Strong solvency ratios can unlock better loan terms and lower interest rates for your restaurant. This metric reveals what percentage of your business you truly own versus what you've borrowed. Banks use this figure to assess creditworthiness and determine lending risk.
What exactly is solvency?
Solvency represents the relationship between your equity and total assets. It reveals what portion of your business comes from your own financing compared to borrowed funds.
💡 Example:
Restaurant The Gourmet Corner has:
- Inventory and fixtures: €80,000
- Cash and bank: €15,000
- Stock: €5,000
- Bank loan: €60,000
- Supplier debts: €10,000
Total assets: €100,000 | Total liabilities: €70,000 | Equity: €30,000
The solvency formula
The math is straightforward:
Solvency % = (Equity / Total assets) × 100
Your equity equals everything you own minus everything you owe. Total assets covers all business property and holdings.
💡 Example calculation:
Restaurant The Gourmet Corner:
- Equity: €30,000
- Total assets: €100,000
Solvency: (€30,000 / €100,000) × 100 = 30%
What do banks consider good solvency?
Restaurant solvency benchmarks typically follow these ranges:
- Above 30%: Outstanding - credit approval comes easily
- 20-30%: Solid - banks show genuine interest
- 10-20%: Acceptable - expect additional collateral requirements or higher rates
- Below 10%: Challenging - loan approval becomes quite difficult
⚠️ Note:
Restaurants typically show lower solvency than other industries due to substantial equipment investments. Banks understand this reality and adjust their expectations accordingly.
What figures do you need?
Collect these specific data points from your financial records:
Assets:
- Equipment and fixtures (kitchen appliances, dining furniture)
- Cash and checking accounts
- Inventory (food supplies, beverages)
- Receivables (customer payments due, deposits)
Liabilities:
- Outstanding loans
- Vendor payables
- Tax obligations
- Additional debts
I've seen restaurants miscalculate their inventory values by 15-20%, a mistake that costs the average restaurant EUR 200-400 per month in poor purchasing decisions and inflated solvency calculations.
How do you improve your solvency?
You can boost your solvency through two main approaches:
💡 Example improvement:
Restaurant starts with 15% solvency:
- Option 1: Add €10,000 capital → 23% solvency
- Option 2: Eliminate €15,000 debt → 21% solvency
- Option 3: Keep €8,000 profit in business → 19% solvency
Timing of your bank meeting
Schedule your meeting thoughtfully. Banks examine both current numbers and historical trends. Consistent solvency growth across several years strengthens your position significantly.
Also craft your narrative: what's the loan purpose? How will repayment work? What expansion opportunities do you see?
How do you calculate solvency? (step by step)
Make an overview of all your assets
Add up all valuable items: kitchen equipment, furniture, cash, bank, stock and outstanding receivables. This is your total assets.
List all your debts
Note all loans, supplier debts, tax debts and other obligations. These are your total liabilities.
Calculate your equity and solvency
Subtract your liabilities from your assets to get your equity. Divide this by your total assets and multiply by 100 for the percentage.
✨ Pro tip
Track your solvency monthly for the 6 months before your bank meeting, not just quarterly. Banks appreciate seeing recent momentum and stability in your financial position.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
What if my solvency is below 20%?
That's not automatically disqualifying, but banks become more selective. Focus on building equity by keeping profits in the business or adding personal capital.
Should I include the goodwill of my business?
Only with professional valuation documentation. Banks reject estimated or self-calculated goodwill figures.
How often should I calculate my solvency?
Monthly calculations help you track trends, but quarterly reviews are sufficient for most restaurant owners. Always use current figures for bank meetings.
Does my personal wealth count toward solvency?
No, solvency only reflects business assets and liabilities. Personal property like your home or vehicle doesn't factor in unless formally contributed to the business.
What if I just started and haven't made a profit yet?
Your equity consists entirely of your initial investment and any additional capital contributions. Banks expect lower solvency from new restaurants and adjust their criteria accordingly.
Can seasonal fluctuations affect my solvency calculation?
Absolutely - inventory levels and cash positions vary throughout the year. Present 12-month averages or explain seasonal patterns to give banks a complete picture.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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