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When mixing up your restaurant’s recipe for success, there’s one essential ingredient you need to take your restaurant to the next level: capital.

When cash is scarce, a restaurant loan can help you bridge the funding gap. Restaurant financing can take different forms, including term loans, invoice loans, or merchant cash advances. The key is knowing which loan is best for your unique situation. A merchant cash advance, for example, might be appropriate if you need quick access to funding. When growth is your objective, a term loan is likely a better fit. Term loans allow you to borrow larger amounts of capital at competitive interest rates, with payments spread out over time so you’re not putting a pinch on your cash flow.

Here are six ways to leverage a loan to meet your restaurant’s short- and long-term goals.

1. Expand your operations

If business is booming, expanding may seem like a logical next step and a term loan can help you do it. For example, you could use a term loan to:

  • Open a second location across town
  • Renovate and expand your existing location
  • Start a mobile food truck
  • Open up a brick-and-mortar location if you started off as a mobile business
  • Establish a location for catering services

Intermediate term loans are designed to be repaid over a period of one to three years, and you can borrow as much as $1,000,000 based on your creditworthiness. Whether you’re planning a smaller expansion or a larger one, a term loan can provide the funding you need to stretch and grow.

2. Purchase equipment

You can’t run a restaurant without the necessary supplies and equipment. You could use a merchant cash advance to get capital quickly but the cost of borrowing is often high. A term loan, on the other hand, could be used to:

  • Upgrade your range or replace your dishwashing setup
  • Install new espresso machines
  • Swap out leaky coolers for new ones
  • Overhaul your point-of-sale system
  • Purchase new tables and chairs

From the front of the house to the back, a term loan can help outfit your restaurant with everything it needs to run smoothly.

3. Pay for day-to-day costs

You’re not alone: Maintaining a positive cash flow is a challenge many restaurant owners face. The following overhead costs can add up fast, especially if you face an unexpected cost:

  • The most important costs: deliveries of food and alcohol
  • Staff payroll for front and back of the house
  • Your location’s lease or mortgage payments
  • Electricity, water, Internet and other utilities
  • Insurance
  • Linen service
  • Advertising

In this scenario, you could use a term loan or a working capital loan to get the funding you need to cover basic operations. The main difference between the two is that working capital loans may have a shorter repayment period. For instance, you may be expected to repay a working capital loan with 30 days while you might have 12 months to pay off a short-term loan. Looking at what you can afford to repay out of your projected cash flow can help you decide which is the better fit.
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4. Refinance your existing debt

Debt can be a drag on your restaurant’s cash flow, especially when it comes with a high interest rate. If you’re able to qualify for a term loan at a lower interest rate, you could refinance your existing loans, saving money in the process. The kinds of debt you could use a term loan to refinance include:

  • Inventory or equipment loans
  • Merchant cash advances
  • Invoice financing or factoring
  • Working capital loans

If you’re considering using a term loan to refinance existing restaurant debt, be sure to compare the rates and fees different lenders are offering to make sure you’re getting the best deal possible.

5. Hire new staff

From management to kitchen staff, everyone in your restaurant has an important part to play. Taking out a loan can provide you with capital to:

  • Hire and train a new kitchen manager
  • Take on an in-house accountant to manage your restaurant’s books
  • Boost your management team or wait staff
  • Hire workers to crew your mobile food truck or man your catering operation

The key is to consider the return on investment you’re getting with the loan. How much value will hiring new staff provide in terms of profitability and increased productivity, compared to the cost of the loan? That’s an important question to consider any time you’re taking on restaurant financing.

6. Prep for seasonal highs and lows

One downside of having a seasonal restaurant is the ups and downs in your sales. If you run a beachfront cafe, for example, the winter months are likely to cool your cash flow. Fortunately, restaurant financing can come in handy for seasonal budgeting when you need to:

  • Hire seasonal staff
  • Step up your marketing campaign ahead of the seasonal rush
  • Use your downtime to overhaul your restaurant’s marketing
  • Purchase supplies to prepare for the season but you’re short on cash
  • Cover day-to-day expenses during the slow period

With careful planning and budgeting, a restaurant loan can benefit your business. A term loan give you repayment flexibility and the opportunity to borrow at a lower cost compared to a merchant cash advance or invoice financing. Take your time. Weigh your options, then determine which loan is most appropriate for your needs.

BIO: Bond Street is transforming small business lending through technology, data and design. The company offers term loans of up to $1,000,000 with interest rates starting at 6% and terms from one to three years.