas of baking, so not everyone will have experience baking sourdough bread, birthday cakes, wedding cakes, and other baked goods. So, specialized menus require specific tools, and depending on where your most essential needs lie, you’ll need different amounts of funding for various expenses.
Bakeries Funding Options
There are different funding options you can look into when first starting your bakery, and each brings unique pros and cons to the table.
SBA loans are loans provided to small businesses by financial institutions that work alongside the SBA (Small Business Administration). These loans come in four main types: SBA 7(a) loans, SBA 504/CDC loans, SBA microloans, and SBA Express loans. These loans can provide anywhere between $500 and $5 million across 5 to 25 years.
Commercial cash advances are tailor-made for those looking to get short-term funding for their business. These merchant cash advances allow you to repay the commercial cash advance company based on how your sales perform. Higher sales will lead to a faster repayment period, while lower sales will make the period longer.
A line of credit allows for greater flexibility than what you would get with a standard small business loan because you borrow a specified amount and pay interest for your money. It is an ideal option for covering short-term expenses like buying baking equipment, as a line of credit functions similarly to a credit card.
There are also equipment loans, which you can use specifically to purchase equipment for your bakery. This equipment can sometimes include anything from ovens to cash registers, so getting an equipment loan is especially worth considering for a bakery.
Tips for Bakeries Trying to Qualify for Financing
If you’re trying to qualify for financing as a baker, the most helpful thing you can do for yourself is pick one type of funding and focus on that. Don’t try spreading yourself thin to qualify for all kinds of funding because you’ll give yourself more work than necessary.
Be it SBA loans, commercial cash advances, a line of credit, alternative business loans, crowdfunding, or something else, focus your efforts on qualifying for one form of financing. Also, figure out whether you want to go with a traditional bank or an alternative lender. Both options will require different things if you wish to qualify.
If you’re unsure what option will work best for you, construct a short roadmap that includes a list of goals you want to accomplish with your bakery during its first year. Then choose whatever financing type you think will best support you in trying to reach those goals.
Doing this will serve you far better than simply trying to qualify for whichever form of financing sounds like the best overall. In reality, every form of financing has pros and cons, and you need to understand how to navigate those pros and cons to succeed with your bakery.
Bakery Loans Pros and Cons
Regarding some of the pros and cons that you can associate with bakery loans, here are some to be aware of as you start looking around for different types of loans.
There is a good deal of flexibility in the different types of loans available to you as a bakery owner. You aren’t limited to one or two options, which means that there’s a loan type that will work for you regardless of what kind of bakery you’re looking to open.
For example, the line of credit option will let you pay interest on only the funds you use while keeping the rest of the capital available to you. That is something you would not necessarily get with an SBA loan, as those are more set in stone.
While loans are mainly suitable for getting your business on its feet, getting the right loan is sometimes the key to long-term success. Many bakers have mentioned the importance of having funding to get their bakery up and running and to afford any costs and expenses that come after the initial opening.
So, don’t underestimate the effect that the right loan can have on your bakery long term.
As helpful as loans are, they can also feel like a lot of busy work. Baking is a naturally creative practice, so working with loans can feel tedious and time-consuming if you’re new to owning and operating your own business.
Loans are not something you can easily avoid either. You can get the capital necessary to start your bakery without going through a traditional bank, but you’re going to have to get funding from somewhere no matter what, and in most cases, a loan is the easiest way to do this.
So, you have to take the time to read up on how different loans work and educate yourself so that you don’t try qualifying for one that doesn’t support your specific needs. And while worrying about whether or not you are eligible for something like a line of credit can prove stressful, remember that it’s sometimes part of the journey to having a successful baking business.
Frequently Asked Questions on Bakery Loans
Why Does a Bakery Need Financing?
A bakery needs financing to function as a business. Without financing, you won’t have the means to afford quality equipment or hire and retain staff, which are two essential factors to the success of any bakery.
What Does It Cost to Start a Bakery?
The cost of starting a bakery largely depends on the type of bakery you are looking to create. The size, location, and types of baked goods you’re going to sell will all determine the expenses you’ll have to pay. On average, starting a smaller bakery can cost $10,000-$50,000.
What Credit Score Is Required to Qualify for a Bakery Loan?
For traditional banks, having a credit score of 720+ will allow you to qualify for a loan. On the other hand, alternative financing options like merchant cash advances only require you to have a 500+ credit score, making them the more accessible choice of the two.
What to Look For When Choosing a Lender for Bakeries?
When choosing a lender for your bakery, start by checking to see how reputable they are. If they seem trustworthy and have a good track record with their business, check the prices on their fees. It will prevent you from working with lenders whose fees are too high for you to repay them with interest.
Can a Bakery Loan Be Used to Hire New Employees?
Yes, you can use a bakery loan to hire new employees if you need to devote some of the money to acquire new staff. Your employees are the backbone of your business, so you want to ensure you get the most professional and skilled individuals you can for the job.
Funding Your Business Is Our Business
Bakery Loans Can Help Your Business Grow
Bakeries are a considerable investment both from a financial and time perspective. So, if you’re looking into the different types of financing options for bakeries, you’ve likely already given the idea of starting your bakery a good amount of thought.
The key to successfully financing your bakery is having patience and understanding what type of financing you need. By following the information we went over in this guide, you’ll have the necessary knowledge to get yourself the right kind of loan to get your business well on its way.
Don’t Allow a Lack of Funding
to Hold your Business Back
It’s Time To Move Your Business Forward!