Bakery Loans: Financing Options for Bakeries and Bake Shops

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Bakery Loans

Key Facts

  • Average initial investment: $10000 to $50000
  • Average cost for lease/rent: $38.06/ sq ft11.
  • Equipment Cost: Min $400022
  • Business registration/licensing cost: $1500 to $3500 (depending on the state)
  • Average annual salary payable to employees: $40,495 p.a.
  • Average revenue expectations from the bakery: $450,000 (approx)3
  • Estimated profits: 20% of the revenue

A bakery business is one of the emphatic revenue sources. One of the few sectors dominated by small businesses, this sector saw exponential growth in the last ten years4. The bakery market is now worth USD 99.47 billion. But it would grow at a CAGR of 2.08%5. Opening a bakery business now seems a reasonable investment. There are many bakery Business loans to help you. Here, we will discuss some options that suit your business.

Why Do You Need a Bakery Loan?

Most of the initial investment costs in the bakery business are high. It is always better if you self-finance your small start-up. However, 48% of small start-ups can only meet their financing means in the US. Rest fail. Therefore, I suggest the best financing options for your business here.

The market statistics are only some of it. There are other reasons why you need financing. 

Today, buying/renting commercial real estate is a costly affair in the US. Hence, you need a loan. Moreover, bakery equipment can also sum up the burden of your start-up cost. That’s another reason to take a business loan. 

In a nutshell, bakery Business loans are the best options to kickstart your bakery business. 

I know you may wonder- what if I fail? I can’t deny that 60% of start-ups in the US fail to secure a loan for their business6. But, the average success rate in the bakery business is relatively high. The main reason behind this is the lucid growth of the consumer market for bakery products. And the trend will continue till 2028, at least7.

Financing Options For Bakery Loans

Here are the finest bakery Business loans to grow your brand quickly. Check out and find which one suits you. 

Bakery Business Loans from Banks

Taking loans from traditional banks is the best. Firstly, they offer interest rates as low as 6.14%. The best banks to grant business loans for mall companies in the US are:

  • Bank of America (interest- 9.5%)
  • JP Morgan Chase (interest starts from 7.8%)8
  • U.S Bank (interest rate 6.25%)
  • Citibank (interest rate 12 to 18%)

Banks not only provide low interest rates. They also allow longer payback tenures. The average repayment tenures are between 3 to 10 years9. As a result, the monthly installments are also low. In a nutshell, the loans become quite affordable. You may avail of term loans as well. However, banks may take up to 6 months to process term loans. Hence, term loans won’t suffice your quick financing needs.

Bakery Business Loans From SBA Loans 

SBA loans are government loans, especially for small businesses. But there’s a reason why these loans are better. 

Firstly, the government acts as the guarantor for your business. So banks don’t feel the risk of non-payment. As a result, the chances of approval of SBA loans are higher than those of regular bank loans. 

Which SBA loan schemes are best for your bakery?

The 7(a) Scheme

This scheme is for you if you need more capital. The government covers 75 to 85% of the bakery Business loans’ payback value. 

Loans Against Low Documentation

You only need to form to get bakery business loans against low documentation. After that, the loan will be credited within 36 hours. 

Express Loan

Express SBA loans are disbursed equally fast. However, Express loans grant up to $550,000. However, the interest rates can be much higher. Moreover, the government covers only 50% of the loan amount.  

Equipment Leasing

Bakery business loans are now more accessible, and equipment loans are available. Often, small business owners fund the real estate and construction costs. Yet, they need more funds to spare for equipment. 

In a bakery business, you need the equipment. Most standard bakeries need equipment of about $20000 (min)10

That’s where equipment loans come in. You may save a considerable part of your upfront costs by leasing equipment rather than buying it. 

However, a fund crunch is one of many reasons why equipment leasing is suitable for a bakery. 

As new baking trends come up, you may need the latest equipment, too. 

But buying upfront equipment blocks the funds you could utilize for more equipment later. 

So, I recommend equipment leasing. When you don’t need the equipment, pay the token lease closure amount. Then lease the other set of equipment you need. 

Online Lenders for Micro Business Loans

Online lending is in vogue now.  There are avid bakery Business loans available from online lenders. Most of these are quick finance options. However, their rates of interest are higher than traditional loan options. 

Here, you will find a selection of online lenders suited to your bakery business needs:

Lendzi

Lendzi is one of the most popular microfinance apps in the US. It has a 4.5 user rating, too. You may also borrow up to $4 million from Lendzi. Moreover, Lendzi also gives loans to entrepreneurs with a credit score of 500. 

Wait. There are other benefits, too. 

You can choose the mode of financing you want for your bakery. For instance, Lendzi gives equipment financing up to $2 million. But you may also apply for a business line of credit. It will cater to your flexible business financing needs. However, you need good industry knowledge to use compatible loan options. For better ideas to run a bakery, read How a Bakery Expert Runs One of the Best Bakeries in the US?

SMB Compass

SMB Finance loans are more flexible and apt for small start-ups. If you plan to start a small cafe shop, you may apply for a petty loan of $10000. However, SMB gives loans of up to $10 million to credible lenders. 

The interest rates are also compatible. It starts from 7.9% only. However, flexible payback tenures are the best thing about SMB. 

You may also drag an SMB loan for up to 25 years.

Biz2credit

The terms of credit are almost similar to those of SMB. However, the minimum grant amount is $25000. However, Biz2credit loans are mainly used for real estate funding. 

Ideal ways to Use Bakery Business Loans

Often, you may get a loan due to a good credit score. But you may need to prepare to use the loan better. I understand inexperience lies in its basis. But I will share a few tactics to help you in this situation.

Develop a Suitable Space with Your Loan

Have you been to CocoCasa Kitchen in NY City? Sim started the bakery back in 2010. Their garnishing palette and cupcake designs will blow you away. 

They invested in their physical space and equipment. At the same time, they spent on designing, photoshoots, and online advertising despite being a small bakery. 

Hence, CocoCasa Kitchen is now a familiar name among bakeries in NY. 

You may also use your loan judiciously to stand apart in your business, like Sim. 

Sort Your Equipment Game

The right equipment is the key to charming customers with cute bakery products. The right equipment also decides the quality of your bakery products. 

Hence, the machines you use in your bakery should be of standard quality. That’s where equipment financing may help you. 

The costliest equipment in your bakery might be the walk-in fridge, mixers, oven, etc. You may finance all of them through equipment loans. 

Promote Your Brand

Without promotions, you don’t stand a chance. Vertical IQ calculated that there are 10800 active bakeries in the US11

So, you need good promoting skills to topple the fierce competition. 

You may cover frequent TV, radio, and social media ads through your loan amount. 

If you have adequate funds after covering the rest of the needs, you may hire a marketing consultant. 

Recruiting Bakers

Taking baking can be a severe toil. So it’s better to have staff help you, since day one. As a result, you can avoid delivery delays. You can also ensure that you can rope in additional orders during festive seasons.

Recruiting 1-2 staff using bakery Business loans is a viable option. You may recruit them on a part-time basis too. 

I understand nascent businesses may be confused or even worried at this point. The article on Bakery Management: 10 Best Tips For The Audience can help them. 

Wrapping Up…………….

Bakery businesses are quite profitable in the US now. So, it’s the right time to start your bakery now. Don’t think much. Apply for bakery Business loans now. 

I shared all possible tips to get a loan. You may take a loan from banks. Alternatively, there are SBA loans to help you. However, the easiest option to get a loan is an online loan. Still, online loans charge the highest interest. 

So, aim for the less costly loan that fits your business needs and fiscal eligibility

For any other business financing tips, comment down here.

For More Informative Business Articles Click Below!!

  1. How much does it cost to open a U.S. retail store in 2023? ↩︎
  2. How Much Does It Cost To Open A Bakery? ↩︎
  3. What Is the Average Revenue for a Bakery? ↩︎
  4. North America Bakery Product Market ↩︎
  5. North America Bakery Market Size & Share Analysis – Growth Trends & Forecasts (2024 – 2029) ↩︎
  6. Startup Failure Statistics: What Percentage of Startups Fail? ↩︎
  7. North America Bakery Market Size & Share Analysis – Growth Trends & Forecasts (2024 – 2029) ↩︎
  8. JPMORGAN CHASE BANK N.A., INDIA MARGINAL COST OF FUND BASED LENDING RATE ↩︎
  9. Bakery Loans: Financing Options for Bakeries and Bake Shops ↩︎
  10. How Much Does It Cost To Open A Bakery? ↩︎
  11. Commercial and Retail Bakeries ↩︎

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