Now that it’s easier than ever for someone to open and own a small business, many would-be entrepreneurs choose this life due to the freedom and opportunities that may be awaiting them down the line. One of the most appealing types of ventures to open is a food business, thanks to the timeless nature of the industry, its high earning potential, and the creativity and flexibility it affords aspiring entrepreneurs.
That being said, one of the earliest hurdles any small- or medium-sized enterprise (SME) in the food or dining sector will inevitably face is getting financing. Food businesses can be considered a dime a dozen, and the fledgling food entrepreneur may initially be quite anxious about sourcing funds for their operations knowing how competitive the industry is.
Indeed, it may seem like a difficult task to find an individual or financial institution willing to give you the capital you need for your new food business venture if you don’t already have a strong financial track record. But that doesn’t spell the end for your entrepreneurial dreams. Here are some ways to get that much-needed boost in capital and to get your dream food business venture going:
1) Shop Around for a Business Loan
Getting a business loan is one of the most common financing routes entrepreneurs explore, as the most favorable loans will offer higher lending limits within a longer repayment period. Your local bank will most likely have this available among their current financial products.
As mentioned above, however, it’s not always easy for small business owners to get approved for a business loan. You may be required to submit documentation proving that your monthly gross income meets a certain threshold, and some banks may also require collateral.
If you haven’t already, look for business loan programs from digital banks that are specially tailored to SMEs and new food business ventures. The Philippines’ Maya’s Flexi Loan, for example, will allow SME borrowers to obtain up to PHP 2 million of additional funding.
Applying for a business loan with Maya is also a breeze—an entrepreneur based in the Philippines needs to simply open their Maya Business Manager account, go to the Loans tab, and click Sign Up Now. The loan application will take only a few minutes to be processed and, once approved, the funds will be deposited straight into the applicant’s Maya Business account. Upon being approved for a Maya Flexi Loan, you can use the funds right away to buy supplies, equipment, and other necessities for your new food business.
2) Find Government Funding
Various government agencies are also willing to help out aspiring entrepreneurs get the funding they need for their businesses. For instance, the Philippines’ Social Security System (SSS) offers salary loans to its members, which can help them acquire the initial funding needed to kickstart a food business. Note, however, that you can’t expect a high loanable amount from this method. Think of it as a means to supplement your own savings or to tap into additional funds for your new food business venture.
For higher loan offers, you may have better luck with other government agencies that cater specifically to business owners. Explore the Philippines’ Department of Trade and Industry (DTI)’s RISE UP loan program, which gives an applicant the funding needed to grow their business with low interest rates and a payable term ranging from three to five years
3) Borrow from Friends and Family
Another possible way to raise capital for your food business is to borrow money from family and friends. Do keep in mind that this method can be considered a double-edged sword. On the one hand, borrowing money from people you know means you won’t have to go through all the trouble of submitting documents to the bank and waiting to get approved. Payment periods can also be negotiable depending on the agreement between you and your lender. On the other hand, if money-related conflicts arise, then they could inevitably influence your personal relationships.
If you wish to go this route, then make sure there’s a properly documented agreement between you and your chosen lender. This demonstrates to all parties that you’re serious about paying them back, and it can also help you avoid conflicts about whether your lender expects added interest for the amount they loaned to you or not.
4) Venture Capital
Are you confident about your food business idea being unique and capable of standing out above others in the highly competitive food industry? If so, then you might want to consider venture capital funding. Venture capitalists invest in startups and businesses with promise, offering not only funding but also guidance and mentoring for entrepreneurs in order to help them grow their businesses.
For this method, the approval of your funding rests on how well you can pitch your business idea and how much value venture capitalists see in it. A venture capitalist who’s considering financing your business venture may also require some control over your food business once it’s fully operational.
There’s no doubt that the food business is one of the toughest to break into. Still, you may want to persevere because of your love for food and your belief in your entrepreneurial dream. Review the possible financing options listed above and think carefully about the best way to raise capital, as the type of financing you receive can do a lot to help your venture take flight.
