Buy and Sell debt portfolios online

Your Guide to Restaurant Equipment Financing

Fact checked
Read time:
3
min

This text has undergone thorough fact-checking to ensure accuracy and reliability. All information presented is backed by verified sources and reputable data. By adhering to stringent fact-checking standards, we aim to provide you with reliable and trustworthy content. You can trust the information presented here to make informed decisions with confidence.

Running a successful restaurant requires significant investments in equipment, from commercial ovens and refrigerators to dining room furniture and point-of-sale systems. However, the high cost of purchasing equipment outright can strain a restaurant's cash flow. That's where restaurant equipment financing comes in. In this comprehensive guide, we'll explore everything you need to know about financing your restaurant's equipment needs.

Key Takeaways

Restaurant equipment financing provides various options to acquire necessary equipment without depleting cash reserves. Key factors to consider when choosing a financing option include interest rates, repayment terms, fees, flexibility, and total cost. Equipment loans are popular as they use the equipment as collateral, making them easier to qualify for. Carefully compare terms and costs of different options and seek professional advice to make the best decision for your restaurant business.

What Is Restaurant Equipment Financing?

Restaurant equipment financing is a type of loan that allows restaurant owners to purchase the necessary equipment for their business without paying the full cost upfront. Instead, the cost of the equipment is spread out over time, with the borrower making monthly payments that include principal and interest. This type of financing is designed specifically for the purchase of restaurant equipment and is often easier to obtain than traditional business loans.

Restaurant equipment financing is available from a variety of sources, including banks, credit unions, online lenders, and equipment financing companies. The terms and conditions of these loans can vary widely, so it's essential to shop around and compare offers to find the best fit for your restaurant's needs.

How Does Restaurant Equipment Financing Work?

When you finance restaurant equipment, the lender provides the funds to purchase the equipment, and you agree to repay the loan over a set period, typically ranging from 1 to 5 years. The equipment itself serves as collateral for the loan, which means that if you default on your payments, the lender can seize the equipment to recoup their losses.

The application process for restaurant equipment financing generally involves providing information about your business, such as financial statements, tax returns, and business plans, as well as details about the equipment you intend to purchase, including quotes from vendors.

Once approved, you'll sign a financing agreement that outlines the terms of the loan, including the interest rate, repayment period, and any fees associated with the loan. The lender will then either pay the equipment vendor directly or disburse the funds to you to make the purchase.

Interest rates for restaurant equipment financing vary depending on factors such as your credit score, business financial history, and the type of equipment being financed. However, because the loan is secured by the equipment, interest rates are often lower than those of unsecured loans. Fixed interest rates are common, which means your monthly payments will remain consistent throughout the life of the loan.

What Can You Use Restaurant Equipment Financing For?

Restaurant equipment financing can be used to purchase a wide variety of equipment essential to running a restaurant, including:

  • Commercial kitchen appliances: Ovens, ranges, freezers, refrigerators, and dishwashers are all essential pieces of equipment that can be financed.
  • Large and small kitchen equipment: From prep tables and cutting boards to pots, pans, and utensils, financing can cover a range of kitchen equipment sizes.
  • Point-of-sale (POS) systems: Modern POS systems can be expensive, but they're critical for managing orders, payments, and inventory. Financing can help you acquire the latest technology.
  • Dining room furniture: Tables, chairs, booths, and decor can all be financed to create an inviting atmosphere for your customers.
  • Delivery vehicles: If your restaurant offers delivery, financing can help you purchase or lease delivery vehicles.

What kind of equipment can you finance?

In addition to the items listed above, restaurant equipment financing can be used for virtually any type of equipment needed to operate a restaurant, such as:

  • Ventilation systems: Proper ventilation is crucial for maintaining a safe and comfortable kitchen environment.
  • Food preparation equipment: Mixers, slicers, food processors, and other prep equipment can streamline your kitchen operations.
  • Storage solutions: Shelving, racks, and other storage equipment can help keep your kitchen organized and efficient.
  • Bar equipment: Coolers, ice machines, glass washers, and other bar equipment can be financed to keep your drinks flowing.
  • Linens and uniforms: Financing can cover the cost of table linens, napkins, chef coats, and other restaurant textiles.

The versatility of restaurant equipment financing allows you to acquire all the necessary tools to run a successful restaurant, from back-of-house essentials to front-of-house fixtures.

The Benefits of Financing Your Restaurant Equipment

Financing your restaurant equipment offers several key advantages over purchasing equipment outright:

  1. Preserve cash flow: One of the most significant benefits of equipment financing is that it allows you to spread the cost of expensive equipment over time. By making smaller monthly payments instead of a large upfront investment, you can maintain a healthier cash flow for your restaurant. This is particularly important for new restaurants or those with tight margins, as it frees up cash to allocate to other critical areas such as inventory, payroll, and marketing.
  2. Minimal upfront costs: Most equipment financing options require little to no down payment, which makes it easier for restaurants to acquire the necessary equipment without a significant initial investment. This is in contrast to purchasing equipment outright, which can require a substantial amount of cash upfront. By minimizing initial costs, equipment financing can help restaurants get up and running more quickly and with less financial strain.
  3. Access to high-quality equipment: Financing allows you to obtain top-of-the-line equipment that might otherwise be unaffordable. With access to better equipment, your restaurant can operate more efficiently, produce higher-quality food, and provide a better overall experience for your customers. This can give your restaurant a competitive edge in a crowded market.
  4. Stay current with technology: As restaurant technology evolves, financing makes it easier to upgrade your equipment to stay ahead of the curve. From advanced POS systems to smart kitchen appliances, staying current with the latest technology can help streamline your operations, reduce waste, and improve customer satisfaction. With equipment financing, you can spread the cost of these upgrades over time, making it more feasible to keep your restaurant on the cutting edge.
  5. Boost staff morale: Providing your staff with modern, efficient equipment can improve their job satisfaction and productivity. When your kitchen staff has access to high-quality appliances and tools, they can work more efficiently and effectively, which can lead to better food quality and faster service. Similarly, when your front-of-house staff has access to user-friendly POS systems and comfortable, attractive furnishings, they can provide a better experience for your customers. By investing in your equipment through financing, you're also investing in your staff's well-being and success.
  6. Fixed monthly payments: Equipment financing often comes with fixed monthly payments, which can make budgeting and financial planning much easier for restaurant owners. With a consistent payment amount each month, you can better allocate your resources and plan for the future. This predictability can be especially valuable for restaurants with seasonal fluctuations in revenue, as it allows you to manage your cash flow more effectively throughout the year.
  7. Potential tax benefits: Depending on the structure of your loan and your location, you may be able to deduct the cost of financed equipment from your taxes. In the United States, for example, Section 179 of the tax code allows businesses to deduct the full cost of certain equipment purchases in the year they are made, rather than depreciating the cost over time. This can provide significant tax savings for restaurants that finance their equipment. Be sure to consult with a tax professional to understand the specific tax implications for your restaurant.

By offering a way to acquire essential equipment without tying up large amounts of capital, equipment financing can help restaurants improve their operations, stay competitive, and grow their business over time.

What to do Before Applying for Equipment Financing

Before applying for restaurant equipment financing, it's important to take several key steps to ensure that you're well-prepared and can secure the best possible financing terms for your restaurant.

  1. Determine your equipment needs: Start by making a detailed list of the equipment you need to purchase for your restaurant. This might include items like ovens, refrigerators, freezers, prep tables, dishwashers, and more. Be specific about the makes and models you're interested in, as well as any special features or requirements you have. Having a clear understanding of your equipment needs will help you determine how much financing you'll need to secure.
  2. Research equipment vendors: Once you know what equipment you need, research potential vendors to find the best options for your restaurant. Look for vendors that offer high-quality equipment at competitive prices, and read reviews from other restaurant owners to get a sense of their reputation and customer service. You may also want to consider factors like warranty options, delivery and installation services, and ongoing maintenance and support.
  3. Get detailed quotes: Reach out to your preferred vendors and request detailed quotes for the equipment you're interested in. Make sure the quotes include all relevant costs, such as taxes, delivery fees, and installation charges. Having accurate pricing information will be essential when it comes time to apply for financing.
  4. Assess your financial situation: Before applying for financing, take a close look at your restaurant's financial situation. Review your income statements, cash flow projections, and credit history to get a sense of how much you can realistically afford to borrow and repay each month. If your restaurant is new or has limited financial history, you may need to provide personal financial information as well.
  5. Determine how much you can afford: Based on your financial assessment, determine how much you can comfortably afford to spend on monthly equipment loan payments. Keep in mind that you'll need to factor in other ongoing expenses like rent, payroll, and inventory costs. It's important to be realistic about what you can afford to avoid taking on more debt than your restaurant can handle.
  6. Check your credit score: Your credit score is one of the key factors that lenders will consider when evaluating your equipment financing application. Before applying, check your credit score and review your credit report for any errors or issues that could negatively impact your chances of approval. If your credit score is low, you may need to take steps to improve it before applying for financing, such as paying down existing debt or disputing errors on your credit report.
  7. Gather required documentation: Most equipment financing lenders will require certain documents as part of the application process, such as business financial statements, tax returns, and equipment quotes. Gather all the necessary documentation ahead of time to streamline the application process and increase your chances of approval.

By taking these steps before applying for restaurant equipment financing, you can ensure that you're well-prepared and in a strong position to secure the funding you need to purchase the equipment your restaurant requires.

Can You Finance Restaurant Equipment with Bad Credit?

While having a strong credit score can certainly help you secure more favorable financing terms, it's still possible to obtain restaurant equipment financing even if you have less-than-perfect credit. Because the equipment itself serves as collateral for the loan, lenders may be more willing to work with borrowers who have lower credit scores than they would for unsecured loans.

However, it's important to keep in mind that financing equipment with bad credit may come with some drawbacks. For example, you may face higher interest rates than borrowers with good credit, which can increase the overall cost of financing. You may also be required to provide a larger down payment or additional collateral to offset the lender's risk.

If you have bad credit and are seeking restaurant equipment financing, there are a few steps you can take to improve your chances of approval and secure better terms:

  1. Be transparent about your credit situation: When applying for financing, be upfront about your credit challenges and any steps you've taken to improve your credit. Lenders appreciate honesty and may be more willing to work with you if you're transparent about your situation.
  2. Offer a larger down payment: Putting more money down upfront can demonstrate your commitment to the purchase and reduce the lender's risk, which may make them more willing to approve your application.
  3. Provide additional collateral: If you have other business assets that you can offer as collateral, such as real estate or vehicles, this can help secure the loan and reduce the lender's risk.
  4. Choose used equipment: Financing used equipment can be less expensive than financing new equipment, which may make it easier to qualify for a loan with bad credit.
  5. Consider alternative lenders: Some online lenders and equipment financing companies specialize in working with borrowers who have less-than-perfect credit. These lenders may have more flexible qualification criteria and be more willing to work with you than traditional banks.

While financing restaurant equipment with bad credit can be more challenging than with good credit, it's still possible to secure the funding you need to purchase the equipment your restaurant requires. By being proactive and exploring all your options, you can find a financing solution that works for your business.

Can Startups Finance Restaurant Equipment?

Yes, startup restaurants can finance equipment just like established businesses. In fact, equipment financing can be an especially attractive option for startups, as it allows them to acquire the necessary equipment without tying up significant amounts of capital that could be used for other startup costs.

However, it's important to note that securing equipment financing as a startup can be more challenging than it is for established businesses. Lenders typically view startups as higher-risk borrowers, as they don't have a track record of success or established revenue streams to demonstrate their ability to repay the loan.

To improve your chances of securing equipment financing as a startup, there are a few key steps you can take:

  1. Create a detailed business plan: A comprehensive business plan that outlines your restaurant concept, target market, financial projections, and growth strategy can help demonstrate to lenders that you have a viable business model and a clear path to profitability.
  2. Provide personal financial information: Since your startup doesn't have an established financial history, lenders may require you to provide personal financial information, such as tax returns and bank statements, to assess your creditworthiness as an individual.
  3. Offer a larger down payment: Putting more money down upfront can demonstrate your commitment to the business and reduce the lender's risk, which may make them more willing to approve your application.
  4. Choose equipment with strong resale value: Financing equipment with strong resale value, such as commercial ovens or refrigerators, can be more appealing to lenders, as they know they can recoup their investment if you default on the loan.
  5. Consider alternative lenders: Some online lenders and equipment financing companies specialize in working with startups and may have more flexible qualification criteria than traditional banks.
  6. Build your personal credit: Since lenders will likely consider your personal credit history when evaluating your application, it's important to take steps to build and maintain a strong personal credit score, such as paying bills on time and keeping credit card balances low.

While securing equipment financing as a startup can be more challenging than it is for established businesses, it's still a viable option for many new restaurants. By being proactive and taking steps to demonstrate your creditworthiness and the viability of your business, you can increase your chances of securing the funding you need to purchase the equipment your startup requires.

How to Apply for Restaurant Equipment Financing

Applying for restaurant equipment financing can seem daunting, but the process is generally straightforward and can be broken down into several key steps.

  1. Gather necessary documentation: Before applying for financing, gather all the documentation you'll need to provide to lenders. This typically includes:some text
    • Business financial statements (income statement, balance sheet, cash flow statement)
    • Tax returns (business and personal)
    • Bank statements
    • Equipment quotes or invoices
    • Business plan and financial projections (for startups)
    • Proof of insurance
    • Ownership and legal structure documentation
  2. Research financing options: Look into the various financing options available to you, including traditional bank loans, SBA loans, online loans, and equipment financing companies. Compare interest rates, loan terms, and qualification requirements to find the best fit for your restaurant.
  3. Determine your budget: Based on your restaurant's financial situation and the quotes you've received from equipment vendors, determine how much you can afford to borrow and what monthly payments you can comfortably handle.
  4. Choose a lender: Once you've researched your options and determined your budget, choose the lender that offers the most competitive rates and terms for your restaurant's needs.
  5. Fill out the application: Most lenders have online applications that you can fill out quickly and easily. Be prepared to provide detailed information about your restaurant, including ownership structure, financial history, and the equipment you intend to finance.
  6. Submit required documentation: Along with your application, submit all the required documentation that the lender has requested. This may include the items listed in step 1, as well as any additional documentation specific to the lender.
  7. Wait for approval: After submitting your application and documentation, the lender will review your information and make a decision on your financing request. This process can take anywhere from a few hours to several days, depending on the lender and the complexity of your application.
  8. Review and sign the financing agreement: If your application is approved, the lender will provide you with a financing agreement that outlines the terms of your loan, including the interest rate, repayment period, and any fees associated with the loan. Review the agreement carefully and ask any questions you may have before signing.
  9. Receive funding and purchase equipment: Once you've signed the financing agreement, the lender will either pay the equipment vendor directly or disburse the funds to you to make the purchase. You can then proceed with acquiring your restaurant equipment.

By following these steps and being prepared with the necessary documentation and information, you can streamline the application process and increase your chances of securing the equipment financing your restaurant needs. Keep in mind that the specific requirements and process may vary somewhat depending on the lender you choose, so be sure to follow their instructions closely and ask for guidance if needed.

Your Options for Restaurant Equipment Financing

When it comes to financing your restaurant equipment, there are several options to consider, each with its own set of advantages and disadvantages. Understanding these options can help you choose the best financing solution for your restaurant's unique needs and financial situation.

Get a "traditional" restaurant business loan

Traditional business loans from banks or credit unions are a popular option for financing restaurant equipment. These loans are typically term loans, which means you receive a lump sum of money upfront and then make fixed monthly payments over a set period of time, usually several years.

One of the main advantages of traditional business loans is that they often offer competitive interest rates, especially for borrowers with strong credit histories and established businesses. This can make them a cost-effective option for financing larger equipment purchases over a longer period of time.

However, traditional business loans can also be more difficult to qualify for than other financing options, particularly for newer restaurants or those with less-than-perfect credit. Banks and credit unions typically have strict lending criteria and may require extensive documentation, collateral, and a personal guarantee from the business owner.

Some popular traditional business loan options for restaurant equipment financing include:

  • Term loans: As mentioned, term loans provide a lump sum of money that you repay over a set term, typically 1-5 years or more. They can be used to purchase a wide variety of restaurant equipment and often offer competitive rates for well-qualified borrowers.
  • SBA loans: The U.S. Small Business Administration (SBA) offers several loan programs that can be used for restaurant equipment financing, including the 7(a) and 504 loan programs. SBA loans are issued by traditional lenders but are partially guaranteed by the government, which can make them easier to qualify for than conventional bank loans. However, the application process can be lengthy and complex.

Manufacturer financing

Another option for financing restaurant equipment is to work directly with the equipment manufacturer or vendor. Many manufacturers offer their own financing programs, either in-house or through partnerships with third-party lenders.

Manufacturer financing can be a convenient option, as it allows you to bundle the equipment purchase and financing into a single transaction. This can streamline the process and potentially make it easier to negotiate pricing and terms.

However, manufacturer financing programs may have limited flexibility in terms of loan amounts, repayment terms, and interest rates compared to other financing options. They may also require a personal guarantee or blanket lien on your business assets.

Some popular restaurant equipment manufacturers that offer financing include:

  • Hobart: Hobart offers financing for its commercial kitchen equipment through its in-house financing division, Hobart Financial Services. Programs include both loans and leases with flexible terms and competitive rates.
  • Univex: Univex partners with third-party lenders to offer financing for its mixers, slicers, and other prep equipment. Options include loans, leases, and rent-to-own programs.
  • True: True Manufacturing offers financing for its commercial refrigeration equipment through a partnership with Western Equipment Finance. Programs include loans, leases, and special financing promotions.

Lease-to-own

Lease-to-own programs, also known as rent-to-own, allow you to use the equipment while making monthly payments, with the option to purchase the equipment at the end of the lease term. This can be a good option if you're not ready to commit to a long-term equipment purchase or if you have limited cash flow to make a large upfront investment.

Under a lease-to-own agreement, you typically make monthly payments that cover the cost of renting the equipment, plus a portion that goes toward the eventual purchase price. At the end of the lease term, you have the option to buy the equipment outright for a predetermined price, which is often a nominal amount.

One advantage of lease-to-own programs is that they may have more lenient qualification requirements than traditional loans or leases, making them a good option for newer businesses or those with lower credit scores. They also offer the flexibility to upgrade or return the equipment at the end of the lease term if your needs change.

However, lease-to-own programs often have higher overall costs than traditional financing, as you're essentially paying rent on the equipment in addition to the purchase price. They may also have shorter terms than loans, which can result in higher monthly payments.

Some popular lease-to-own providers for restaurant equipment include:

  • Clicklease: Clicklease offers an easy online application process for lease-to-own financing on a wide range of restaurant equipment, with terms up to 48 months and no hard credit check required.
  • Engs Commercial Finance: Engs offers lease-to-own programs for both new and used restaurant equipment, with flexible terms and the ability to bundle multiple pieces of equipment into a single agreement.
  • TimePayment: TimePayment provides lease-to-own financing for a variety of restaurant equipment, including ovens, refrigerators, and POS systems. They offer a simple application process and flexible terms up to 60 months.

Buy Now Pay Later

Buy Now Pay Later (BNPL) programs are a newer financing option that has gained popularity in recent years, especially for online purchases. These programs allow you to purchase equipment with no money down and then spread the cost over a series of equal payments, typically over a few months to a year.

BNPL programs are often offered through third-party providers that partner with equipment vendors and manufacturers. Some popular BNPL providers for restaurant equipment include:

  • Affirm: Affirm partners with a variety of restaurant equipment vendors to offer BNPL financing at checkout. They offer repayment terms of 3, 6, or 12 months, with interest rates ranging from 0-30% APR based on creditworthiness.
  • Klarna: Klarna offers BNPL financing for online purchases of restaurant equipment, with repayment options including 4 interest-free payments over 6 weeks or longer-term financing up to 36 months.
  • PayPal Credit: PayPal Credit is a BNPL option that can be used for online purchases of restaurant equipment at any vendor that accepts PayPal. It offers no-interest financing on purchases over $99 if paid in full within 6 months, as well as longer-term financing options with interest.

One advantage of BNPL programs is that they often have a simple, fast application process and can provide instant approval at checkout. They may also have more flexible qualification requirements than traditional financing options.

However, BNPL programs typically have shorter repayment terms than loans or leases, which can result in higher monthly payments. They may also have higher interest rates and fees than other financing options, especially for longer-term financing.

Toast Capital

Toast Capital is a unique financing option specifically designed for restaurants that use the Toast point-of-sale (POS) system. Toast Capital offers short-term loans that are repaid through a percentage of your daily credit card sales, rather than fixed monthly payments.

To qualify for Toast Capital financing, you must be a Toast customer and meet certain minimum sales volume and time in business requirements. If approved, you can receive funding in as little as one business day and use the funds for any business purpose, including purchasing restaurant equipment.

One advantage of Toast Capital is that it offers a simple, seamless financing experience for Toast users, with no need to apply through a separate lender or integrate with a third-party system. The repayment process is also automated through your Toast POS, which can help with cash flow management.

However, Toast Capital loans do come with a fee that is based on a percentage of your loan amount and can be higher than interest rates on traditional loans. The repayment period is also relatively short, typically 3-6 months, which can result in higher daily payments.

Tips to Compare Restaurant Equipment Financing

With so many restaurant equipment financing options available, it can be overwhelming to try to compare them and choose the best one for your business. Here are some tips to help you evaluate and compare different financing options:

  1. Consider your financing needs: Before you start comparing financing options, take some time to assess your specific equipment financing needs. Consider factors such as:some text
    • How much equipment do you need to purchase?
    • What is your budget for monthly payments?
    • How long do you need to finance the equipment?
    • Do you want to own the equipment outright or have the flexibility to upgrade or return it?

Answering these questions can help you narrow down your options and focus on financing programs that meet your specific needs.

  1. Look at the total cost of financing: When comparing financing options, it's important to look beyond just the monthly payment or interest rate and consider the total cost of financing over the life of the loan or lease. This includes factors such as:some text
    • Interest rates and fees
    • Loan origination or documentation fees
    • Equipment shipping and installation costs
    • Maintenance and repair costs
    • Residual value or purchase option price (for leases)

By calculating the total cost of financing for each option, you can get a more accurate picture of which one is the most cost-effective in the long run.

  1. Consider the terms and flexibility: In addition to cost, it's important to consider the terms and flexibility of each financing option. This includes factors such as:some text
    • Repayment terms (length of loan or lease)
    • Payment frequency (monthly, weekly, daily)
    • Prepayment penalties or early buyout options
    • Ability to upgrade or add equipment mid-term
    • Flexibility to seasonal or fluctuating revenue

Look for financing options that offer terms and flexibility that align with your business needs and cash flow.

  1. Evaluate the lender: When comparing financing options, it's also important to evaluate the lender or financing company itself. Consider factors such as:some text
    • Reputation and customer reviews
    • Experience and expertise in restaurant financing
    • Customer service and support
    • Ease and speed of application and approval process
    • Flexibility and willingness to work with your specific needs

Choose a lender that has a track record of success in restaurant financing and that you feel comfortable working with for the long term.

  1. Read the fine print: Before signing any financing agreement, be sure to carefully read and understand all of the terms and conditions. Pay particular attention to:some text
    • Interest rates and fees
    • Payment terms and frequency
    • Default and late payment penalties
    • Equipment ownership and maintenance responsibilities
    • Insurance and liability requirements

Don't hesitate to ask questions or seek clarification on any terms that are unclear or concerning.

By following these tips and thoroughly evaluating your options, you can find the restaurant equipment financing program that best meets your needs and helps your business succeed.

How to choose restaurant equipment financing

With so many restaurant equipment financing options available, it can be difficult to know which one is right for your business. Here are some factors to consider when choosing the best financing option for your needs:

Equipment loans for restaurants

Equipment loans are a type of financing specifically designed for purchasing business equipment. They are secured by the equipment itself, which serves as collateral for the loan. This can make them easier to qualify for than unsecured loans, even for businesses with less-than-perfect credit.

Equipment financing is best if:

  • You have a low credit score: Because the equipment serves as collateral, lenders may be more willing to approve equipment loans for borrowers with lower credit scores.
  • You need to finance a large or expensive piece of equipment: Equipment loans can often finance up to 100% of the cost of the equipment, making them a good choice for high-ticket items.
  • You want longer repayment terms and lower monthly payments: Equipment loans typically have repayment terms of 1-5 years or more, which can help keep monthly payments manageable.

Consider these equipment financing options for restaurants:

  • Triton Capital: Triton Capital offers equipment financing up to $250,000 with terms up to 5 years. They have a simple online application process and can provide funding in as little as 24 hours.
  • National Funding: National Funding provides equipment financing up to $150,000 for restaurants with as little as 6 months in business and credit scores as low as 575. They offer flexible terms and a fast application process.

Term loans for restaurant equipment financing

Term loans are a type of traditional business loan that provides a lump sum of cash upfront, which you then repay over a set term with fixed monthly payments. They can be used for a variety of business purposes, including purchasing restaurant equipment.

Business term loans are best if:

  • You have strong credit and financials: Term loans typically require good to excellent credit and a strong financial history to qualify for the best rates and terms.
  • You're an established restaurant looking to expand or upgrade equipment: Term loans are generally better suited for established businesses with a track record of success than for startups or new restaurants.

Consider these options if a term loan seems right for your restaurant:

  • SBA loans: SBA loans are government-backed term loans with competitive rates and longer repayment terms up to 10 years or more. They can be a good option for financing larger equipment purchases, but the application process can be lengthy and complex.
  • OnDeck: OnDeck offers short-term loans up to $250,000 with repayment terms of 3-12 months. They have a simple online application process and can provide funding in as little as 24 hours, making them a good option for restaurants that need fast access to cash.
  • Funding Circle: Funding Circle provides term loans up to $500,000 with repayment terms of 6 months to 5 years. They offer competitive rates and a streamlined application process, with funding available in as little as 3 business days.

Business lines of credit for restaurant equipment financing

A business line of credit is a type of revolving credit that allows you to borrow funds up to a set credit limit, repay the funds, and then borrow again as needed. This can provide more flexibility than a term loan for financing equipment purchases over time.

Business lines of credit are best if:

  • You need flexibility in your funding and repayment: With a line of credit, you only borrow and pay interest on the funds you actually use, and you can often choose your own repayment schedule.
  • You can handle potentially higher interest rates and shorter repayment terms: Lines of credit typically have higher interest rates and shorter repayment terms than term loans, which can result in higher overall costs.

Consider these line of credit options for restaurants:

  • Headway Capital: Headway Capital offers lines of credit up to $100,000 for restaurants with as little as $50,000 in annual revenue and 6 months in business. They have a simple online application process and can provide funding in as little as 1 business day.
  • Bluevine: Bluevine provides lines of credit up to $250,000 for restaurants with at least $10,000 in monthly revenue and 6 months in business. They offer a fast online application process and funding in as little as 24 hours.

Restaurant equipment leasing

In addition to financing options for purchasing restaurant equipment, leasing is another popular choice for many restaurant owners. With an equipment lease, you essentially rent the equipment from the leasing company for a set term, typically 2-5 years. At the end of the lease term, you may have the option to purchase the equipment, renew the lease, or return the equipment.

There are two main types of equipment leases:

  • Capital leases: Capital leases are similar to financing a purchase, as they typically result in ownership of the equipment at the end of the lease term. They are often used for equipment with a long useful life and may offer tax advantages.
  • Operating leases: Operating leases are more like traditional rentals, where you pay to use the equipment for a set term but do not own it at the end of the lease. They may offer more flexibility and lower monthly payments than capital leases.

Equipment leasing can be a good option for restaurants that:

  • Want to conserve cash flow: Leasing typically requires little or no down payment, which can help preserve cash for other business expenses.
  • Need to update equipment frequently: With a lease, you can often upgrade to newer equipment at the end of the lease term, rather than being stuck with outdated equipment.
  • Have limited credit or financial history: Leasing companies may have more flexible qualification requirements than traditional lenders, making it easier for newer or less-established restaurants to obtain equipment.

However, there are also some potential downsides to leasing restaurant equipment, including:

  • Higher overall costs: While leasing may offer lower monthly payments than financing a purchase, the total cost of leasing over the life of the equipment may be higher.
  • Lack of ownership: Unless you have a lease-to-own or capital lease agreement, you will not own the equipment at the end of the lease term.
  • Early termination fees: If you need to end the lease early, you may be subject to costly termination fees or penalties.

When considering equipment leasing for your restaurant, be sure to carefully review and compare the terms and costs of different leasing options, and consider seeking the advice of a financial professional or attorney to help you make the best decision for your business.

The Bottom Line

Restaurant equipment financing and leasing can be powerful tools for helping your business obtain the equipment it needs to succeed, while preserving cash flow and managing costs. By understanding your options and carefully evaluating the terms and costs of different financing and leasing programs, you can find the solution that best fits your restaurant's unique needs and goals.

When choosing a financing or leasing option, be sure to consider factors such as:

  • Your restaurant's specific equipment needs and budget
  • The total cost of financing or leasing over the life of the equipment
  • The terms and flexibility of the financing or leasing agreement
  • The reputation and customer service of the lender or leasing company
  • The tax and accounting implications of financing vs. leasing

By taking the time to research and compare your options, and seeking the advice of financial and legal professionals as needed, you can make an informed decision that helps your restaurant thrive for years to come.

On This Page

Need Equipment Financing for Your Business?

Get the best price for your loans with our platform.
Get a Free Quote
Written by
Henry Arora
Head of Business Development

Experienced Manager with a demonstrated history of working in the Fintech/Customer services/Debt Collections industry. Skilled in Management, Debt Collections Sales, Leadership, Team Management, and Public Speaking. Strong operations professional graduated from Madhurai Kamraj University.

  • Fintech/Customer services Expert
  • Public Speaking
  • Debt collection Expert

FAQ

+

What is the difference between equipment financing and leasing?

Equipment financing involves borrowing money to purchase equipment outright, while leasing involves renting the equipment for a set term with the option to purchase or return it at the end of the lease. Financing typically results in ownership of the equipment, while leasing may not.

+

How long are the typical repayment terms for restaurant equipment financing?

The repayment terms for restaurant equipment financing can vary depending on the type of financing and the lender, but typically range from 1-5 years or more. Longer terms may result in lower monthly payments but higher overall costs.

+

Can I finance used restaurant equipment?

Yes, many lenders offer financing options for both new and used restaurant equipment. However, the terms and rates may vary depending on the age and condition of the equipment.

+

How long does it take to get approved for restaurant equipment financing?

The approval time for restaurant equipment financing can vary depending on the lender and the type of financing, but can range from a few hours to several days or weeks. Online lenders and equipment financing companies may offer faster approval times than traditional banks or SBA loans.

+

What credit score do I need to qualify for restaurant equipment financing?

The credit score requirements for restaurant equipment financing can vary depending on the lender and the type of financing, but generally range from 600-700 or higher. Some lenders may have more flexible requirements for equipment loans than for unsecured loans, as the equipment serves as collateral.

What debt are we selling

We specialize in car, real estate, consumer and credit cards loans. We can sell any kind of debt.
Interested in buying or selling debt portfolios?
Let's connect! Fill out this form 👇