Business Loan for Coffee Shop

Jon Maloney explains business loans for a coffee shop.

Can I get a loan to buy a coffee shop and what type of business loan would I need?

To buy a coffee shop, you’re going to be looking at a secured loan. It would either be secured on your home property or the business property that you’re buying.

Obviously you can just buy the business itself, with no property, but that would probably still require a secured loan just because it’s probably higher value. You’d probably want to spread the payments over longer than the normal two to five years.

We do arrange secured loans like this, but it’s not our forte. There are more specialist lenders out there to do that sort of thing – but we will happily have a look for you. Once you’ve bought the coffee shop, that’s a different matter. That’s where we can really help you.

We provide loans for shop fits, furniture and everything else.

What are the eligibility requirements for a business loan to buy a coffee shop?

Let’s assume that you used to work in a coffee shop and you decide to set one up yourself. You’re a startup business, so you have a couple of options. First is a secured loan to buy the coffee shop, and then you’re probably looking at asset finance and leasing for the equipment that goes into it.

For eligibility for an unsecured business loan, you need to have been trading for one year minimum and have a turnover through your business bank account of £10,000 or more per month.

To buy a coffee shop you would need to demonstrate some experience and that you’ve got adequate security. Again, we could look at that but secured lending is not our speciality.

Can individuals or only businesses apply for loans with you?

It’s businesses only. We don’t work with individuals.

How much can I borrow for my coffee shop business? How is income assessed?

You can borrow from £10,000 up to £500,000. Assessment is all about affordability and whether you can afford the monthly payments. They might be over six months or five years.

What we require is a full set of your last year end accounts and six months business bank statements. The bank statements are where we get a good idea of whether you can afford the monthly payments. They give a commentary on what’s been going on in the business for the last six months.

We can see day-to-day transactions, whereas accounts are a snapshot of the whole year. The accounts won’t show any potential cash flow issues that happened during the course of the year.

What is the repayment term for a loan for a coffee shop?

If you’re looking to purchase a coffee shop, it can be anywhere between 12 months and 10 years because it’s secured. There is a big difference between secured and unsecured borrowing, though, and we specialise in unsecured.

With unsecured loans, you’d be looking at anywhere between six months and five years. We primarily cover cash flow, working capital and one-off bills or unexpected bills. So our typical term is 12 to 18 months.

What if I have bad credit? Can I still apply for a loan for a coffee shop?

Yes, you can. It depends how severe the credit issue is. Bad credit is quite a broad umbrella term. It covers a missed gas bill payment to someone having had five companies that have gone into liquidation and has run away from HMRC debts. It’s such a broad brush.

So it depends what you deem to be bad credit. Perhaps you’ve had an issue in the past and automatically think that your credit’s terrible – that might not be the case. On the flip side, we have had people who think that their credit is fantastic and when we tell them that they haven’t paid their mortgage in six months, they go a little bit quiet.

The best thing to do is call us and tell us why you think that your credit’s bad. You can obviously subscribe to the credit reference agencies like Experian, TransUnion and Equifax.

If you subscribe to them you can keep on top of it. They might charge you £10 or £15 a month and that will give you your credit report and credit score.

Lenders do use different credit reference agencies. We’ve seen in the past where Equifax might have you down as having an excellent credit score, while with Experian it’s rated good. It depends what lenders share with which agencies. But if you have bad credit, it’s still worth applying and we can let you know.

How do I apply for a loan for a coffee shop?

Click on the button on our website that says ‘check eligibility.’ If you’re eligible, you go through to the application form, which takes about two minutes to fill in. An account manager will be in touch with you within a few minutes requesting some information – the last set of year end accounts and six months’ bank statements.

You’ll get a decision usually within 24 hours. So if you contact us today you could have the decision tomorrow.

There are some times in the year where there’s an influx of applications which can slow things down – but perhaps it would just take an extra day.