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We ranked states based on the veteran labor market and entrepreneurship.

America’s military members are an industrious group once they enter civilian life. Veterans tend to out-earn their nonveteran peers—and indeed, the median income for veterans reached a record-high of $50,476 in 2022, compared with $38,254 among nonveterans.

Click here to see the top states.

Part of that may be due to their entrepreneurial spirit. There’s no shortage of notable veteran business owners, such as Nike co-founder Phil Knight, FedEx founder Frederick Smith, and Bob Parsons, who founded GoDaddy. Warren Buffett, one of America’s wealthiest people, has even said that the military taught him how to take orders, learn from others, and have fun doing it.

And while the number of veteran-owned businesses has been falling over time, research indicates that veterans are more likely to be self-employed than nonveterans, and that veterans with small businesses have higher average net worths than non-entrepreneurial veterans.

Veterans have unique skill sets and discipline that may prime them perfectly to lead. In surveys, veterans tend to say that their military service helped prepare them to run a small business. But even so, they're more likely than nonveterans to be concerned about business regulations, lack of connections, financing, and getting customers—which could point to a lack of support for veteran entrepreneurs in parts of the country.

Lendio analyzed six metrics to determine the best states for veterans to succeed in business, including veterans’ income, employment, and business ownership, as well as startup survival, patent innovation, and new business growth. Those metrics were split into two subcategories: veteran labor market and entrepreneurship.

The results indicate that the best states for veteran entrepreneurs are scattered across the country, with no one region dominating the list. Support for veterans can be found everywhere—but some states offer softer landing pads for veterans as they decide where to set up shop or expand their businesses.

Some Key Findings:

• Virginia is the No. 1 best state. Driven by strong earnings and employment. Virginia veterans’ median income was $68,124 in 2022, compared with $41,429 among nonveterans.
• Top states span across the U.S. Wyoming, Oregon, West Virginia, and South Dakota rounded out the top five states. They typically had high rates of veteran business ownership (for example, 7.3% in West Virginia) and veteran employment (58.5% in South Dakota).
• States with the strongest veteran labor market aren't always the most entrepreneurial. Some states scored well for one subcategory, but not the other—such as No. 11 Alabama, which ranked second for veteran labor market, but 47th for entrepreneurship. That means states that came out on top in the overall ranking struck a good balance between being good for veteran workers and for those starting a business.

Top states

No. 1: Virginia

Virginia is a great state for veterans in the labor market, given that 58.7% of veterans there are employed and their average earnings are 1.6 times higher than nonveterans—better rates than anywhere else in the U.S.

No. 2: Wyoming

Wyoming scores well for both subcategories (8th for the veteran labor market and 6th for entrepreneurship), helping drive it up to the No. 2 spot overall. The state saw a 42.7% increase in new business applications year over year, the highest rate in the country, plus the median income for veterans is 1.4 times higher than that of nonveterans.

No. 3: Oregon

Oregon lands in the middle of the pack for the veteran labor market, but its strong environment for entrepreneurs helped propel it to the No. 3 ranking. The state reports 96.4 patents per 100,000 population, while 58.4% of startups survive at least five years, the highest rate in the U.S.

No. 4: West Virginia

In West Virginia, 7.3% of businesses are owned by veterans, whose median earnings are 1.4 times as high as those of nonveterans. Further, its startup survival rate is 55%, and it saw 25.9% yearly growth in new businesses.

No. 5: South Dakota

In 2022, 58.5% of South Dakota’s veterans were employed, while 6.1% of businesses are veteran-owned. Meanwhile, 55.7% of startups survive at least five years, the second-highest rate after Oregon.

No. 6: Massachusetts

Massachusetts has a high rate of patents (125.6 per 100,000) and a high startup survival rate (55%), driving it to the best state in the entrepreneurship subcategory. Its veteran workers perform fairly well, with 5.2% of businesses owned by veterans and 46.2% of veterans being employed.

No. 7: Alaska

Alaska’s veterans earn 1.5 times as much as nonveterans, based on median income in 2022. It also has one of the highest employment rates for veterans, at 57.5%.

No. 8: New Hampshire

New Hampshire has one of the highest rates of veteran-owned businesses, at 7.7%, and it saw 80 patents filed per 100,000 population in 2020.

No. 9: New Mexico

Veterans in New Mexico out-earn nonveterans by a ratio of 1.6—the third-highest ratio in the U.S. after Virginia and Alabama. The state also saw 32.8% year-over-year growth in new business applications, behind only Wyoming.

No. 10: Maryland

Maryland was propelled to the top 10 by its high level of veteran employment (54.3%) and strong income ratio, given veterans’ median income is 1.4 times higher than nonveterans’.

Runners-up

The runner-up states tend to excel for either their veteran labor markets or for their entrepreneurship more broadly. For example, 6.8% of businesses in Alabama are owned by veterans, whose median income is 1.6 times higher than nonveterans—a higher rate than almost anywhere else. Texas and South Carolina also scored especially well for their veteran labor markets, driven by their high income ratios (each 1.5).

Meanwhile, states like California, Washington, and Kentucky scored well due to the force of their entrepreneurial communities, with California reporting more patents per 100,000 population than any other state (127.8) and Kentucky seeing 30.5% year-over-year new business growth. Washington also has a high patent rate at 118 per 100,000.

5 tips for veterans to start a business

Veterans have valuable skills and experiences to translate to the private sector. But while it can be highly rewarding to run your own business, getting your firm started is a major endeavor that takes time, planning, and effort. These tips will help you get going:

1. Develop a strong business plan - Begin with a well-researched business idea, emphasizing your unique value in the niche or industry you’ve selected. Consider your financial projections, marketing tools, and operations plan.

2. Research grants and loan opportunities - The Small Business Administration offers programs, grants, and loans designed to support veteran entrepreneurs, such as the Boots to Business initiative. Some organizations and nonprofits also offer financial support and coaching.

3. Network - Connect with other entrepreneurs, veterans, and mentors who can offer guidance and support. Get involved with the local business community and join industry-specific groups to spread the word about your business.

4. Establish solid legal and financial structures - Choose wisely whether it makes the most sense to establish an LLC, sole proprietorship, or corporation. Make sure to also separate your personal and professional finances and ensure you’re compliant with federal and local regulations.

5. Be patient - It takes time to establish a successful business. With the right tools in place, you'll be able to stay resilient as you get your business up and running.

Conclusion

The success of veterans as entrepreneurs underscores their impressive contributions to the American economy. Our findings emphasize the need for continued efforts to empower veteran entrepreneurs, allowing them to harness their full potential to lead and excel in the business world.

Methodology

We used the most recent federal data for six metrics across two categories to determine the best states for veterans to start a business. We used a Z-score distribution to scale each metric relative to the mean across all 50 states and Washington, D.C., and capped outliers at 3. A state’s overall ranking was calculated using its average Z-score across the six metrics, while its subcategory ranking was calculated using its average Z-score across the three relevant metrics. Three states were missing data for veteran business ownership (Virginia, Wyoming, and Oregon) so their scores were calculated across the remaining five metrics. Here’s a closer look at the metrics we used:

• Veteran labor market
• Share of employer businesses owned by veterans, 2020 (Census Bureau)
• Median income ratio, veterans to nonveterans, 2022 (Census Bureau)
• Employment rate among veterans, 2022 (Bureau of Labor Statistics)
• Entrepreneurship
• Five-year startup survival rate, March 2022 (Bureau of Labor Statistics)
• Patents per 100,000 population, 2020 (U.S. Patent and Trademark Office)
• Growth in new business applications, Aug. 2022-2023 (Census Bureau)

New small business owners often need funding to meet their goals. However, they frequently struggle to qualify for debt and equity financing because of a bad credit score or a limited operating history.

Revenue-based financing is an alternative method of raising capital that’s often more accessible. If you’re interested in the arrangement, here’s what you should know before you apply, including how it works and when it’s worth using.

What is revenue-based financing?

Revenue-based financing is another name for a business cash advance. Like a business loan, it provides a lump sum you can use to grow your company. You then repay the original amount plus a fee with daily or weekly bank account withdrawals based on a percentage of your monthly deposits.

Revenue-based financing arrangements are relatively accessible and can provide funding quickly, but they’re also expensive. As a result, they’re usually best for business owners who can’t access traditional sources of capital.

How does revenue-based financing work?

Revenue-based financing arrangements serve a similar purpose to business loans, but their structure and terms are significantly different. Here’s how they work.

Qualification requirements

Revenue-based financing is much easier to access than traditional forms of business funding. You typically only need to meet minimal personal credit score, time-in-business, and monthly bank deposit requirements to qualify for an account.

For example, Credibly’s business cash advance has the following eligibility criteria:

• 550+ personal credit score
• 6+ months in business
• $20,000+ average monthly bank deposits

Applying for revenue-based financing is also much faster than requesting other forms of funding. You can often complete your application in minutes, receive a response within a day, and have your funds in around 48 hours.

Financing terms

Terms vary between providers, but revenue-based financing can generate significant capital. Your proceeds primarily depend on your average monthly deposits. The more you earn, the more you can borrow. 

For example, Kapitus offers advances between $10,000 and $750,000, and Backd may offer up to $2 million. Your actual amount is typically between three and six times your gross monthly revenue.

Despite the high borrowing potential, revenue-based financing follows a much shorter repayment term than a small business loan. Most arrangements are between 3 and 18 months, though some can be as long as 36 months.

Meanwhile, financing charges are usually higher than with traditional funding options. In addition, they’re presented as a factor rate rather than an interest rate, and you can expect them to range from around 1.2 to 1.5.

In other words, if you borrow $100,000, you’ll usually repay between $120,000 and $150,000.

Repayment process

Another notable difference between revenue-based financing and a business loan is the repayment process. Instead of making fixed monthly principal and interest payments, you let your funder take a portion of your sales.

Typically, they’ll withdraw a fixed percentage of your average monthly revenue directly from your bank account, either daily or weekly.

For example, your business earns $30,000 monthly, and you take out a $100,000 business cash advance. Your funder takes 10% per month, which equals $3,000. Assuming each month has 20 business days, they withdraw $150 daily.

When is revenue-based financing worth using?

Revenue-based financing is worth considering when traditional business financing options are unsuitable for your situation. Typically, that's because you can’t qualify for them due to your credit scores or time in business.

New small business owners and startup founders often face this issue because traditional financial institutions usually want to see at least two years of business history. They may check your business credit score too, which also takes time to establish.

As a result, a business cash advance is often an attractive funding option in the early years. However, because revenue-based financing is expensive, consider all your other options first.

If you can’t get a business loan from a bank or credit union, an online lender may still be willing to work with you. They have less rigorous qualification requirements that are closer to those of revenue-based funders.

Alternatively, you can consider equity financing options, such as angel investors and venture capitalists. These require that you give up a portion of your company ownership, but they also provide you with valuable allies who can help you grow.

Pros and cons of revenue-based financing

Like all financing options, revenue-based financing comes with its own set of advantages and disadvantages. Understanding these can help you make a more informed decision about whether it's the right choice for your business.

Pros of revenue-based financing

1. Easy to Qualify: One of the major advantages of revenue-based financing is its low qualification requirements. New businesses or those with poor credit scores can easily qualify for this type of financing as the primary focus is on the business's revenues and not its credit history.
2. Quick Funding: Businesses can apply and get approved for revenue-based financing within a matter of days. This speed can be crucial for businesses needing to address urgent cash flow needs.
3. Flexible Repayment: The repayment plan is proportional to your income. This means in slower months, you'll pay less, and in more profitable months, you'll contribute more, ensuring the repayment does not strain your business cash flow.

Cons of revenue-based financing

1. High Cost: The convenience and accessibility of revenue-based financing come at a price. The factor rates can be significantly higher than conventional financing options, making it a more expensive choice in the long run.
2. Shorter Repayment Term: While the repayment amount is flexible, the term is not. Most revenue-based financing options require full repayment within 18 months, which can be a challenge for businesses with inconsistent revenues.
3. Regular Withdrawals: The lender will make daily or weekly withdrawals from your bank account, which could potentially disrupt your cash flow if not properly managed.

Comparing financing options.

When it comes to raising capital, business owners have a plethora of options, each with its own merits and demerits. Here, we'll delve into a comparison of revenue-based financing, debt financing, and equity financing.

Revenue-based financing

As discussed, revenue-based financing is a method where business owners receive an upfront capital injection, repaying with a percentage of future revenues. It's relatively accessible, quick to secure, and provides flexible repayment terms correlated with your sales. However, it's often a steeply-priced option with short repayment terms and regular withdrawals that may disrupt cash flow.

Debt financing

Debt financing involves borrowing money, typically from a lender such as a bank, with an agreement to repay the principal along with interest over a predetermined timeframe. The advantage of debt financing is that you maintain total ownership of your business. However, it requires a good credit score, stable business history, and collateral, making it less accessible for new or struggling businesses. You're also obligated to repay the loan regardless of whether your business is profitable or not.

Equity financing

Equity financing includes raising capital by selling shares of your company to investors, like angel investors and venture capitalists. The primary advantage is that there's no obligation to repay investors; they make money when the company is successful. Furthermore, you can benefit from their expertise and networks. On the downside, you will have to share your profits with your investors and may lose some control over the business as they will have voting rights.

When choosing a financing option, it's crucial to carefully consider your business's financial situation, growth stage, and long-term goals.

Explore your options with Lendio.

Revenue-based financing can be an effective alternative to traditional debt and equity options, especially for new small business owners with bad credit scores. You can quickly access a significant amount of capital and use it to grow your business.If you’re a good fit for revenue-based financing, use Lendio to find the best cash advance provider for your needs. Sign up to compare offers from multiple funders and apply for financing today!

Starting a business can be a daunting task, especially if you lack the capital to get it off the ground. Finding the funding to start a business is one of the biggest hurdles you'll face as a small business owner.

According to a Lendio survey, 54% of SMB owners started their business with personal funds with 79% needing less than $100,000 to start their business and 43% needing less than $10,000.Fortunately, there are plenty of funding options available to help you get started. In this blog post, we'll explore some of the most popular choices for how to get money to start a business. Let's dive in.

Bootstrapping

Bootstrapping is the process of funding your business using your own money and resources. It's a great way to keep you in control of your finances and avoid taking on debt. This method usually requires a lot of hard work, sacrifice, and creativity, but it can pay off in the long run. Examples of bootstrapping include working from home, relying on personal savings, using free or inexpensive marketing channels, and building your product or service in-house.

Crowdfunding

Crowdfunding is another popular option for raising money to start a business. You can set up a crowdfunding campaign on platforms like Kickstarter, Indiegogo, and GoFundMe. The idea is to offer incentives to people who donate to your campaign, such as early access to your product, a shoutout on social media, or even equity in your company. Crowdfunding can be a great way to get early validation from your target market and build a community around your brand.

Friends and family

Another common source of funding for starting a business is to seek help from friends and family. A lot of entrepreneurs initially turn to those they trust for financial assistance. This method can be beneficial as the terms are often more flexible and the interest rates more favorable than conventional loans. If you choose this route, it's crucial to make it professional: draft a formal business plan, clearly communicate repayment terms, and consider establishing an official loan agreement. 

By treating it as a business transaction, you can maintain healthy personal relationships while securing the capital needed to kickstart your business. But remember, borrowing from friends and family should be approached with caution, as it could potentially strain relationships if not managed professionally.

Small business grants

Depending on your industry and location, you may qualify for small business grants. These are usually offered by local or state governments, nonprofits, and private organizations. Small business grants come with fewer restrictions than loans, and you don't have to pay them back. However, they can be more difficult to obtain, and they often require a detailed business plan and proof of your project's potential impact.

To look for small business grants, you should begin by checking out your local and state government websites. They often have information about available grants and instructions on how to apply. Online platforms like GrantWatch and Grants.gov can also be helpful resources. These websites aggregate thousands of active grant opportunities from federal, state, and local governments, as well as private foundations.

Credit cards

Credit cards are another potential source of business funds that is especially useful for smaller, frequent expenses or as a short-term cash flow solution. Business credit cards often come with benefits like cash back, travel rewards, and special rates for specific categories of purchases. Importantly, using a credit card for business expenses can help you build your business credit, which can aid in securing larger financing down the line. 

However, credit cards should be used judiciously, as high interest rates can add to your debt if the balance isn't cleared promptly. Always consider the interest rates, fees, and repayment terms before opting for this method, and strive to pay off your balance in full each month to avoid accumulating debt.

Personal loans

You can apply for personal loans from banks, credit unions, or online lenders. Because these loans are based on your personal creditworthiness, they can be easier to obtain than business loans, especially for new businesses. However, it's important to note that—since the loan is tied to your personal finances—you will be personally responsible for the repayment. Failure to repay can impact your personal credit score. 

As such, while personal loans can be a good option for initial funding, they should be considered carefully, and you should ensure you have a solid plan for repayment before opting for this route.

Business loans

If you haven't yet started your business and started generating revenue, you'll have a hard time qualifying for a business loan. Once you've been in business for six months, you can start to qualify for financing options like a business cash advance, invoice factoring, or equipment financing. After a year or two, you can start to qualify for a term loan, SBA loan, or line of credit. You can get a business loan from a bank, a credit union, or an online lender. With Lendio, it's easy to compare multiple lenders and loan types at once.

Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit, or HELOC, is another viable option for securing funds to start your business, especially if you're a homeowner with substantial equity in your home. HELOC works somewhat like a credit card, where you are given a credit limit based on the amount of equity you have in your home. You can borrow up to this limit during a draw period, typically 5-10 years. 

What's advantageous about HELOC is that you pay interest only on the amount you borrow, not the total equity available to you. Plus, the interest rates are usually lower than those of credit cards, making it a more affordable option. However, keep in mind that your home serves as collateral and failure to repay the loan could put your home at risk. Therefore, like with all other funding options, it's important to have a solid repayment plan in place when considering a HELOC.

Retirement savings

Tapping into your retirement savings is another way to fund your startup. If you have money saved in a 401(k) or an IRA, you might consider using some of it to launch your business. This method has its pros and cons, so it's important to weigh them carefully. On the plus side, you're essentially borrowing from yourself—which means you won't have to go through a credit check or application process—and you won't incur any debt. Additionally, you might have access to a substantial amount of money, depending on how much you've saved. 

However, the downside is that you're risking your financial future. If your business doesn't succeed, you could lose a significant portion of your retirement savings. And even if your business does succeed, you'll still have to make up for the money you've withdrawn from your retirement account. Before you decide to use this method, consider consulting with a financial advisor to understand the potential risks involved.

Angel investors

Angel investors are affluent individuals who provide capital for a business startup, usually in exchange for convertible debt or ownership equity. They can provide much-needed seed funding to get your business off the ground. Angel investors may also provide valuable mentorship and access to their business networks. Websites such as AngelList and SeedInvest make it easier to connect with potential angel investors.

Venture capital

Venture capital is a type of equity financing typically provided by firms to startups and early-stage companies that have been deemed to have high growth potential. Venture capitalists take a share of the company in return for their investment, and they may also require some level of managerial and strategic control. Getting venture capital can be a competitive process, but it can provide significant funding and valuable business expertise.

Business incubators and accelerators

These are programs designed to support the successful development of entrepreneurial companies through an array of business support resources and services. Business incubators focus on the early stage of a startup, providing entrepreneurs with the skills and advisors necessary to grow their business. Accelerators, on the other hand, typically focus on scaling a business and helping it grow fast.

Partnerships

Forming a strategic partnership with another business can provide valuable funding. In return for funding, partners can receive equity, a percentage of sales, or the option to merge or acquire your company in the future. Choose your partners carefully as they'll have a large influence on your business.

Government programs

Various government entities offer programs to support small businesses. The U.S. Small Business Administration (SBA) has several funding programs for startups, including the Microloan program and the SBA Community Advantage Program.

Customers

You may be able to secure funding through your customers. Pre-selling your product or service, and asking for deposits or subscriptions can provide you with the funds to start or grow your business. This method also validates your business idea, proving that there's a market for your product or service.

Conclusion

If you're wondering how to get money to start a business, there are plenty of options available to you. Keep in mind that each method has its pros and cons, and it's up to you to decide which one fits your needs and goals best. Learn more about startup business loans.

A traditional business loan can be difficult to get without collateral. Many lenders may be unwilling to approve you for a business loan unless you can offer some sort of asset—such as real estate or equipment—which you agree to surrender if you’re unable to repay the funds you borrow. 

However, not all borrowers have assets to provide as collateral. And even those who have available assets they could offer to secure loans might not want to use them.

Read on to learn more about startup business loans you can get without collateral. These loans have the potential to help you turn your business startup dreams into reality without putting your personal and business assets at risk to secure financing.

What are business loans with no collateral? 

A business loan with no collateral is a funding option for which you don’t need to pledge an asset that a lender could seize if you fail to repay the debt. Another term for this type of financing is an unsecured business loan. 

It is important to point out that the lender’s risk is higher with an unsecured loan since it has no assets to take possession of in the event of a default. Because no collateral business loans involve more risk for lenders, these loans tend to be less common. And when you find lenders that offer these loans, they also tend to cost more. Business loans with no collateral may feature higher interest rates and fees compared with other business financing options. 

Even without collateral requirements, you may still have to provide a personal guarantee when you take out an unsecured business loan. A personal guarantee is an agreement between you (the business owner) and a creditor stating you agree to repay a debt yourself if your business fails to do so. In essence, a personal guarantee makes you a co-signer when your business borrows money. 

Startup business loan options with no collateral.

Below are some options to consider if you’re looking for a business loan with no collateral.

SBA microloan

There are numerous types of SBA loans that business owners can seek when they need financial assistance. Almost all of these loans require some sort of collateral. However, the SBA offers microloans that do not require collateral. Instead, they require a personal guarantee.

Microloans are available for up to $50,000. But the average microloan a business receives is around $13,000. You can use an SBA microloan to purchase inventory, supplies, equipment, furniture, or machinery, to fulfill working capital needs, and more. 

Unsecured business line of credit

An unsecured business line of credit is a flexible financing solution that your business can rely on multiple times. With a revolving business line of credit, you can borrow up to the credit limit on your account, repay some or all of the money borrowed, and access the credit line again. This setup differs from a traditional business loan where you receive the loan proceeds you borrow in a single disbursement, but lack the ability to borrow again from the same source in the future. 

You do not have to provide collateral for unsecured business lines of credit. However, many lenders require a personal guarantee. 

Unsecured business term loan

While uncommon, some banks and online lenders offer unsecured business term loans. These loans will typically still require a personal guarantee and will have more stringent qualification criteria including a longer minimum time in business requirement.

Alternative financing options.

Aside from the options mentioned earlier, alternative financing methods can offer a practical solution for business owners in need of capital.

Equipment financing

An equipment loan or equipment leasing is a collateral-based loan. In general, the equipment you purchase serves as some or all of the collateral. In the case of equipment leasing, only the equipment being leased is used as collateral with no prior existing asset required. 

For many business owners, this arrangement feels very different from a loan that uses the borrower’s personal property as a guarantee or asks for additional business assets as collateral. Yet the lender can still reduce its risk with this type of loan since there is an asset to seize and resell in the event of a default. 

Invoice factoring

Technically, invoice factoring does require collateral, but instead of putting up real estate or personal assets, the lender accepts your unpaid invoices as collateral. This type of financing can be easier to qualify for since the creditworthiness of your customers, rather than you or your business, is a major factor in the approval process. 

With invoice factoring, a lender advances you money against your unpaid invoices. Then it collects payments from your customers on those invoices and remits the balance minus its fees to you.

Inventory financing

Similar to invoice factoring, inventory financing uses your business’s inventory as collateral instead of requiring you to secure your loan with other assets. With inventory financing, you can receive a loan or line of credit to purchase more inventory, expand your business, increase cash flow, and more.

The lender will assess the value of the business's existing inventory through a process known as auditing. They'll look into aspects like the type of inventory in question, its market value, its scalability, its condition, and its age. Based on this audit, the lender determines the amount they are willing to lend.

Business cash advance

A business cash advance refers to a type of financing you can use to borrow against future revenue that your business will earn. With a business cash advance, a lender provides you money up front and takes repayment via an automatic deduction of a percentage of your business’s future sales. 

Your company might be eligible for this type of financing once it has at least four to six months of acceptable revenue history that a cash advance provider can review. And while a business cash advance can be more expensive than a traditional business loan, this financing solution could work well for a startup with no collateral and even those without good credit. 

Alternatives to business loans with no collateral.

As a business owner, you may need various types of startup funding to achieve your goals. Here are four alternatives to collateral-free business loans to consider.

Business credit cards

A small business credit card is another financing option that can benefit startups and established businesses. It offers perks such as building business credit, separating personal and business finances, and providing short-term cash flow solutions. Depending on the account type, you may earn rewards or cash back on necessary business purchases.

If your personal credit score is 690 or higher, you may qualify for an unsecured business credit card without a cash security deposit. Note that most business credit card issuers require a personal guarantee from the business owner.

Crowdfunding

Small business owners with strong social networks might consider crowdsourcing to raise money for their startup goals. Crowdfunding allows small businesses to raise funds from multiple investors or donors without repayment obligations.

Unlike a loan, crowdfunding doesn't require collateral. However, other considerations exist when using rewards-based, donor, or equity crowdfunding for business funding.

Personal savings

The majority of startups don’t seek financing. According to the SCOREFoundation, powered by the SBA, 78% of startups rely on personal savings or income from another job. 

If you decide to use personal funds to start a new business, it’s important to exercise caution. Draining emergency savings or retirement funds is risky. So, you should consider how you might cope if you lost those funds and make sure you have a plan that you can live with before moving forward with such a high-risk investment.

Requirements for a startup loan without collateral.

To qualify for a business loan with no collateral, you will need to meet the lender’s eligibility criteria. Some factors that lenders may consider are your credit score, time in business, revenue and cash flow, debt-to-income ratio or EBITDA margin, personal financial strength, industry risk level, and how you plan to use the funds.

Since the loan is unsecured the lender may also require the following to help reduce their risk:

Personal guarantee

Instead of putting assets at risk to start your business, some lenders may accept a personal guarantee from the business owner as added security when you apply for startup funding. A personal guarantee states that you as the individual will be responsible for the loan in the event that your business cannot repay the debt.

A personal guarantee can be valuable to a lender if you have existing credit and personal assets. A high credit score indicates to lenders that you are trustworthy and likely to repay the money you borrow as promised. 

Blanket UCC lien

A blanket UCC lien states that if your business defaults on its loan, the lender can seize all of its assets—including equipment and accounts payable. A blanket UCC lien lets you use your entire business as collateral, even if you haven’t built it yet. 

There is, of course, risk involved when you agree to a blanket UCC lien. If you can’t repay a business debt, the lender might decide that it’s better off taking money you have in the company and selling your equipment rather than continuing to wait for you to make another payment. 

Adjusted loan terms

If you’re struggling to find unsecured loans on your desired terms, consider changing your expectations. Look for ways to reduce the lender’s risk, so they are more likely to approve your funding application. 

In general, lenders see shorter term lengths as less risky since they get their money back sooner and there are fewer potential events that could lead to a default. 

If you are still hitting roadblocks during the loan application process, consider taking out a smaller business loan. For example, instead of requesting $30,000 in business financing, you could ask for $5,000.

Next steps 

At Lendio, our job is to help businesses find the right financing at the best rates. If you are looking to fund your startup, turn to our lending center. Learn about your options for taking out a small business loan without putting your assets up as collateral.

The information in this blog is for informational purposes. It should not be used as legal, business, tax, or financial advice. The information contained in this page is Lendio’s opinion based on Lendio’s research, methodology, evaluation, and other factors. The information provided is accurate at the time of the initial publishing of the page (October 26, 2023). While Lendio strives to maintain this information to ensure that it is up to date, this information may be different than what you see in other contexts, including when visiting the financial information, a different service provider, or a specific product’s site. All information provided in this page is presented to you without warranty. When evaluating offers, please review the financial institution’s terms and conditions, relevant policies, contractual agreements and other applicable information. Please note that the ranges provided here are not pre-qualified offers and may be greater or less than the ranges provided based on information contained in your business financing application. Lendio may receive compensation from the financial institutions evaluated on this page in the event that you receive business financing through that financial institution.

When running a medical practice, cash flow is often a top concern. Waiting for insurance companies to pay can cause significant delays in receiving payments for services provided. This is where medical factoring comes in as a potential solution.

But what exactly is medical factoring? Let's dive into the details.

What is medical factoring?

Simply put, medical factoring is a financial transaction where a medical practice sells its invoices or accounts receivable to a third party at a discounted rate. This third party, known as a factor, then advances the medical practice with immediate cash for these outstanding invoices. In return, the factor collects payment from the insurance companies on behalf of the medical practice.

In other words, medical factoring allows medical practices to receive payment for services rendered immediately, instead of waiting for insurance companies to pay. This can help improve cash flow and allow medical practices to meet their financial obligations in a timely manner.

How does medical factoring work?

Medical factoring involves three parties: the medical practice (also known as the client), the factor, and the insurance companies. The process usually goes as follows:

1. The medical practice provides services to patients and submits claims to insurance companies.
2. The medical practice sells its outstanding invoices or accounts receivable to a factor at a discounted rate.
3. The factor advances the medical practice with immediate cash, typically around 70% to 80% of the total value of the invoices.
4. The factor collects payment from the insurance companies on behalf of the medical practice.
5. Once the insurance companies pay, the factor deducts their fees and returns the remaining amount to the medical practice.
6. The process repeats, as necessary, for ongoing cash flow needs.

Who qualifies for medical factoring?

Medical factoring is not available to all types of medical practices. Factors typically work with healthcare providers, such as hospitals, nursing homes, home health agencies, and physician practices.

In addition to the type of practice, factors also consider the following criteria when determining eligibility:

• The total amount of outstanding invoices
• Average claim size
• Payment terms with insurance companies
• Length of time in business (usually at least one year)
• Creditworthiness of the medical practice

Factors will also assess the collectibility of the invoices and may require a certain percentage to be insured against non-payment. This is known as medical receivables financing.

Benefits of medical factoring.

Medical factoring offers several benefits for medical practices, including:

1. Improved cash flow - By receiving immediate payment for services rendered, medical practices can improve cash flow and meet their financial obligations in a timely manner.
2. No debt - Medical factoring is not considered a loan, so there is no debt incurred by the medical practice. This can be beneficial for practices with existing loans or those looking to avoid taking on additional debt.
3. Flexibility - Medical factoring allows medical practices to choose which invoices to sell, giving them more control over their cash flow.
4. Faster payments - Factors have the resources and expertise to collect payments from insurance companies in a timely manner, which can help medical practices avoid lengthy delays in receiving payments.
5. Reduced administrative burden - By outsourcing the collection of payments, medical practices can save time and resources that would otherwise be spent on managing accounts receivable.

Medical factoring can be a valuable tool for medical practices struggling with cash flow issues. However, it is important to carefully consider the fees and terms associated with different factors before choosing one to work with.

Factoring Medicare and Medicaid claims.

Working with Medicare and Medicaid can often be a complicated dance for medical practices. These government insurance programs are known for their lengthy payment cycles, which can significantly impact a practice's cash flow. But, did you know medical factoring can offer a solution for this too? Absolutely!

With medical factoring, practices can sell their Medicare and Medicaid receivables to a factor, just as they would with private insurance claims. This means you don't have to wait for these programs to remit payment. Instead, you'll get an advance from the factor, typically around 70% to 80% of the claim value, providing immediate cash flow relief.

However, it's essential to be aware that factoring Medicare and Medicaid claims requires a sound understanding of these programs' unique rules and requirements. Factors with experience in these claims have the know-how to navigate the complex landscape and can help your practice receive payments quicker, relieving the financial pressure that comes from slow-paying insurance claims.

While medical factoring can provide an effective solution to the cash flow challenges posed by Medicare and Medicaid's slow payment cycles, it's still important to consider the associated fees and terms to ensure they align with your practice's needs and financial capabilities.

Conclusion

Medical factoring is a financial tool that can provide immediate cash flow relief for medical practices. By selling outstanding invoices at a discounted rate, factors can provide medical practices with immediate funds to meet their financial obligations. However, it's crucial to carefully consider the fees and terms associated with different factors before making a decision.

Thinking about solutions to manage your medical practice's finances? Check out medical practice loan options and find the one that suits your needs best.

From finance and insurance to mining to real estate, veterans are making an impact in every industry you can imagine. Veterans now own more than 2.5 million businesses in the U.S., and that number doesn’t appear to be slowing down.

“You go through so much in the military, but really what the military is teaching you is how to be resilient,” said Dawn Halfaker, founder and CEO of Halfaker and Associates. “You plan a mission, and then you execute, but nothing ever goes according to plan. Your job is to continue to lead in not-ideal circumstances.”

That sounds like entrepreneurship in a nutshell. 

If you’re a veteran looking to build a business from the ground up, then hold your head high—the odds are in your favor. And fortunately for you, there are concrete fiscal benefits to running a veteran-owned small business, and we want to help you take advantage of all of them. This guide will walk you through everything you need to know to make your business-owning dream a profitable reality. First, let’s make a plan.

Steps to starting a veteran-owned business.

1. Come up with your business idea
2. Create a small business plan
3. Register your business
4. Find financing

1. Come up with your business idea.

The first step towards starting a veteran-owned business is to come up with a compelling business idea. A good starting point is to reflect on your personal interests and passion. What are you deeply passionate about? Where do your strengths lie? A business built around your passion and skills is likely to keep you motivated during tough times.

Additionally, consider the skills and experience you acquired during your time in the military. Your unique training and perspective can provide a solid foundation for a security consultancy firm or a logistics company, for example.

Also, consider the needs of your local community. Is there a service or product the community lacks? Providing a solution to a local problem can give rise to a successful business.

Finally, don't shy away from seeking advice from other veteran entrepreneurs and business professionals. Their experience and insights can prove invaluable in helping you refine your business idea.

2. Create a small business plan.

Before you start building your business, you need a plan. Your plan will be the roadmap to your success. Where are you currently? Where do you want to be one year, five years, and 10 years from now? What do you need to do to get there? Your business plan will help you answer these critical questions, and these answers will guide your business like Siri guides your car—except better.

Don’t have a business plan yet? No problem. Take an hour or a day (or a week) to walk through our “Step-by-Step Guide to Writing a Business Plan.” This guide will help you decide which industry you should target and what kind of business you should build. Where is their demand? What startup would be best served by your skillset?

Benjamin Franklin said, “If you fail to plan, you are planning to fail!” You’d probably nod your head at that. Then, you might tack on a well-known quote from the film Valkyrie: “Remember, this is a military operation. Nothing ever goes according to plan.” Then, we would take our turn to nod ours.

Entrepreneurship is full of surprises and unknown variables. You can’t plan for everything, and even when you do, everything could still go wrong. That’s where your resilient attribute really comes in handy. When faced with challenges, others would likely throw in the towel, but you’ve been trained to grit your teeth and fight through the hard times.

If you’re struggling to come up with a viable business plan, don’t stress too much. There are plenty of veteran-specific resources we’ll discuss later that will help you fill in all the critical details. Free education, training, mentorship, online courses—there are tools available for whatever you need to find the best path forward.

Now, with your plan in hand, it’s time to start building your business. Where do we begin? You’ll need to register your business, so let’s start there.

3. Register your business.

The process of registering your business involves several steps, each crucial to ensuring that your business operates legally and efficiently. Here's a simplified guide to get you on the right track:

Step 1: Decide on a business structure

Before registering your business, decide on the type of business structure that best suits your needs. The structure you choose will impact your tax obligations and legal liabilities. The most common types include sole proprietorship, partnership, limited liability company (LLC), and corporation.

Step 2: Choose a business name

Once your business structure is defined, the next step is selecting a name. Make sure to conduct a thorough search to ensure the name you've chosen isn't already in use or trademarked.

Step 3: Register your business name

After settling on a unique business name, you must register it. The process varies depending on your state and the structure of your business. For example, if you're operating as an LLC or corporation, the business name will typically be registered when you file your articles of incorporation or organization.

Step 4: Get a federal tax ID

Also known as an employer identification number (EIN), a Federal Tax ID is necessary for tax purposes and is also often required to open a business bank account. You can apply for an EIN through the IRS website.

Step 5: Apply for state and local tax IDs

Depending on your state and the nature of your business, you may need to apply for state and local tax IDs. Check the requirements in your specific area.

Step 6: Obtain necessary permits and licenses

Depending on your type of business and your location, you may need specific permits or licenses to operate. Check with your local and state government to see what's required.

Step 7: Register with the VA

As a veteran-owned business, register with the Department of Veterans Affairs (VA) to potentially qualify for government contracts.

Remember, each state has different rules and regulations for business registration. It's recommended that you seek legal advice when registering your business to ensure all legal requirements are met.

4. Find financing.

You can find a variety of financing options for your veteran-owned business. You could secure veteran-specific programs and grants or debt financing.

Veteran financing programs

In addition to generic business loans, you can find several financing options that are veteran-specific. 

1. Veterans Business Fund (VBF)

The VBF is a nonprofit organization formed to help a growing number of unemployed veterans get access to supplemental capital to qualify for small business loans. So if you’re struggling to qualify for a loan because you don’t have the necessary base capital, apply for help from the VBF.

2. Military Reservist Economic Injury Disaster Loan program (MREIDL)

This interesting financing option is run by the U.S. Small Business Administration (SBA). MREIDL provides funds to small businesses that have been impacted by a leader or critical employee being called up to active duty with the reserves. Veterans can apply for this loan within one year of returning from active duty, but some of the terms last up to 30 years.

3. Hivers and Strivers

If you’re a veteran who graduated from a U.S. military academy, you may qualify for financing from Hivers and Strivers. Hivers and Strivers is an angel investment group that focuses on early-stage startups. Most of the group’s founders and leaders have served in the military, so they’re all about supporting young veteran entrepreneurs.

4.SBA Express Loan Program 

Veterans can have the upfront guarantee fee waived if they qualify for an SBA Express loan. Maximum funding through the SBA Express Loan Program is capped at $350,000, but that’s really the only downside to this financing option.

5. Lendio

Lendio’s marketplace can help you find the right veteran business loan, even if you’ve already been turned down by a bank. With a 15-minute application, we’ll connect you with a loan from our network of more than 75 lenders.

This list is by no means definitive, but it’s a great place to start looking for veteran-specific financing options.

Veteran Grants

Grants are considered by many to be the holy grail of business financing. Unlike loans, which a borrower must pay back with interest, grants are awarded for a specific purpose, with no repayment requirements. However, VA grants tend to be more difficult to secure than loans. Each grant has its own specific requirements, so do your research before applying to get the best shot of being approved.

Here are a few of the VA grant options available:

Honor Courage Commitment’s Veteran Entrepreneur Training Program

The Veteran Entrepreneur Training (VET) program grant gives you a chance to attend training sessions at the HCC Veteran Business Center in Dallas, Texas. It also offers the opportunity to receive grants for specific phases of your business, including building your idea and getting legal help, as well as the building phase, where you’ll receive aid for advertising. They also provide training about other forms of business financing.

Second Service Foundation's Military Entrepreneur Challenge

If you are an ambitious veteran looking to make your mark in the business world, the Second Service Foundation's Military Entrepreneur Challenge could be an excellent opportunity for you. The Military Entrepreneur Challenge is a grant competition wherein veterans submit their business plans for scrutiny by a panel of experts. Winners of this competition are awarded grants that they can use to kick-start or expand their businesses. This challenge is not just about the grant money; it's also an avenue to receive valuable feedback about your business plan and a chance to connect with a network of successful entrepreneurs and investors

GrantWatch

Title aside, this isn’t an actual grant. However, it does showcase resources and grants available to veterans, including business grants. It’s worth keeping an eye on this site because the offerings change frequently and have different deadlines.

Veteran-owned small business resources.

Money is only one part (although a large one) of building a business. You also need the know-how to use that money wisely. Veterans can gain this know-how and get a leg up on the competition with access to several veteran-specific small business resources. There are a lot of resources available, but here are a few of our favorites:

Patriot Boot Camp

Patriot Boot Camp (PBC) is an accelerator program (presented by Techstars) that helps veterans and their spouses create tech companies. PBC’s flagship program is a free three-day event that includes education training and one-on-one mentorship. If you’re thinking of starting a tech startup, trust PBC to give you the tools and talents you need to kick things off with a bang.

Veteran Business Outreach Centers

The SBA provides veteran-specific business training all over the U.S. right in the heart of their communities. Check the SBA’s local assistance page to find a center near you. These Veterans Business Outreach Centers offer training, counseling, and mentorship to help you start and grow your business. Plus, the professionals helping you are from your community—so they’ll be best positioned to answer your questions and guide you in the right direction.

Boots to Business

Boots to Business (B2B) is another SBA-offered program that provides business and entrepreneurship training to veterans. Registrants start with a two-day, in-person program to learn the fundamentals. Afterward, participants can advance their studies with a free, eight-week online course that walks students through creating their business plan and other critical elements of a startup. 

Veteran Entrepreneur Portal

The VA’s Veteran Entrepreneur Portal (VEP) is a go-to resource for all things startup. Whether you’re looking for best practices, financing, government contracting opportunities, or training, the VEP has it all and much more. All veteran business owners should spend some time scrolling through the incredible amount of free information and resources on this platform.

Warrior Rising - VetToCEO Business Accelerator

Warrior Rising is a non-profit organization committed to empowering U.S. military veterans and their immediate family members by providing them with the resources to start and grow their own businesses.

The organization's flagship offering is the VetToCEO Business Accelerator program. It’s designed to help veterans transition from service to entrepreneurship. The program is a seven-week online course that takes participants through a step-by-step process of launching their own businesses. Each week, participants are required to complete assigned tasks related to their business. These assignments are reviewed and critiqued by established veteran entrepreneurs, providing valuable feedback and guidance.

In addition to the accelerator program, Warrior Rising also provides ongoing mentorship, networking opportunities, and access to capital to help veteran businesses grow and prosper. The organization not only fosters entrepreneurial skills, but also helps veterans create sustainable businesses that contribute to the economy and create jobs.

Thank you for your service.

Free resources, simple financing, and federal contracts won’t come close to repaying you for the service you’ve rendered to our country, but hopefully, they can play an important role in getting your veteran-owned business off the ground. 

Let’s be honest. You don’t need any of these additional advantages, but they sure can help. You now have a business plan, financing to get it off the ground, veteran certification, and every resource you could imagine. Plus, you have the training, experience, discipline, and leadership to create a successful business. Now you just need to take action to make your business-owning dream a reality.

There’s a reason close to half of all American World War II veterans went on to become business owners. You notice problems and work hard to find solutions. You have the tenacity to fight for what you believe in, even if it’s not easy.

We thank you for your military service to our country, and we hope you can continue to make America a great place in a different capacity. As a small business owner, you can still play a significant role in your community, the government, our country, and the world. Now go get after it, entrepreneur.

According to Small Business Administration (SBA) data, the median cost to start a restaurant in 2018 was $75,000. A survey from restaurantowner.com found that pre-opening expenses range from $10,000 to $50,000, with total costs ranging from $175,500 to $750,000.

But what exactly do these startup costs include? And how can you accurately estimate and manage them for your own restaurant?

Up-front startup costs for your restaurant. 

Your up-front startup costs are the costs you’ll incur before you even open the doors on the big opening night. Before customers start flooding in, you need a physical space, tables, menus, ovens, employees, and much more. Let’s start with what are typically the most expensive assets of all—the location and property.

Typical startup costs for a restaurant

Here is a list of some common startup costs you'll likely encounter as you prepare to open your restaurant:

1. Lease or purchase of property - The cost of leasing or buying a property can vary widely depending on location. Prime real estate in popular areas will be more expensive. According to restaurantowner.com, the median monthly cost for leasing a restaurant space is $5,000.
2. Renovation and interior design - Making the space fit your restaurant's theme and ensuring it meets health and safety codes can be a significant expense.
3. Kitchen equipment and furnishings - This includes everything from ovens and stoves to commercial refrigerators and dishwashers. Tables, chairs, bar stools, and other furniture will be needed to make your guests feel comfortable.
4. Licenses and permits - Various permits and licenses are required to operate a restaurant, such as a food service license, liquor license, and health department permit.
5. Initial inventory - This includes food, beverages, and other consumables you need to start serving.
6. Staff wages and training - Before opening, you'll need to hire and train staff. This cost includes their wages and any training materials.
7. Marketing and advertising costs - To attract customers to your new restaurant, you'll need to invest in marketing and advertising.
8. Technology - A point of sale (POS) system, payment terminal, cash drawer, employee scheduling software, kitchen display system, and reservation tool are all basic technology to acquire.

Remember, these costs can vary significantly based on your location, the size of your restaurant, and the concept you've chosen. Be sure to do your homework to accurately estimate these costs.

1. Location and property

Location is a crucial consideration in the restaurant business. Choosing a back-alley spot with low foot traffic may be cost-effective, but a prime location in a busy area comes with a higher price tag. Unlike brick-and-mortar restaurants, food trucks have the advantage of mobility.

Before opening a restaurant, assess the market value of the planned location using tools like LoopNet. This will help you find a space that aligns with your budget and goals. Keep in mind that most spaces require some remodeling, which can range from a simple paint job to a full-scale renovation.

Consider the needs of your restaurant and the available space. Will you have enough room for a kitchen, serving area, and seating? Prioritize customer seating, if necessary. Take into account the costs of renovations, both inside and outside the restaurant. Don't overlook branding expenses like logo design and signage, as they can add up quickly.

Buying vs. leasing a property

One of the first decisions you'll encounter when setting up your restaurant is whether to buy or lease your property. Both options come with their own pros and cons.

Purchasing a property can be a significant upfront expense, but it means you own the space and have complete control over it. You can customize it to your heart's content without having to get a landlord's approval. However, it may tie up a large amount of capital that could be used elsewhere in the business.

Leasing, on the other hand, often involves a lower initial outlay, leaving more funds for operational expenses and growth. It also offers more flexibility if your business needs change. However, you're at the mercy of your landlord when it comes to rent increases, renovations, and lease renewals. When making this decision, consider factors such as your budget, long-term business goals, and the real estate market in your desired location.

2. Renovation and interior design

An essential element of your restaurant's startup costs is the renovation and interior design. This process makes the space align with the theme and vibe of your restaurant, giving it a unique personality and creating an atmosphere that resonates with your target audience. It's not just about aesthetics—your restaurant's interior design should also prioritize functionality and comply with health and safety standards.

The cost of renovation can vary dramatically depending on the scale of changes needed. If your space previously housed a restaurant and the layout suits your concept, you may need to do little more than a paint job and some minor updates. However, if you're converting a different type of space into a restaurant, you could be looking at extensive plumbing, electrical, and construction work.

When budgeting for interior design, also consider the cost of hiring professionals, if needed. For example, an interior designer could help bring your vision to life, while a contractor will oversee the construction work.

3. Equipment and supplies

Now that you have the location, you’re going to need the equipment to get cooking and serving. There’s a lot to consider:

• Tables and chairs - Whether you’re splurging on chic restaurant chairs or going homely with long wooden benches, you’ll need to budget accordingly.
• Commercial cooking equipment - Your typical kitchen oven isn’t going to do the trick when you’re cooking for a room of 75 to 150 people. You’re going to need commercial-grade ovens, stovetops, blenders, deep fryers, and much more.
• Specialty cooking equipment - Don’t forget to incorporate the cost of specialty equipment. For example, if you need a stone oven to make your signature pizza, you’re looking at a $10,000 to $20,000 investment, at minimum.
• Plates, cutlery, and cooking utensils - You’ll need to supply everything from the napkin your customer uses to the spatula your chef wields to flip pancakes.  

4. Licensing and paperwork

This is probably the least fun part—sorry! To avoid the government kicking down your doors, you’ll need to obtain all the necessary licenses and permits.

Toast provides a handy checklist of all the licenses and permits you’ll need. Here’s a quick list for reference:

1. Business license
2. Employer identification number (EIN)
3. Certificate of occupancy
4. Food service license
5. Sign permit
6. Music license
7. Resale permit
8. Building health permit
9. Employee health permit
10. Seller’s permit
11. Liquor license
12. Valet parking permit
13. Dumpster placement permit
14. Live entertainment license
15. Pool table license

The cost of any individual license can range from $100 to $5,000 or more, depending on your state.

5. Initial inventory

When estimating how much food you’ll need and how much it’ll cost, try working backward. Look at your menu first and determine what ingredients you’ll need for each dish. Then, figure out the price of the amount of ingredients in that single dish. Once you know how much it costs to produce that meal, multiply that by the number of meals you plan to serve in your first week.

6. Dream team hiring and training

Before your restaurant can open its doors, it's crucial to assemble a team that will help deliver an exceptional dining experience. The number of employees you'll need can depend on factors such as your restaurant's size, layout, and service style. For instance, a small cafe may only require a handful of staff members, while a large fine dining restaurant may need a significant team across various roles, including kitchen staff, waitstaff, bartenders, hosts, and managers.

Budgeting for staff involves not only their wages, but also the costs associated with recruitment, training, and employee benefits. When determining how much to budget for staff, start by considering the roles you need to fill and the industry's typical pay rates for these positions. Then, factor in additional costs, such as uniforms, training materials, and payroll taxes. Also, keep in mind that labor costs can fluctuate and may increase during peak times when you may need additional staff.

7. Marketing and public relations

Regardless if you’ve secured a prime location in the heart of the city or if your to-die-for burrito is absolutely irresistible, you’re going to need a healthy marketing budget to gain momentum. Don’t make the mistake of thinking social media and word of mouth will suffice—there’s only so much a few tweets and your best friends’ network can do.

Signage, ads, PR services, and digital marketing could cost you thousands of dollars, even before the grand opening. You don’t want to get talked into an expensive, lengthy contract with a marketing agency before you’ve seen the ROI (return on investment), but you also don’t want the opening night to be a penny-pinching ghost town. You’ll need to find the delicate balance and decide how much you’re willing to invest in marketing your restaurant.

Do some market research and see what similar businesses and competitors did for their initial marketing efforts. What do you feel went right? What went wrong? A basic analysis like this will help you decide where (and where not) to invest your valuable capital. 

8. Technology stack

Lastly, you’ll need to consider the cost of the technology you use. This stack is everything from your POS system to your reservation management tools to your kitchen display systems.

Different options for a POS system

Choosing the right POS system is pivotal in the smooth operation of your restaurant. The POS serves as the central component for your business, where sales, inventory, and customer management merge. Here are a few options to consider:

1. Square POS - Square is a popular choice for small businesses, including restaurants. It offers a free software option and affordable hardware with a unique pay-as-you-go payment processing system. A square payment reader can cost as little as $10.
2. Toast POS - Designed specifically for the restaurant industry, Toast offers features like tableside ordering, menu management, and real-time reporting. It also comes with a robust kitchen display system. The pay-as-you-go model provides all of the software and hardware up front at no cost with a slightly higher processing fee than if you pay for the hardware up front.
3. TouchBistro - TouchBistro is an iPad-based POS system designed for restaurateurs. It provides tableside ordering, floor plan and table management, and the ability to process cash, card, and mobile payments. Pricing starts at $69 per month.
4. Upserve - Upserve by Lightspeed offers an all-in-one restaurant management system that includes an intuitive POS, inventory tracking, and detailed analytics—all aimed at improving your bottom line. Pricing starts at $69 per month.
5. Clover - Clover offers both small handheld devices and larger countertop setups, making it a suitable option for various types of restaurants. It's a versatile system with an app market for customization. Pricing starts at $100 per month.

Reservation systems for restaurants

Managing reservations effectively is crucial to the smooth running of your restaurant. A reliable reservation system can help you manage your tables efficiently, reduce no-shows, and enhance your customer experience. Here are a few options to consider:

1. OpenTable - OpenTable is one of the most widely used reservation systems worldwide. It allows customers to make online reservations and reviews, and it offers a rewards program for frequent diners. Its comprehensive features include table management, reservation management, and guest management. Pricing starts at $39 per month.
2. Resy - Resy is a robust platform that offers not just reservations, but also waitlist management, table management, and ticketing for events. Resy's system is designed to give restaurants greater control over their dining rooms and a direct line to their guests. Pricing starts at $249 per month.
3. Yelp Reservations - Yelp Reservations comes with table management, waitlist management, and a reservation system. It's perfect for small to midsize restaurants looking for a straightforward, user-friendly solution. Pricing starts at $99 per month with the first 60 days free.
4. EatApp - This system is a comprehensive restaurant management software that provides online booking, table management, sales analytics, and more. EatApp also integrates with other systems, including POS and delivery platforms, making it a fitting option if you prefer an all-in-one solution. Pricing starts at $0 per month.
5. Tock - Tock is a more expansive platform that offers pre-paid reservations, deposit reservations, and traditional reservations. This system is ideal for restaurants that offer unique dining experiences or host special events. Pricing starts at $249 per month.

Upkeep expenses for your restaurant. 

Once the doors are open, you’ll also need to plan for how you’re going to keep them open. Some of your upfront startup costs will suffice, but you’ll need additional cash on hand to handle the upkeep.

1. Cost of goods sold

The cost of goods sold (COGS) is the total direct costs of producing the products or services you sell. It includes all expenses related to purchasing and manufacturing your menu items, such as ingredients, packaging, and labor. Tracking your COGS is essential for managing costs and setting prices that will help generate a profit. You’ll need to watch inflation, supplier cost fluctuations, and demand to make sure you’re adequately stocked and correctly pricing your menu.

2. Ongoing hiring and training

Unless you magically solve the restaurant turnover problem, you’re going to need to account for ongoing hiring and training. With most restaurant employees lasting less than a year, you’ll be continually hiring and training new employees—it’s a never-ending process. Plus, you’ll need to keep current employees’ skills and discipline fresh, as well.

Investing money into training your staff can also help you avoid costly mistakes. Trained staff may be more expensive, but they’ll also work more efficiently and improve the customer experience.

3. Building and equipment maintenance

No matter how new or nice your equipment is, it’ll eventually break—it always does. Instead of waiting for your equipment to die so you can replace it, invest money to regularly clean and maintain your existing machines and devices. If disaster strikes and your necessary equipment kicks the bucket without much notice, look into getting equipment financing to help cover the immediate fixes.

An unexpected burnt-out oven can put a real dent in your financial forecasts—plan ahead! Make sure to include building and upkeep costs in your monthly and annual budgets. 

4. Permits and licensing renewal

Remember all those fun permits and licenses we talked about before? Unfortunately, you’re going to need to renew most of these licenses at one point or another—and some you’ll need to renew annually. While it’ll only cost you a few hundred dollars here or there, keep these expenses in mind when doing your budgeting.

5. Ongoing marketing

Marketing is far from a one-and-done deal. After your grand opening and as time goes on, you’ll secure (or hopefully you’ll secure) a favorite place in the hearts of a select few. You can count on these people to be your regulars. Not only will these individuals feed themselves on the regular at your restaurant, but they’ll also advocate for you and occasionally bring in some new business. 

But unless you’re being featured as a top restaurant in town—or you have a gigantic fluorescent sign that everyone in a highly foot-trafficked location can see—you’re going to need to further market your restaurant. Digital ads, social media, email marketing, review sites, local news coverage—anything will help! Try new ideas, drop old ones, and continue experimenting to see what works best. But whatever you do, never stop marketing your business…ever.

6. Utility costs

You can expect to spend around 5% of your total costs on utilities, and while that might seem tiny, it’s an expense you have to plan on month after month. Depending on the size of your restaurant, you could be paying anywhere from $5,000 to $20,000 annually. Here are the utilities you’ll need to budget for:

• Electricity
• Water
• Natural gas
• Internet
• Cable

These are the major ongoing expenses you can expect, but your unique restaurant will likely have unique expenses. Don’t forget to budget for those, too.

7. Professional services

As a small business owner, you’re likely tempted to go it alone and wear all the hats: owner, floor manager, baker, waiter, accountant, lawyer, and more. Don’t get stuck in this trap—learn early on to delegate, delegate, delegate. Starting day one, consider who you can pay to help you and if they’ll be worth it:

• Attorneys - There are permits to be had, licenses to be acquired, and regulations to be followed. Instead of sifting through mountains of paperwork and legal jargon, think about paying for some help.
• Accountants - From your taxes to your bookkeeping to your business strategy, accountants can help with it all. Don’t wait until tax season to finally get some financial help.
• Construction contractors - We all want to be Chip and Joanna Gaines, but this desire could lead your restaurant construction to drag on like your unfinished garage project. Let the pros do it right from the start.
• Marketers - The physical and digital marketing landscapes are tricky beasts to navigate. If you don’t have any marketing experience, consider hiring a freelancer or an agency to lend you a hand. 

8. Insurance

Insurance is an indispensable part of operating a restaurant business. It safeguards your investment against unforeseen circumstances like property damage, employee injuries, or customer lawsuits. Here are the types of insurance you should consider:

• General liability insurance - This broad insurance coverage protects your restaurant from claims such as bodily injury, property damage, or personal injury. It's essential in handling customer injury or property damage claims.
• Property insurance - This policy covers your restaurant building, the property inside it, and loss of income due to a disaster. It's vital if you own your restaurant building or have invested heavily in kitchen equipment.
• Workers' compensation insurance - It's mandatory in most states if you have employees. This policy covers medical treatment, disability, and death benefits in the event an employee is injured or dies as a result of work with your business.
• Liquor liability insurance - If your restaurant serves alcohol, you'll need this policy. It covers your legal fees and damages if you're sued over a patron's actions after they consumed alcohol at your restaurant.
• Food contamination insurance - This covers your losses if you have to close your restaurant temporarily due to a contagious disease outbreak or if a power outage spoils your food.

The cost of insurance varies based on your restaurant's location, size, and offerings. It's advisable to work with an insurance agent who specializes in restaurant insurance to get the most suitable coverage.

9. Payment processing fees

Every time a customer pays with a credit or debit card, your restaurant will incur a payment processing fee. These fees are charged by the card networks (like Visa, MasterCard, and American Express) and your payment processor. The exact amount varies, but it typically ranges from 1.5% to 3.5% of the transaction amount.

Keep in mind that premium cards and online transactions usually have higher fees. Also, don't forget about PCI compliance costs and any fees associated with your POS system. To manage these expenses, shop around for a payment processor that offers competitive rates and fully understands the needs of your restaurant business.

Raising funds for your restaurant.

Raising funds for your restaurant can be a challenging task, but with the right approach, it's attainable. Here's how to secure funding for your gastronomic venture:

1. Personal savings and friends and family - Personal savings are often the first source of funding. You might also consider reaching out to friends and family who believe in your vision and are willing to invest in your restaurant. Make sure to formalize all agreements to avoid any misunderstandings in the future.
2. Bank loans - Traditional bank loans are a common source of funding for restaurants. You'll need a solid business plan, a good credit history, and possibly some collateral. The SBA offers loan programs that can make it easier to qualify for a bank loan.
3. Online lenders - Online lenders can be a good option for restaurant owners who need funds quickly or don't qualify for traditional bank loans. These lenders often have less stringent criteria and faster approval times, but their interest rates can be higher.
4. Angel investors and venture capitalists - These are individuals or firms who provide capital to start-ups in exchange for equity. They are typically interested in high-growth businesses, so you'll need a compelling business proposal and a clear path to profitability to attract these types of investors.
5. Crowdfunding - Crowdfunding platforms like Kickstarter and GoFundMe allow you to raise money from the general public. This can be a great way to generate funds and create buzz for your restaurant, but it also requires a strong marketing strategy.
6. Equipment financing - Equipment financing allows you to borrow money specifically for buying restaurant equipment, often with the equipment itself as collateral. This can be a good option if you need expensive kitchen appliances or other equipment.

Remember, every funding option has its pros and cons, so it's crucial to thoroughly research and consider each one before deciding. Professional advice from a financial advisor or accountant can also be beneficial in making your decision.

Put it all together.

After researching and selecting options for each of the categories discussed, create a final budget for your restaurant.

1. Building rent or mortgage
2. Renovations
3. Equipment and supplies
4. Reservation system
5. Cost of goods sold (COGS)
6. Hiring and training
7. Building and equipment maintenance
8. Permits and licensing
9. Marketing
10. Utility costs
11. Professional services
12. Insurance
13. Payment processing fees

Looking for funding for your restaurant? Learn more about restaurant business loans.

If you own or run a restaurant, you know all about the disruption in the industry. Digital technologies are opening up new avenues for customers to purchase food, and shifting consumer tastes are leading to demand for more varied menu items. While this kind of change can bring uncertainty, it also creates possibilities. Regardless of how much you want your business to evolve in the coming year, boosting restaurant sales is a priority for everyone.

Whether you’re looking to revolutionize your menu, open a new location, or increase local awareness, here’s a look at 15 tried-and-true strategies to help you grow your restaurant.

1. Attract new customers to your restaurant.

The best marketing options for many restaurants involve hyperlocal promotions that bring nearby residents through the doors. Digital advertising via the web, email, and social media is also critical in broadening your audience. When it comes to boosting sales, blending email marketing, classic options like direct mail, and online relationship-building through social media can drive brand awareness and help get the attention of the locals.

Building your Yelp community by engaging with reviewers and venturing into similar online sites can also help you gain recognition from locals and also attract visitors from out of town, boosting restaurant sales in the long run. While these tactics are powerful, they also come with costs. Strategic small business loans can give you the jolt of funding necessary to get off the ground in this area. Online lenders can offer short term financing options that let you launch new projects without risking significant debt.

2. Use retention strategies to build loyalty.

Retaining existing customers is often less expensive than attracting new ones. Launching a customer loyalty program that rewards regulars can help you keep customers coming back. You may also want to consider giving customers an opportunity to voice their opinions about your menu or ambiance through online surveys or similar feedback tools.

3. Offer diverse purchasing options.

Technological advances have made it possible to give restaurant customers a choice in who and how they patronize. Boosting restaurant sales is easier if your patrons can make purchases however they prefer. Digital sales platforms, however, come with a caveat. Many online food ordering apps are popular among consumers, but they also take a cut of sales. Building your own online ordering system and mobile app lets you provide convenience without losing a portion of the sales. A small business loan can help you upgrade your web systems and build a smartphone app.

In addition to enhancing your digital offering, keep in mind that delivery, prepared dishes, and similar services can also diversify customer ordering options, boosting restaurant sales. A small business loan can provide funding for you to hire delivery drivers or purchase in bulk from suppliers to create those ready-to-go meals.

4. Maximize table turnover rate.

Moving more customers through the restaurant—without adversely affecting their experience by making them feel rushed—is a great way to increase revenue. A few options to improve efficiency include:

• Deploying self-service kiosks at tables.
• Implementing fully integrated kitchen management and point-of-sale solutions to ensure that kitchen workers get orders as quickly as possible and simplify operations for servers.
• Hiring more front-of-house staff to ensure prompt, efficient service.

Whether you’re making equipment investments or trying to cover salaries while you try new things, small business funding can position you to improve your table turnover rate.

5. Train your staff.

Ensure your staff is well-trained and knowledgeable about your menu items. Customers appreciate recommendations, and good service can create loyal patrons. Offering ongoing training can also keep your staff motivated. Happy employees make for happy customers and ultimately result in increased sales.

To maintain high-quality service and keep your team well-informed and motivated, consider implementing one or more of these restaurant staff training programs:

• Product knowledge training - This program focuses on educating staff about the details of your menu items, including ingredients, preparation methods, and ideal pairings. It helps waitstaff offer informed recommendations and answer customer queries with confidence.
• Customer service training - This training focuses on enhancing communication skills, managing customer expectations, and resolving complaints effectively. It can help improve customer satisfaction and loyalty.
• Health and safety training - Essential for all staff, this program teaches hygiene practices, safe food handling and preparation, and emergency procedures.
• Certification programs - These can include ServSafe Certification for food handling or Sommelier courses for wine knowledge. They provide professional growth opportunities for staff and improve the dining experience for your customers.
• Leadership training - For staff who are either in or moving into management roles, this program focuses on team management, conflict resolution, and leadership skills. It can help maintain a positive and productive work environment.

Remember, investing in staff training can lead to better customer experiences and increased restaurant sales in the long run.

6. Leverage social media.

Social media is not just a platform for social interaction, it's a powerful marketing tool. Properly utilized, it can be an effective element in your strategy to increase restaurant sales.

Promote user-generated content

Encourage your customers to share their dining experiences on their social media platforms. You can run contests where customers post pictures of their favorite dishes with a unique hashtag related to your restaurant. User-generated content not only increases your online presence but also builds trust and authenticity.

Collaborate with influencers

Consider partnering with food bloggers, influencers, or local celebrities who can promote your restaurant to their followers. This kind of promotion can dramatically boost your restaurant's visibility, especially if the influencer's audience aligns with your target demographic.

Share behind-the-scenes content

Customers appreciate transparency, and providing behind-the-scenes content can help humanize your brand. Share images or videos of your kitchen staff in action, the journey of your dishes from prep to plate, or even your team's fun moments. This gives your audience a glimpse into your restaurant's operations and showcases your commitment to quality and service.

Utilize Instagram stories and highlights

Use Instagram's Stories feature to promote daily specials, events, or limited-time offers. You can also showcase customer testimonials or positive reviews in your stories. Further, make use of the Highlights feature to permanently showcase important stories like your menu, special events, and customer experiences. This helps new followers quickly understand what your restaurant has to offer.

7. Offer special promotions.

Regularly run special offers or promotions to encourage more visits. This could be a happy hour, a discount on certain days of the week, or a seasonal offer.

Here are some steps to create an effective promotion:

Identify your goals

Firstly, define what you hope to achieve with the promotion. Do you want to attract new customers, encourage repeat visits, or perhaps generate more sales during a particular time slot? Understanding your objectives will guide you in creating a promotion that yields the desired results.

Know your audience

Understand who your customers are. What kind of deals would attract them? Are they more likely to respond to a discount on a specific meal or a 'buy one get one free' offer? Your promotion should be tailored to appeal to your target demographic.

Design your promotion

Craft your offer to be tempting to customers and profitable for your business. The design of your promotion should also be aligned with your brand. Keep the offer simple and ensure the terms are clear and easy to understand.

Promote your promotion

Spread the word about your promotion using various channels. Send emails to your mailing list, post them on your social media platforms, and display them prominently on your website. Consider using local advertising or even word of mouth to reach people in your community.

Analyze the results

After running the promotion, evaluate its effectiveness. Was there an increase in sales? Did you attract new customers or increase repeat visits? Analyzing the results will help you understand what worked and what didn't, and this information can be used to improve future promotions. Remember, the goal is not just to increase restaurant sales, but to also provide value to your customers and foster loyalty.

8. Optimize your menu.

Your menu is a critical marketing tool. Make sure it's well-designed and highlights your special dishes. You can also use upselling techniques on your menu to increase the average spend per customer.

Use strategic pricing

Strategic pricing can greatly influence a customer's decision to order a particular dish. Place your higher-profit items near cheaper ones to make them seem like a better value. Consider using bundle deals or "meal deals" to encourage customers to spend more.

Highlight seasonal items

Customers appreciate variety and are often drawn to limited-time offerings. Promote seasonal dishes or drinks to create a sense of urgency and entice customers to order them before they're gone.

Offer health-conscious options

With the growing trend towards health and wellness, offering healthy menu items can attract a new demographic of customers. Clearly mark these items on your menu to make it easy for health-conscious individuals to find them.

Create a well-organized menu

Group related items together and use clear, readable fonts. A well-organized menu improves the customer experience and makes it easier for them to make a decision.

Use mouth-watering descriptions

Good food descriptions can make a dish more appealing. Use evocative language to make your menu items sound irresistible.

Remember, your menu is often the first point of contact between your customers and your food. Making it as appealing and easy to navigate as possible can go a long way in boosting your restaurant sales.

9. Host events

Hosting events such as trivia nights, live music, or cooking classes can attract new customers and create a vibrant atmosphere.

How to host an event at your restaurant

1. Understand your customer base

Before planning the event, take a moment to understand your customers. What interests them? What type of events are they likely to attend? Use this information to decide on the type of event that would resonate most with your target audience.

2. Plan the event

Once you have decided on the type of event, it's time to plan. What will be the theme? How will you decorate the restaurant? What food and drink specials will you offer? Remember to consider the logistics, such as the date, time, and number of staff needed.

3. Promote the event

Start promoting your event well in advance. Use all available channels—your website, social media, newsletters, in-house posters, local newspapers, and even word of mouth. Provide clear information about the event—date, time, cost, special offers, and what attendees can expect.

4. Prepare your staff

Make sure your staff is well-prepared. They should understand the timeline of the event, their responsibilities, the menu changes, and to expect a higher-than-usual volume of customers. This preparation can help ensure smooth operations on the event day.

5. Create a festive atmosphere

On the day of the event, make your restaurant feel special. Decorations, music, and lighting can all contribute to the atmosphere and make your guests feel excited and welcomed.

6. Capture the moments

Consider hiring a professional photographer or encouraging your staff to take photos. These images can be used later for promotional purposes and to share on social media, creating anticipation for future events.

7. Gather feedback

After the event, take the time to gather feedback from your customers and staff. This will help you understand what worked well and what could be improved for future events.

Hosting events in your restaurant is a great way to bring in new customers, delight existing ones, and create a vibrant, community-oriented atmosphere. With careful planning and execution, these events can significantly boost your restaurant's reputation and sales.

10. Partner with local businesses.

Collaborate with local businesses to cross-promote each other. This can be a great way to reach new potential customers in your area.

Consider partnerships like hosting a joint event with a local business that complements your services—such as a wine tasting with a local vineyard or a dessert pairing with a local bakery. You might also consider partnering with nearby hotels or tourism companies to offer special deals or packages for travelers.

Additionally, cross-promotion can be as simple as trading promotional materials—leaving your menus or coupons at a local retailer, while displaying their flyers or products in your restaurant.

Engaging in community events, such as local festivals or markets, can also facilitate beneficial partnerships and increase visibility. Lastly, consider a loyalty program that integrates rewards from other local businesses, motivating customers to support not just your restaurant, but your local business community as a whole.

11. Upselling and cross-selling.

One way to increase restaurant sales is through the techniques of upselling and cross-selling.

Upselling involves suggesting higher-priced items or add-ons to customers to increase the overall value of their orders. For example, offering premium sides, encouraging a move from a regular to a large size, or suggesting superior-quality beverages can enhance the customers' dining experience while increasing your sales.

Cross-selling is the practice of suggesting related but different items. For instance, if a customer orders a steak, suggest a suitable wine pairing or recommend a complementary dessert. However, it's essential to train your staff appropriately so that upselling and cross-selling feel like excellent customer service, rather than pushy sales tactics. These strategies not only boost your sales, but also allow customers to discover new favorite items on your menu.

12. Provide excellent customer service.

Excellent customer service can turn first-time visitors into loyal customers. Ensure your staff is attentive, friendly, and professional.

Train your staff for personalized service:

• Get to know regular customers, remember their preferences, or even their names.
• Build a strong customer service culture to significantly boost customer satisfaction and increase sales.
• Implement a comprehensive employee training program to enhance skills in dealing with different customers and situations.
• Empower staff to make customer-centric decisions for improved satisfaction and loyalty.

Assess and improve service quality:

• Consider conducting customer surveys to assess service quality and identify areas for improvement.
• Handle customer complaints promptly and professionally.

13. Update your décor.

The ambiance of your restaurant can contribute to your customer's overall dining experience. Consider updating your décor to make your restaurant more appealing.

Lighting

This includes considering the lighting, which should enhance the mood of the restaurant. Soft, warm lighting can create a cozy and intimate atmosphere, while bright, cool lighting can make the space feel energetic and lively.

Music

The choice of music can also significantly impact the ambiance of the restaurant. Choose music that matches the theme of your restaurant and the preferences of your clientele.

Seating

Comfortable seating arrangements and high-quality furnishings also add to the overall experience.

Decor

Consider showcasing local art or cultural elements to give your restaurant a unique character and a local touch.

14. Implement a reservation system.

If you don't already have a reservation system in place, consider implementing one. A reservation system provides numerous benefits that can increase restaurant sales.

Firstly, it allows for efficient table management, ensuring that you can maximize occupancy and serve as many customers as possible.

Secondly, it provides a convenient way for customers to ensure they have a table, increasing their likelihood of choosing your restaurant over others.

Thirdly, having advanced knowledge of reservations can help with staff scheduling and inventory planning, reducing operational costs and waste.

Finally, a reservation system can also provide valuable customer data, allowing you to understand peak times and customer preferences, and enabling personalized marketing.

15. Offer catering services.

Expanding your business to offer catering services can significantly boost your restaurant's revenue. Catering allows you to serve large groups at once and exposes your food to new potential customers.

However, successful catering requires careful planning and execution. Consider investing in high-quality equipment and training staff to handle larger orders efficiently. Additionally, be sure to market your catering services through various channels such as social media and word-of-mouth advertising.

Catering can also lead to repeat business as satisfied customers may choose to host more events with your restaurant's food.

Funding holds the key to boosting restaurant sales.

Boosting restaurant sales is easier when you have capital on hand to support operations. The good news is that small business lending is changing. Restaurant owners today have more options than ever to seek a variety of loan types, so their financing strategies align with their growth strategies. Learn more about restaurant business loans.