Running a restaurant takes guts. It also takes money. For most owners, that means taking on some debt at one point or another, whether it’s to renovate your kitchen, open a second location, or ride out a slow season. That’s okay. In fact, the right debt at the right time can fuel growth you couldn’t achieve on cash alone.
Where it gets tricky is when those payments start to feel heavier than your lunch rush. That’s when debt stops feeling like a tool and starts feeling like a weight.
The good news?
You don’t have to panic. With a clear, practical plan, you can manage what you owe, keep your business growing, and work your way toward freedom from the stressful kind of debt.
Know Exactly What You Owe
Before you make any decisions, you have to see the full picture. Grab your loan agreements, credit card statements, supplier invoices, and lease docs. Basically, everything where there’s an obligation, and build a simple debt inventory.
When all that is in one place, things become much clearer. You can see which debts are killing your cash flow and which ones are more manageable.
Your debt inventory should include columns like:
- Name of creditor or lender
- How much do you owe
- Interest rate or fee structure
- Minimum monthly payment
- When it’s due
- Any guarantee or collateral involved
- Any clauses you need to watch (if interest rate can move, late fee triggers etc.)
Pick A Repayment Strategy You Can Stick With
There are two straightforward ways people pay down debt: the avalanche and the snowball methods. There’s no “right” method. What matters more is consistency, so choose what feels sustainable for you and your team and stick to it.
- Avalanche method: With this method, you make the minimum payment on everything, then throw extra payments at the debt with the highest interest rate. This approach saves you the most money over time. It works if you can tolerate looking at big numbers and want long-term savings.
- Snowball method: This involves paying off the smallest debts first, even if they don’t carry the highest rate. It gives you quick wins and helps build momentum so you feel like you’re making progress, especially when debt feels overwhelming. Many restaurant owners choose this method as the progress helps them stay consistent.
Refinance Or Consolidate Where It Makes Sense
When interest rates go up, it can put pressure on payments. If you’ve got debt with variable rates or short-term high-interest loans, refinancing to a more stable, lower rate can free up cash.
Consolidation is combining several debts into one loan or payment. If you can get a lower interest or more favorable repayment terms while simplifying what you’re managing, it can make a difference. But watch out for fees and longer repayment terms, which can sometimes increase total cost.
You can also look into getting loans from the Small Business Administration (SBA) as they often allow refinancing of existing business debt with better terms.
Negotiate With Anyone Who’s Lending To You
You might be surprised how often you can adjust terms by simply asking.
It helps to think along these lines:
- Can you ask for lower interest rates or interest-only periods for a bit?
- Can payments be deferred for a short period tied to a recovery plan?
- Can you rework supplier payment terms, say, longer net terms, smaller minimums, or more predictable delivery schedules?
- Can you talk to your landlord about adjusting the lease, rent-step clauses or deferring or structuring things around your high season?
Put whatever you negotiate in writing. By showing up with a plan, your lenders, suppliers, and even landlords will see that you mean business.
Free Up Operating Cash Flow
You can also look at ways to tighten your costs and free up operating cash flow, even small tweaks add up.
Here are some ways:
- Revisit your prime cost (Cost of Goods + Labor cost). Most restaurant concepts aim for a prime cost between 60-65 % of sales. If yours is higher, even trimming 2 or 3.5% gives you more cash to put toward debt.
- Tighten your recipe standardization and portion control to reduce waste and over-portioning.
- Align labor scheduling to demand. If you track covers/reservations or daily trends, it will help to inform your scheduling so you don’t over-staff for slow shifts. You can also cross-train your staff, so they can take on different responsibilities in a shift rather than staying idle.
Whenever things go better than expected, you can channel the extra cash toward the highest priority debt. Even modest extra payments toward principal can drastically reduce total interest and shorten how long it takes to become debt-free. You just need to be sure that you already have enough cash reserves to cover 4-8 weeks of operating costs.
What You Can Do Next
Debt isn’t all bad. When used wisely, it can be the boost that lets you expand your patio, upgrade your kitchen or finally launch that catering program. The key is to pair the dollars you borrow with a realistic, actionable repayment plan.
Here at Vast, we help restaurant owners map out their numbers and build plans that free up cash, without strangling growth.
If you’d like someone in your corner to help you make sense of it all, reach out and book a call with us.
We’d love to help you tackle your debt and make your restaurant more profitable.
