How are restaurants funded?

Bank loans for restaurants

Restaurants are companies with a business model normally aimed at private customers, which require a very specific financing circuit. The financing of any company is divided into two types of financial needs, a long term one, destined to the expenses of the first establishment and any other investment with long term return, and the short term or circulating one, destined to cover the operative circuit, and on these two needs all the bank negotiation is centered.

Private financing for entrepreneurs

Modigliani and Miller in 1958 in their theory ¨Relevance Thesis¨ consider the existence of perfect markets where there are no costs for bank loans and taxes. However, they cannot be defined in such a way, due to the existence of imperfections where transaction costs, agency costs and taxes are limitations that every company must face when choosing its financing strategy.

Researching financing strategies in tourism sectors such as hotels and restaurants, responds mainly to the support that government entities are giving to Ecuadorian tourism, besides being a sector that can contribute permanent income to the country’s economy. For this, it is necessary to adapt to the needs of the environment, being fundamental to mark presence in the market, to make financing decisions that satisfy the needs of internal and external users.

The purpose of the study is to analyze the financing strategies used by the owners of hotel and restaurant companies, through a panel study, taking the theories of Financial Hierarchization (Pecking Order) and Objective Leverage (Trade Off) as the best known capital structure theories, in order to identify the causes that may be causing the owners of the businesses to make certain financing decisions. Its analysis is important because it provides information that contributes to improve the policies of access to financial resources of companies and encourages investment in new ideas or projects.

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Financiamiento de una pizzería

Guía: CÓMO <strong>ESTABLECER</strong> <strong>UN</strong> <strong>RESTAURANTE</strong> Este reporte es el resultado del esfuerzo y colaboración entre el Instituto para Asuntos Rurales de <strong>Illinois</strong> (<strong>Illinois</strong> Institute for Rural Affairs, por sus siglas en inglés IIRA) y el Departamento de Comercio y Oportunidad Económica de <strong>Illinois</strong>. IIRA, a través de un contrato con Catherine J. Henning, quien recopiló el material y llevó a cabo el análisis. DCEO publicó y distribuyó el documento. Presentado por Nancy Baird, Instituto para Asuntos Rurales de <strong>Illinois</strong>. Publicado y distribuido por: El Departamento de Comercio y Oportunidad Económica de <strong>Illinois</strong> 500 East Monroe Street Springfield, IL 62701 800/252-2923 o 217/782-7500 TDD: 217/ 785-0211 Este documento también esta disponible a través de las páginas electrónicas del IIRA http://www.iira.org y DCEO http://www.ienconnect.com i

Traditional sources of financing

Also known as venture capital, these are funds that invest more considerable amounts in startups in the growth phase, whose potential and risk are high. It is important to have well-defined and attractive projects to attract the attention of these funds.

If technology has brought us something through different channels, it is financial inclusion. Crowdfunding are platforms where you can publish your company or project, allowing individuals and companies to invest in them either through debt, capital or even through donations.

The term mezzanine refers to one of the sources of financing that occupies an intermediate place between debt and equity in terms of risk and return. It complements bank debt by providing resources for growth projects that for some reason are not financed by banks. Complements equity by providing resources without diluting existing partners. Adapts to the specific needs of companies that require this type of long-term financing.

How are restaurants funded?
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