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November 17, 2021

Bakery Financing: How to Use It to Grow Your Operations

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Fora Financial

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Regardless of your current situation, there are so many ways to grow your business. However, it can be challenging to make consistent sales, afford regular expenses, and have money left over for emergency expenses. That's why many business owners decide to pursue additional working capital options. To help you navigate the financing process, we’re sharing our top tips for using a bakery loan. We'll also review popular financing options that you should consider prior to accepting a loan offer.

6 Ways to Use a Bakery Business Loan:

Before you pursue bakery financing, we suggest reviewing your business plan. You may find that there are financial needs that you can't afford without additional financing. Below, we'll review our top suggestions for how you can use a bakery loan.

1. Offer Delivery and Ordering Services

People appreciate convenience, so it's crucial to make purchasing items from your bakery a seamless experience. In order to do this, you can add online ordering capabilities to your website or hire a transportation service to deliver items to nearby patrons. If you don’t want to handle logistics in-house, consider paying to list your business on sites like GrubHub, Seamless, and Yelp. When users search for keywords like “bakery” or “cookies,” your bakery will show up in the results.

2. Expand Your Menu

If you want to stand out against competitors, you’ll need to go above and beyond to earn their valuable business. Don’t just stick to the status quo; try to develop items on your menu that are specific to your bakery. Offering classics is great, but you should have treats on your menu that customers won’t be able to get elsewhere. Also, consider taking custom orders for birthday parties, weddings, and other big events. Another way to attract more customers is to offer gluten free, vegan, or low-sugar baked goods. This will help you earn sales, even from individuals who have dietary restrictions.

3. Hold Sales or Offer Coupons

By offering sales, customers will rush to your retail bakery shop for their sugar fix! During the holiday season, give customers a discount, host sales, or offer free delivery. During the rest of the year, you can offer other perks, such as starting a loyalty program. Using your loan, you can invest in marketing for these sales, hiring additional staff members to handle demand, or invest in other areas of your sales strategy. Bakery-in-Text

4. Cater Local Events

Make connections in your community by catering local events with your baked goods. If the attendees enjoy your treats, they may visit your bakery in the future. Plus, catering jobs can be a great way to earn additional revenue.

5. Invest in New Marketing Strategies

Inform as many people as possible about what your bakery has to offer! There are so many creative ways that you can market your business, such as:
  • Posting pictures of finished cakes on your company’s’ social media profiles
  • Advertising sales in local publications
  • Creating online ads for your target market

6. Start a Bakery Food Truck

Using a bakery loan, you can invest in a food truck that you park at different locations. By opening a food truck, you can make sales in addition to your brick and mortar location.

Types of Bakery Business Financing:

Now that understand how a bakery loan can be spent, let's evaluate the different financing options available to bakery owners:
  • Small Business Loans
When you apply for a business loan from an alternative lender, you can receive a lump sum that you’ll repay in a set term.
  • Merchant Cash Advance
Unlike a business loan, cash advances aren’t repaid in set terms. Once you receive your financing, you’ll remit it based on your business’s credit card sales. So, if your bakery receives significant credit card sales, this could be a great option.
  • SBA Loan
The SBA provides financing to business owners who can’t acquire it elsewhere. In order to receive an SBA loan, you’ll need to prove that your business can't qualify for traditional funding options.
  • Credit Cards
If you need access to financing on an ongoing basis, you might benefit from a business credit card. With a business credit card, you can charge purchases to this card, and hopefully earn rewards in the process. However, it's crucial to pay off your balance each month to avoid racking up debt.
  • Line of Credit
When you receive a business line of credit, you’ll have access to a certain amount of financing that you can borrow against. If the line is revolving, you can borrow the same amount of money again once you pay off the balance.
  • Bank Loan
Most banks offer business loans. However, if you have a bad credit score, own a startup, or need financing quickly, this probably won’t be the best option.
  • Inventory Loan
Business owners that need money to purchase inventory can apply for this type of financing. It’s important to note that this financing can’t be used for other costs, so you should only apply for it if you need to buy inventory.
  • Equipment Financing
If you need bakery financing specifically for equipment (like ovens or a food truck), you can apply for an equipment loan.

Conclusion: Invest in Your Bakery’s Future

By taking out a bakery loan, you can invest in various areas of your business. By doing this, you can run a bakery that makes consistent sales and stand out against neighboring bakeries. It's a win-win, and you won't regret making improvements to your business! Editor’s Note: This post was updated for accuracy and comprehensiveness in November 2021.