How to Open a Restaurant With Bad Credit

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Owning your own restaurant can be the fulfillment of a dream, but you may have trouble taking the first step if you can't get the startup capital you need. In early 2011, small business loans are still hard to find, and you need good credit to qualify. If your credit rating is bad, you can still find financing for your restaurant by exploring alternative sources. Write a detailed business plan and have it on hand to help you attract potential investors to finance your venture.


Find one or more business partners with good credit who can borrow the capital you need from a bank or a credit union in return for part ownership in your company. Have the attorney draft a partnership agreement that specifies each partner's responsibilities, percentage share of profits, and the distribution they'll be entitled to if they leave the partnership. Sign the partnership agreement if both parties consent to them. Discuss financing options with your business partner, and agree upon loans or lines of credit that your partner will apply for.

Approach family members about borrowing startup funding for your restaurant. Give interested family members a tour of your restaurant, or of the area where you plan to open your restaurant, and tell them about your plans for the business. Write a business proposal that details your plans for relatives who agree to lend you money. Retain an attorney to draft a promissory note that spells out the interest rate and duration of the loan. Sign the loan paperwork so that your relative can disburse the money to you.

Start your restaurant on a micro level, by renting a small space that you can afford without borrowing money. Examples of affordable spaces can be tables or booths at farmers markets or in corporate office buildings. To purchase food or other supplies, open an account in your business name with vendors who don't check personal credit. Pay your vendors on time. As your business grows, use your vendor references, your business plan and financial statements from your business to seek loans to rent or purchase a bigger space.


  • Get an attorney experienced in small business startups to advise you during your startup period. Your attorney can help your restaurant launch smoothly by applying for all necessary licenses and reviewing legal documents on your behalf.