Business loan – financing bars, cafes , etc.
To open a restaurant, a bar, a bistro or a café, this sector of activity remains popular among project promoters. This kind of trade continues to be unanimous for a very good reason. Customer friendliness compensates for bad business days. Unfortunately, accessing this dream is not a simple task. Large investments, sometimes a large bank loan, await entrepreneurs. Often, the route ends there and the project remains a dream. But have you heard of the business loan or the brewer contract? Let’s find out what it is.
The business loan, the alternative
The business loan is a very common practice in the field of financing bars, cafes, hotels and restaurants . How it works ? The supplier (brewer, beverage wholesaler, distribution group …) helps the distributor (the owner of the café or restaurant) in his projects by granting him a financial loan, material support or services. In exchange, the owner agrees to supply himself with drinks, exclusively at the brewer. In general, the contract lasts 5 years. At the end, the operator retains ownership of all equipment if he pays his debts.
Good to know : one in two establishments in France uses the business loan.
The business loan, WHO negotiates WHAT?
To get to the heart of the matter, here’s what you need to know about the business loan.
- If both parties agree on a financial loan, the contract will stipulate the amount (up to several tens of thousands of euros) and the method of payments. The owner risks fines if he exceeds the exclusivity heard with his supplier. In the worst case, he risks breaking the contract and repaying the entire loan with penalties.
- If the contract focuses more on the supply of materials and services, the agreement must clearly state the nature of the supports and the counterparts. For example: the endowment of a coffee machine, beer pump and its cold system, the granting of a license for alcohol, the maintenance of the machines, the renovation of a room …
Good to know : The duration and terms of the exclusivity must be mentioned in the contract. In case of sale of the activity before the end of the contract, the distributor undertakes to have the contract continued by the new acquirer (distributor’s security clause).
What are the disadvantages of the business loan?
The business loan is used as an alternative of choice to the professional bank loan . Unfortunately, it does not only have advantages:
- Its cost can be very high
- If the distributor is unable to pay its debt at the end of the contract, it is extended.
- It favors the big brands.
The secret is in the negotiation
As you have noticed, it is the exclusive commitment of the owner who is the cement of the contract. However, this does not leave the brewer free to act as he wishes. Indeed this one also has obligations towards the owner. It is for this reason that we must specify in the contract the nature of this exclusivity. Do not be afraid to draw the breadth of the brewer’s responsibilities. In other words, be a good negotiator.
During the negotiation, the owner must find the right system as:
- Get a good quota on the volumes to be sold annually
- Get rebates from the brewer to keep the price down and stay competitive
- Request a more flexible exclusivity and be able to sell other brands such as organic drinks or craft brewers
- Summon a break in the contract in advance