You could either be running or planning to start a lounge bar or corner coffee-shop, a local cuisine takeaway or 5-star fine dining restaurant. When faced with a cash-crunch taking a loan is a good option.

Reasons for taking out a loan:  You could be planning a new start-up, renovating/refurbishing an existing business or opening up a branch/franchise in a new location, adding new features like poolside or al fresco dining, or you could be expanding into bigger premises.

The loan category could also include equipment-leasing loans or cash advances for events like Opening Day or New Year's etc.

Often the loan you need is to simply provide a working-capital cushion. In this case, a short-term loan is a better option, though interest may be higher. This kind of loan is appropriate when you have a temporary cash crunch or cash flow problems which you know for sure are limited in nature.

Basics to be considered before you start the loan process include the size and category of the restaurant, how much personal funding you can put up, your expertise in the field, running costs, capital investment, staff size etc. Once you have this data you can start planning the kind of loan you need.

Traditionally, banks have never been bullish on restaurant financing. It is considered a high-return but high risk business, subject to whims and fancies of customers, trends, consistency of quality and word-of-mouth advertising; hence you could face initial setbacks when you approach a bank.

Look at alternate options. Individuals or angel investors, personal loans against security or assets to cover risk, SBA or small business administration loans are some good options.

Another category is merchant cash advances. These do not require elaborate background checks, credit history or collaterals. The approval turn-around time is also faster than banks.  

A factor to be considered when taking restaurant-loans is the payback options. Some loan-services require fixed monthly payments; others may have quarterly interest payments etc. You can choose the most appropriate one.

Some precautions to be taken while considering restaurant loans are:

Privacy/Confidentiality: Your financial information should never be shared by the bank/loan-provider to any other agency without your written permission.

Processing Delays: Availing of bank loans and SBA loans are loaded with paperwork. You may also have to satisfy certain criteria such as your expertise in the field, trade projections, etc

Read the fine print: Take time to read the Restaurant Loans application, contract agreements etc thoroughly before you sign. Check with the lender if you have any doubts. Understand the extras, fees, processing charges and security requirements before you sign up. If there are special offers, check their time period and validity.