Opening a restaurant or retail business: How to secure bank financing – and these are the 7 showstoppers

Category: Business Plan & Financing | Author: Daniel Schäfer | Reading time: 8 min.
Meta description: Applying for bank financing for a restaurant or retail business? Discover the 7 most common reasons for rejection and what a bank-ready business plan really needs to look like.

If you want to open a restaurant or a retail business, you need a very good business plan. Banks have become particularly cautious in these sectors – they not only check whether your application is complete, but also whether it is plausible and whether you have everything you truly need. Underestimating this risks rejection – and you may lose valuable time and often the best location.

Contents

1. Why time is your greatest enemy
2. Who are you actually writing your business plan for?
3. The 3 most important showstoppers – and how to avoid them
4. What makes a business plan ready for financing
5. How long does the entire process take?
6. Our tip: Start with a dummy location
7. Conclusion and next steps

Why time is your greatest enemy

As soon as you have a good business idea and are scouting initial locations, the clock starts ticking. Good locations are in high demand – and a landlord will not wait months for a bank approval.
If you only start working on your business plan once you have found a location, you will lose two to four months in practice – and often exactly the location for which the concept was created. Our experience shows: By the time the bank approval finally arrives, the original location is, in most cases, already rented to someone else.

Important: Start preparing your business plan as early as possible – ideally before you have found the final location.

Who are you actually writing your business plan for?

Most founders think of the bank as the only recipient of the business plan. In reality, you usually have at least three to five different audiences:
The bank – for the external financing of your venture.
The landlord – you must apply as a reliable tenant and convince them that your concept is viable.
The Employment Agency – if you are currently employed or seeking work, there are funding programmes for which you will need a well-developed concept.
Investors – if you wish to raise private equity capital.
Consulting funding – for subsidies on consulting costs through government programmes.
Each of these recipients has different expectations. A truly professional business plan takes this into account from the outset.

The 3 most important showstoppers – and how to avoid them

Showstopper 1: No secured location

For gastronomy and retail, as in the property sector, it’s all about location, location, location. A poor or unsecured location is one of the most common reasons for rejection.
Our urgent advice: Always keep at least three potential locations in reserve. In the bank financing process, you will typically lose the first and sometimes even the second location. If you have a third or fourth option in the pipeline, you can simply adapt your business plan – instead of starting from scratch.

Showstopper 2: No equity capital

Anyone who relies 100% on external capital will almost certainly receive a rejection. The trend among banks is clear: the more equity you contribute, the more willing the bank is to finance the remainder.
The safest starting point is a 50/50 split: you provide half of the required capital, and the bank provides the other half. If you contribute only 10 to 20% equity, there is still a significant risk of rejection.

Showstopper 3: Poor credit rating – Schufa and Krefo score

In addition to your personal credit rating (Schufa score), banks also check the Krefo score for existing entrepreneurs – this is your company’s rating by Creditreform. Anything above 300 points is considered critical and usually leads to rejection.
If you have a current or previous business and have failed to regularly submit figures to Creditreform, you risk a poor score – often without realising it. So check this early and bring your score into the positive range before submitting your application.

Note: There are further showstoppers – for example, meeting the requirements for a liquor licence. We are happy to discuss the full list with you in a free initial consultation.

What makes a business plan ready for financing

Step 1: The checklist appendix

Before you write a single line of text, you need a complete checklist of all the documents the bank expects. If even one essential document is missing when you submit your application, the documents will be returned – and you will lose another two to four weeks.
Different documents take different amounts of time to obtain. A certificate of good standing from the tax office, a current annual financial statement from your tax adviser, or a commercial register extract – all of these take time. If you start gathering these the day before your bank appointment, you will fail.
A clear checklist on two A4 pages shows you: once everything is ticked off, you are 100% ready to apply to the bank.

Step 2: The financial section – before any text is written

The financial section is the foundation. Here, calculations are made and it is checked whether your business model is economically viable – using the actual rents, investments, deposits, taxes, and the capital service for interest and repayment. Only when the financial section is 100% plausible and demonstrates that the business can pay you, your employees, the state, and the bank does the real text work begin. This is the mistake most people make: they download a text template from the internet and add the numbers afterwards. That does not work – and banks notice it immediately.

Step 3: The text section – your silent salesperson

The text section describes what the financial section proves. It explains you as a person, your idea, the location, the competition, and the business model. No business plan is the same – it must be tailored to your project, your location, your capital structure, and your team. Important: The decision-maker at the bank will probably never meet you in person. Your business plan is your representative on their desk. It must convince on its own.

How long does the entire process take?

Preparing a complete, bank-ready business plan takes between two weeks and two months, depending on your prior work. In addition, there is the actual bank process: you usually do not go to just one bank, but your main bank also submits applications to funding institutions such as KfW or the state bank. These take another three to four weeks. If a guarantee bank is also involved, a total of two to three months is not uncommon.

 So plan realistically: From the idea to bank approval, four to five months can pass. If you start too late, you risk losing the location.

Our tip: Start with a dummy location

You do not have to wait until you have found the perfect location. Start with a hypothetical sample location and prepare your business plan and financial plan on this basis. Rental costs, deposit, renovation needs, and market situation can be updated later. This way, you will quickly have an 80 to 90 percent complete business plan – and when you then compare two or three specific locations, you simply enter the figures and immediately see which location is truly economically worthwhile.

Conclusion: Do not waste time

From a bank’s perspective, gastronomy and retail are high-risk sectors. A complete, plausibly calculated, and individually prepared business plan is not optional – it is the basic requirement for a financing commitment. The key points at a glance: start early, have several locations ready, bring sufficient equity, and proactively check your creditworthiness. And above all: numbers first, text afterwards. Good news regarding costs: If you are seeking work or unemployed, you can receive vouchers from the Employment Agency that cover up to 100% of the consultancy costs. Through other programmes, up to a 50% subsidy is possible – even if you do not yet have an ALG I decision. https://youtu.be/66iFocI82a0