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Bakery Loans

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The bakery industry consists of approximately 2,800 commercial bakeries and 6,000 retail bakeries with combined annual revenues of nearly $40 billion per year.

Retail bakeries come in all sizes and shapes from start-ups to franchises. You may have your favorite product that you believe will have a market like Mrs. Fields did in 1977 or you may want to go with an established franchise brand, like Mrs. Fields is today. In either event there will be start-up costs which include equipment, materials, labor, rent, franchise fees, advertising and marketing, to name a few.

In all likelihood you will need financing in addition to your own capital to launch or grow your business. You will need a business plan to determine your needs and what type of financing best suits your needs. If you are looking for a franchise, the International Franchise Association (IFA) website can provide you with a list of bakery industry franchises and their financial requirements. Many IFA members offer financial incentives to veterans through their VetFran program. Many franchisors will offer a business plan template to help you get started. In addition business plan templates are available from various U.S. Small Business Administration sponsored sites such as the

There are many options available in order to finance your bakery business. From SBA loans and conventional bank loans to non-traditional financing through alternative lenders. The most efficient way to find funding that fits your business model and size is through an online marketplace that connects you with all types of lenders. The best way to decide which bakery loan is best for your business is to familiarize yourself with the different types of small business financing.

Which Loan Product Is Right For Your Bakery?

Conventional Financing Small Business Loans

Conventional loans offer flexible pricing and terms for bakery businesses, and lending institutions are usually able to give lower pricing for more robust loan requests. Conventional loans can be arranged through banks and even non-traditional lenders. The credit standards on conventional loans are usually higher than other forms of banking, because the loans are not guaranteed by a third party, and the bank assumes the full risk of the loan.

SBA Small Business Loans

One of the more popular alternatives to traditional loans is a Small Business Administration’s (SBA) loan. The 7(a) loan programs typically back 75% of the loan, while the SBA 504 loan will provide enhancements up to 40% of the loan, which lessens the risk that the bank or lender has to assume in financing a bakery. In order to receive an SBA loan, the bakery owner must adhere to the SBA Standard Operating Procedures for loan underwriting. SBA loans are usually structured around the bakery’s assets that can be used as collateral.

Merchant Cash Advance

A merchant cash advance (MCA) is a loan whereby the bakery secures money based on credit card receivables. In order to qualify for an MCA, the bakery must have a brick and mortar establishment, and have a history of credit card payments from customers. The lender then gives the bakery owner a loan that is equal to a percentage (typically 70-80%) of the credit card sales. MCAs should be considered short-term financing, as the interest rates are substantially higher than other loans.

Asset Based Loans

Bakery owners often apply for asset based loans instead of conventional financing. Asset based loans and asset based lines of credit are based on the market value of the bakery’s equipment, real estate, inventory, and other assets. These act as collateral to back the asset based loan. Asset based loans can be conventional loans and SBA loans.

Unsecured Line Of Credit

An unsecured line of credit is based on the needs of the bakery, as well as the financial strength of the business and its cash flow history. Most unsecured lines of credit have strict financial requirements, because the lender assumes 100% of the investment risk.

Equipment Leasing & Financing

Often the sellers of bakery equipment or affiliated finance companies will provide financing for equipment purchases through equipment leasing arrangements.

Seller Carry Finance

Some bakery owners and entrepreneurs look to buy existing bakeries, in order to save on shopping for new equipment, a new location, and everything else involved with building a business form scratch. In many of these cases, terms and pricing of buying a bakery can be worked out with the established owner. In addition to this, the existing owner usually helps with the transition and training of staff in order to ensure the success of the new bakery.

Baking Industry: Economic Impact

According to the American Bakers Association, the baking industry provides over 700,000 direct jobs and another 1.1 million in supplier and other direct jobs with a total annual economic impact of nearly $300 billion.

Apply For Bakery Loans

Above are listed just a few of the many financing options for bakery owners. Whether you own a bakery and are looking to expand your operations, or if you are an entrepreneur looking to start up a new baking business, you should consult with a business financing professional to figure out which type of bakery loan is best for your operation.

Applying for a bakery loan has never been easier, and BoeFly has over 5,000 lenders ready to help your bakery achieve success. A single loan application through BoeFly is the fastest and most efficient way to get financial backing for your business. While many banks can help start the lending process, BoeFly helps bakery owners by creating competition among lenders so that you have a wide range of financing options, terms, and pricing for you to choose from, so you can get the right funding for your bakery.

Ready to start? Contact BoeFly at 1-800-277-3158 for a free consultation or find out if you’re fundable with our FREE fundability app! Need more information download our free e-book The Complete Guide to Small Business Lending.