A new location creates an underwriting problem before the doors even open: the project needs capital, but the location itself has no operating history. Leasehold improvements, equipment, trades and suppliers may all need to be paid before the first customer walks in. In one restaurant transaction, $1.25 million was financed for leasehold improvements and equipment through a lease facility with a $1 buyback and an eight-year amortization.
Personal guarantees were kept to a minimum, and trades and suppliers were paid directly. The structure also provided preferred tax treatment and a relatively swift process. This kind of financing is different from simply asking for an operating loan against a business that does not yet have revenue. The lender is evaluating the project, the assets being financed, the sponsor and the broader business case.
How the funds are advanced can also matter. Direct payment to trades and suppliers creates a controlled use-of-proceeds process and can make a construction or fit-out budget easier to administer. Longer amortization is another important element. Leasehold and equipment costs can be substantial, but their benefit is realized over years.
Matching repayment more closely to the useful economic period can protect early-stage cash flow when the new location is still ramping up. No operating history does not mean no financing is possible. It does mean the file must tell a different story. The focus shifts toward the quality of the project, the people behind it, the assets, the budget and the structure that gets the location from construction to stable operations without exhausting its working capital.