Title Image

Restaurant Financing Options

Home  /  Restaurant Financing Options

Different Types of Restaurant Financing Option

Different Types of Restaurant Financing Options

Restaurant owners have for the longest time had trouble getting financing for their restaurant businesses. Most restaurant businesses fail due to lack of working capital. Clearly, there has to be a solution to the restaurant financing problem to enable restaurant owners to access working capital easily. The best part is that lending institutions are now offering restaurant business loans, which make business owners to obtain financing quickly.

Maintaining a restaurant can be costly. Sometimes licensing, staff, equipment, and other expenses can add up so quickly. Restaurants require business loans to take care of advertisement and promoting expenses, remodeling expenditures and hiring kitchen staff among others. Restaurant loans enable restaurants to operate smoothly and stay competitive. It is important for restaurants to consult the lender to ensure that they meet the lending criteria.


Forms of restaurant financing


There are a few types of loans for restaurants available out there. The kind of financing you get depends on the lender you choose as well as your financing needs. Here are a few common financing options available for restaurant businesses.


Restaurant equipment loans

Restaurant owners understand how expensive acquiring new equipment, repairing or replacing broken restaurant equipment can be, especially baking equipment such as ovens. You can still upgrade your restaurant equipment to the most state-of-the-art equipment through restaurant equipment loans. Some lenders finance up to 100% of the cost of the new machine by giving an equipment loan. You don’t need collateral when looking for an equipment loan because the equipment itself is collateral. Therefore, you don’t have to put any of your personal assets as collateral.


Working capital loans

Almost every restaurant at some point will require a working capital loan. They are short-term loans that assist restaurant owners in taking care of expenses and operating their business smoothly. Working capital loans enable restaurant owners to access fast loans for restaurants that aren’t too huge. The maximum loan amount for such loans is mostly $250,000.


Restaurant specific loans

They are loans specifically designed for restaurant needs. Restaurant specific loans are given by banks and other conventional lending institutions. Restaurants can use restaurant specific loans for any financial need within the business like restocking, remodels, and furnishings among others. The loan term and the interest rate depend on the loan size. Smaller loans usually have higher interest rates and a shorter repayment time as compared to bigger loans.


Inventory financing

Restaurant owners can admit how costly it is to cover for food costs. If you need to finance inventory purchases for your restaurant business, consider inventory financing. It can be in different forms: short-term, medium-term, or a line of credit. Inventory financing is for the specific purpose of purchasing stock for your business. It is not different from equipment financing because the stock you buy acts as the collateral for your loan.


Restaurant bank loans

Traditional bank term loans have favorable rates and terms. They have the best rates as compared to any other type of small business loans available to restaurant owners. Banks offer loans to creditworthy restaurant businesses, which sometimes knocks out some businesses. The payment terms range from three to ten years. The interest rates in most cases range between five to ten percent.


Small Business Administration (SBA) loans

Restaurant loans are SBA’s largest form of approved business loan. With SBA loans, the government acts as the guarantor by giving assurance for the money restaurants get from SBA. All you have to do as a restaurant owner is to ensure that you have everything ready to make it easy for SBA to invest in your restaurant. Here are things you need to know about the process of applying for SBA loans for your restaurant business:

  • Ensure that you have relevant business experience
  • Prepare your financial documents
  • Check your credit history
  • Develop a business plan

Applying for restaurant business loans

Now that you know the various restaurant loan options available, you can now go ahead and apply for the most suitable option. The best part is that there are different lenders out there. You just need to choose the lender that offers favorable financing terms. The best time to apply for a loan is when you are prepared. You need to ask yourself certain questions before applying for a restaurant loan. Here are some of those important issues.

  • Why the restaurant needs the money
  • When the restaurant needs the money
  • Consider if the business is ready to apply for the loan
  • Has the business explored all the available options

Your restaurant business can be successful depending on how you operate it. You can take advantage of business loans to adopt the emerging technological trends like marketing and social media. The variety of financing options could help your business to grow.

Call us at 866-257-2973 and find out how we can help you!