July 07, 2022

Bar and Nightclub Financing: How to Find a Loan

7 Types of Bar Loans

Not all bar loans are created equal. There are a variety of options you might want to explore, including:

1. Term Loans

Term loans are offered by banks, credit unions, and online lenders. Upon approval, you’ll receive a lump sum of money upfront. Then, you’ll repay it over time via fixed monthly payments over an agreed-upon term. While term loans can be challenging, especially if you’re a new bar and nightclub, most come with competitive interest rates and flexible terms. 

2. SBA Loans

Partially guaranteed by the Small Business Association, SBA loans offer low-interest rates and lengthy repayment terms that you may not find elsewhere. Depending on the loan program and your unique situation, you may be able to borrow up to $5 million and take up to 25 years to pay it off. While SBA loans offer many benefits for bar and nightclub owners, these products come with an extensive application process. Good credit is usually required as well. 

3. Equipment Loans

If you’ve found a space for your bar and nightclub, you’ll need to fill it with various equipment, including:
  • Brewing tools
  • Tables
  • Chairs
  • Ice boxes
  • Draft lines for beer
Even if you buy it used, it won’t be cheap. With equipment loans, you can receive funding to cover the cost of your equipment. Since these loans are secured and tied to the equipment, you’ll likely qualify for them, even if you have bad credit. 

4. Business Lines of Credit

Chances are your bar and nightclub will face emergencies or seasonal dry spells. With a business line of credit, you can enjoy easy access to cash to help you out when times get tough. A line of credit is similar to a credit card but comes with much higher limits. You can withdraw funds as much or as little as you’d like and only pay interest on what you borrow. A line of credit is the ideal way to cover expenses without dipping into your cash reserves. 

5. Commercial Real Estate Loans

The location of your bar and nightclub is essential if you’d like to attract the right clientele. Since a nice space in a trendy or appealing area can run you hundreds of thousands of dollars, a commercial mortgage or commercial real estate loan is a good option. You can use it to buy a bar for your business or renovate your existing facility. 

6. Merchant Cash Advances

A merchant cash advance can be a solid choice if you own an established bar and nightclub. You’ll receive cash upfront and use a percentage of your credit card and debit card sales to repay the advance. Compared to other bar loans, merchant cash advances are fast and easy to get.

7. Invoice Factoring

Invoice factoring is when you sell your unpaid invoices to a factoring company. Since it’s an unsecured form of financing, you don’t have to risk losing any of the assets you own. Most factoring companies will only advance up to 80% of your invoices, but they’ll approve you, even if you don’t have the best credit.

How to Use Bar and Nightclub Loans

It can cost anywhere from $240,000 and $840,000 to open a bar and nightclub in the U.S. It’s also expensive to run and grow this type of venture. With nightclub business financing, you can cover a variety of business-related expenses for your bar and nightclub, such as:
  • Startup Costs: Startup costs include but are not limited to real estate, supplies, wages, permits, licenses, and insurance. These are usually the most significant hurdle to bar and nightclub ownership. 
  • Food and Alcohol: Even if you serve snacks like chips and popcorn, the cost of bar food can add up quickly. Alcohol, like beer, wine, and liquor, will contribute significantly to your daily operating expenses. 
  • Equipment: At a minimum, your bar and nightclub will need refrigerators, taps, and glassware. The larger your operation is, the more these basics will cost you.
  • Permits and Licenses: No matter where you’re located, you’ll need to invest in proper permits and licenses to operate. These will allow you to serve food and alcohol legally.
  • Expansion Costs: You may want to expand your bar and nightclub at some point. You might add on to your current location or open new locations. 

Conclusion: Set Your Bar and Night Club Up for Success

While owning a bar and nightclub isn’t easy, it’s rewarding. With bar financing, you can start or grow your venture. Make sure you compare all your options and choose the right ones for your unique situation.