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Bakery Loans: Financing Options for Bakeries and Bake Shops

Owner of a bakery seeking working capital or equipment? Looking to open a bakery or cafe and seeking financial options to help get your business up and running? Now is a good time to prepare yourself because the bakery business is expected to grow to $39.9 billion by 2020. Here are some of small business loan options available.

Bakery Loans From a Bank

Getting a business term loan or line-of-credit through a traditional bank is the best of all options for owners of most bakeries because of the low interest rates associated with the loan. With the low rates and long terms, bakeries are able to keep their monthly loan payments low, thus: freeing up cash to help with the bakery’s business operations.

Of course, the bakery owner must have good credit to get this type of small business loan. A bakery or cafe owner can expect to see an interest rate between 5-8% from most traditional business lenders, with a term (repayment period) between 3-10 years (depending on loan structure). A term loan through a traditional bank can take up to 6 months, so don’t expect to receive funding quickly.

SBA Bakery Loans

SBA loans are a great option for owners of bakeries, because it provides you with bank rates, while protecting the bank from a good portion of the risk — which allows the banks to approve more loans to small business owners who have borderline credit (650+).

A bakery or cafe owner can expect to see rates around 6-8% for most SBA loans (depending on SBA loan type), with repayment (term) between 7-25 years for most SBA loan products. Usual time frame for SBA funding is between 10 days to 6 months depending on SBA loan type (as the SBA can approve a SBA Express loan in as little as 36 hours).

Alternative Bakery Loans

Don’t qualify for a bank loan because of lower credit (600-650)? Don’t have the business financial documentation needed for a bank approval? How about a mid-prime alternative business loan? With this type of business loan, you can get the access to funding your business needs, without the stringent requirements of a bank loan. Even better, the process is simple, and funding usually takes place within days.

An owner of a bakery can expect to see rates in the 8-20% range (depending on type of alternative lending products) with a term in the 18 month to 5 year range.

Equipment Leasing For Bakeries

Looking to get equipment for your bakery, but lack the money needed to purchase such baking equipment? Maybe leasing baking equipment is your best option. By leasing the equipment instead of buying, you are able to pay less upfront costs, and not be tied into a piece of equipment that may no longer fit your bakery’s needs in the years to come.

Leasing baking does have it’s drawbacks; you’ll probably end up paying more than you would have for the equipment during the entire leasing term, but you’ll generally have the option to purchase the business equipment for very little when the term is up.

Merchant Cash Advance For Bakeries

Don’t have the credit score to qualify for bank loans and other more traditional forms of business financing? Has your bakery been in business for only a short period of time, and you need short-term financing? How about a Merchant Cash Advance?

A Merchant Cash Advance (or Business Cash Advance) allows bakeries and other small businesses to get short-term working capital they need to buy inventory, purchase equipment, make payroll and other needs you may have as a small business owner. With a Merchant Cash Advance bad credit is OK, and all you need to qualify is a brief application and a few months bank statements.

If a bakery owner does chose to get a Merchant Cash Advance, they can expect the application to funding process to take about 2-7 days. Because this is a high-risk business loan the rates are very high (16-100%) with a short term (payback period) of 3-18 months. Since this is a short-term business loan, it is often used as a bridge loan until a permanent financing is put in place.

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