Restaurant Loans: Costs, Financing Terms & Providers

Restaurant loans are offered by both traditional and online lenders, and are often used for working capital expenses like payroll, utilities, and inventory. Restaurant financing can also be used for large projects like new locations, equipment, and renovations. Average rates range from 6% to 50%, with repayment terms of three months to 10 years.

OnDeck, which sponsored this article, offers short-term financing up to $500,000 for restaurants, with repayment terms up to three years. If you’ve been in business for at least one year and have at least $100,000 in annual business revenue, you may prequalify for rates as low as 9.99%. OnDeck also offers a line of credit up to $100,000, and both have a 10-minute online application and offer next-day funding.

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Top 5 Restaurant Financing Options

Loan Type	Best For
Short-term Restaurant Loans	Restaurant businesses needing short-term funding to solve cash flow problems.
Business Line of Credit	Restaurant owners needing a credit line for recurring expenses.
SBA Loans	Restaurant owners with a 680 or higher credit score needing long-term capital.
ROBS	Business owners with over $50,000 in retirement savings to finance a restaurant.
Equipment Financing	Restaurant businesses looking for capital to purchase large equipment.

How We Determined the Top Restaurant Financing Options

To help business owners apply for a loan that’s best for their restaurant, we evaluated what restaurant owners considered most important: the amount of financing borrowers can receive and the costs and terms of repaying the borrowed funds. We also evaluated what kinds of businesses each option is right for, how familiar lenders are with the industry, and how difficult or easy it is to qualify.

The factors we consider when evaluating the best restaurant financing options are:

• Financing amount: The amount of capital your business can qualify for. This ranges from $100,000 to $5 million depending on the financing you select. Larger restaurant loans will typically take longer to qualify for and will offer the borrower longer repayment terms.
• Repayment terms: We evaluated options based on how long a restaurant business would have to repay their restaurant financing and how often payments need to be made. Restaurant financing terms span from as little as one year to 25 years, with weekly and monthly payments giving restaurant owners several funding choices.
• Overall costs: Restaurant loan rates vary from as low as 8% to over 50%, depending on the loan you get and the individual qualifications of the borrower and the business. Most restaurant financing options are best for a specific cash flow issue, whether it’s financing a major project, paying payroll, or financing new equipment.
• Who the restaurant loan is best for: Some borrowers evaluating restaurant financing options are asking how to get a loan for a restaurant quickly, which is best done with an alternative lender. Other more established businesses may need a larger restaurant loan or longer repayment terms on restaurant financing, for which SBA loans are a better fit.
• Lender experience with restaurant financing: Working with a lender that has experience with providing restaurant financing can increase your chances of being approved, especially if you meet the minimum qualifications.
• Minimum qualifications: Restaurant funding options have a wide range of minimum credit score, time in business, and annual revenue requirements. The lowest among these are provided by alternative lenders, which offer restaurant financing options to borrowers with credit scores of at least 600.

Depending on what your personal and business situation looks like, you may find any of these five best options a good fit for your business. For short-term needs, we recommend OnDeck. It provides both short-term loans and business lines of credit to help restaurants with their funding needs. Through OnDeck, you can get up to $500,000 in as quickly as one day with an application process that takes about 10 minutes.

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Short-term Restaurant Loans

Short-term loans are typically used by restaurants looking for cash to plug working capital gaps and invest in growth. They’re one of the best short-term financing options for restaurant owners because they offer loan amounts up to $500,000 and can get you funded in as little as one to three days.

What Short-term Restaurant Loans Offer

Short-term loans are offered by online lenders that focus less on personal creditworthiness and more on recent business history than traditional loan options. These loans typically have short terms and high interest rates. However, even though the restaurant loan rates are high, the total cost of capital can be lower than a traditional loan because the repayment period is three years or less.

Short-term Restaurant Loan Terms

The restaurant loan terms will vary by lender, but they’ll generally fall into these ranges:

• Loan size: $5,000 to $500,000
• Repayment terms: Three to 36 months
• Payment frequency: Weekly or monthly
• Funding speed: As quickly as one to three business days

Short-term restaurant loans typically offer from $5,000 to $500,000 in restaurant funding. These loans are usually repaid within three years and offer larger funding amounts than most other options. Borrowers needing quick restaurant financing options should consider a short-term restaurant loan for its quick online application and funding speed.

Short-term Restaurant Loan Minimum Qualifications

The minimum qualifications for restaurant loans from alternative lenders you can expect are:

• Credit score: At least 600
• Time in business: At least one year
• Annual business revenue: At least $100,000
• Down payment: None
• Collateral: Blanket UCC filing
• Personal guarantee: Required

Qualifying for a short-term restaurant loan is relatively easy for most businesses. The primary borrower will typically need a personal credit score of at least 600 to be considered. The business will also have to be operational for at least one year with $100,000 or more in annual revenue. There is no down payment or hard collateral requirement for this form of restaurant financing, making it accessible to more businesses.

Short-term Restaurant Loan Costs

The costs you can expect with a short-term restaurant loan are:

• Starting interest rate: As low as 9% simple interest
• Average APR range: 30% to 50%
• Origination fees: 0% to 5%
• Additional fees: None

Short-term restaurant loans typically have higher APRs than other financing options because of the low minimum qualifications required to get funding. Restaurant loan rates start as low as 9% for the most qualified borrowers and typically fall between 30% and 50% on average. There are also origination fees to consider, which can range from 0% to 5% depending on the lender you work with and your personal and business qualifications.

What a Short-term Restaurant Loan Is Missing

A short-term restaurant loan offers the quickest funding speeds for up to $500,000 that a restaurant owner can qualify for. However, the money is available in one lump sum, which is an expensive option for working capital expenses like payroll. For a financing option with the same qualifications and the flexibility to draw funds on demand, consider getting a business line of credit instead.

Where to Get a Short-term Restaurant Loan

Our recommended short-term loan provider is OnDeck, which offers restaurant loans up to $500,000. To qualify, you must have a 600 or higher credit score, at least one year in business, and $100,000 or more in annual business revenue. See if you prequalify with an online application that takes about 10 minutes. OnDeck can fund loans in as quickly as one business day.

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Business Line of Credit for Restaurant Financing

A business line of credit (LOC) can help businesses needing a recurring financing option. It can help restaurants prepare for unexpected expenses that require quick financing or businesses with consistent short-term cash flow gaps, like seasonal restaurants. You can reuse your line of credit repeatedly and only pay interest on the amount you borrow.

What Business Lines of Credit for Restaurant Financing Offer

Like a short-term loan, business lines of credit (LOC) from online lenders focus on your personal creditworthiness and your recent business history for an approval decision. LOCs typically offer up to $100,000 in revolving credit, which is lower than many other options on this list. Prime borrowers can find a line of credit from an online lender, and they can receive funds within one to three days.

Business Line of Credit for Restaurant Financing Terms

The terms for restaurant financing with a business line of credit are:

• Loan size: $5,000 to $100,000 (often revolving)
• Repayment terms: Up to 12 months
• Payment frequency: Weekly
• Funding speed: As quickly as one to three business days

Business lines of credit are typically smaller restaurant financing options used to cover working capital expenses like payroll or utilities. They typically offer up to $100,000 in funding with repayment terms up to 12 months. Although business lines of credit often require weekly payments, they are also revolving, so once the principal is repaid, the money can be borrowed again.

Business Line of Credit for Restaurant Financing Minimum Qualifications

The minimum qualifications for restaurant financing with a business line of credit are:

• Credit score: At least 600
• Time in business: At least one year
• Annual business revenue: At least $100,000

The minimum qualifications for a business line of credit are the same as those for a restaurant business loan. You’ll need a personal credit score of 600, at least one year of operational business history, and $100,000 or more in annual revenue. These qualifications are similar to a term loan, but they are much lower than the qualification requirements of an SBA loan.

Business Line of Credit for Restaurant Financing Costs

The costs of restaurant financing with a business line of credit are:

• Starting interest rate: As low as 13.99% simple interest
• Average APR range: 20% to 40%
• Origination fees: None
• Additional fees: $20 per month maintenance fee

A business line of credit has a higher starting interest rate than a restaurant business loan. The starting rate is typically 13.99%, but because you only owe interest on the funds you borrow, it can be a far less expensive funding option. There is a monthly maintenance fee of $20, and no other origination fees. On average, borrowers can expect to pay APRs between 20% and 40%.

What a Business Line of Credit for Restaurant Financing Is Missing

A line of credit offers restaurant owners a flexible working capital solution and only requires interest payments on the funds you draw. However, repayment terms are typically less than one year, making it less than ideal if your business needs smaller payments. For longer repayment terms, consider getting an SBA restaurant loan instead, which offers terms up to 10 years.

Where to Get a Business Line of Credit for Restaurant Financing

OnDeck can help your restaurant get a business line of credit up to $100,000. OnDeck can fund lines of credit in as quickly as one business day at starting rates of 13.99% and repayment terms up to one year. See if you prequalify by filling out its short, online application.

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SBA Restaurant Loans

SBA loans are best for profitable restaurants and borrowers with a strong personal credit profile. You can use these loans to buy large equipment or real estate because they’re the most affordable restaurant loan option with the longest repayment terms. However, SBA loans can take 30 to 90 days or longer to fund, so they are not a good source of quick funding.

What SBA Restaurant Loans Offer

SBA loans are the most affordable loan option, but they often require you to be a prime borrower with at least two years of business history. These restaurant loans generally have interest rates between 8% and 11%. Restaurants are a good fit for SBA loans and receive more SBA loans than any other industry because they are great for the large purchases restaurants routinely make (real estate, large equipment, and so on.).

SBA Restaurant Loan Terms

The typical terms of an SBA restaurant loan are:

• Loan size: Up to $5 million
• Repayment terms: Up to 10 years for working capital and up to 25 years for real estate
• Payment frequency: Monthly
• Funding speed: 30 to 90 days or longer

An SBA restaurant loan is the largest restaurant financing option available to borrowers, with potential funding up to $5 million. It also has the longest repayment terms, which can last up to 10 years for working capital and 25 years for real estate. You’ll be required to make monthly payments once approved, but you will need to wait 30 to 90 days to receive initial funding, which is the longest funding time we evaluated.

SBA Restaurant Loan Minimum Qualifications

The minimum qualifications for an SBA restaurant loan are:

• Credit score: At least 680
• Time in business: At least two years
• Down payment: At least 10%
• Collateral: Typically required
• Other requirements: Must be profitable

Qualifying for an SBA restaurant loan is difficult due to the extended terms and large funding amounts it offers. Although the SBA does not set a minimum time in business, many SBA lenders want to see at least two years of operations from applicants. You’ll also need a personal credit score of at least 680 and at least 10% for a down payment, which can sometimes be business equity.

If your restaurant is a fairly new business, or in the startup phase, then you’ll need more collateral and a higher down payment than other businesses. Typically, startups in the restaurant business may have to put down as much as 25% in collateral to qualify for an SBA restaurant loan.

SBA Restaurant Loan Costs

The typical costs of an SBA restaurant loan are:

• Interest rate: 8% to 11%
• SBA origination fee: 0.5% to 3.5%
• Packaging fee: $2,000 to $4,000

SBA loans are an affordable form of restaurant financing, with rates that are limited by the SBA ranging from 8% to 11%. Part of the reason for the low rates is that the SBA guarantees part of the loan amount, reducing the risk to the lender. Besides interest, you must pay an SBA origination fee of 0.5% to 3.5% and a packaging fee of $2,000 to $4,000 for the restaurant loan.

What an SBA Restaurant Loan Is Missing

An SBA restaurant loan offers borrowers a low-cost term loan with repayment terms up to 10 years, although it’s difficult to qualify for due to high minimum qualifications. If your business is unable to qualify for these requirements, consider getting a Rollover for Business Startups, which only requires that you have $50,000 or more in a qualifying retirement account.

Where to Get an SBA Restaurant Loan

SBA loans are originated by traditional lenders like banks. We’ve created a free webinar to help you learn more about different restaurant loans. Our small business expert will help you identify the best financing option for your business needs and how to qualify for funding.

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Rollover for Business Startups (ROBS) for Restaurant Financing

ROBS is best for anyone with at least $50,000 in a tax-deferred retirement account who needs financing to start, buy, or invest in a restaurant. 401(k) business funding through a ROBS is a way to get restaurant financing without taking on debt, which means you won’t have to make large weekly or monthly payments. There are also no early withdrawal penalties or taxes with a ROBS, and you can use these funds as a down payment for traditional financing, like an SBA loan.

What ROBS for Restaurant Financing Offers

According to a recent study by RestaurantOwner.com, most first-time restaurant owners funded their restaurants with savings or other personal sources of financing. Withdrawing funds directly from your retirement account will probably cause you to pay fees or extra taxes. A ROBS allows you to roll over your money from a tax-deferred 401(k) or IRA into your business without paying these penalties.

A ROBS can be a complicated transaction with a lot of moving parts because you must follow rules from both the IRS and the Department of Labor. Because of the sensitivity of making sure you follow these rules, we recommend partnering with an experienced ROBS provider that has completed hundreds of ROBS transactions.

ROBS for Restaurant Financing Terms

The typical terms for restaurant financing through a ROBS are:

• Financing amount: At least $50,000 (not a specific ROBS minimum, but is the required minimum for most ROBS providers)
• Repayment term: No minimum or maximum requirement
• Payment schedule: None, because it’s not a loan
• Funding speed: Two to three weeks

Although there is no minimum financing amount required for a ROBS, most of the top ROBS providers will require that you roll over at least $50,000. If you rollover less, the costs of the transaction are typically higher than a business loan would be for the same amount of funding. There’s no repayment obligation with a ROBS, leaving your restaurant business with more working capital. Funding typically takes two to three weeks.

ROBS for Restaurant Financing Minimum Qualifications

The typical qualifications for using a ROBS for restaurant financing are:

• Credit score: No minimum requirement
• Time in business: No minimum requirement
• Down payment: No minimum requirement
• Collateral: No minimum requirement
• Other requirements: At least $50,000 in a tax-deferred retirement account (if working with a ROBS provider) and your business must be a C corporation

Since a ROBS isn’t a loan, you won’t be required to have a minimum credit score or reach a certain revenue requirement. Instead, you must meet certain ROBS requirements to make sure you’re in compliance with federal laws and rules surrounding this transaction. A ROBS provider can help you stay in compliance both when setting up the ROBS and for maintenance once it’s active.

ROBS for Restaurant Financing Costs

The typical costs of restaurant financing with a ROBS are:

• Expected setup fee: $5,000
• Monthly service charge: $130 to $150, and there is typically an additional charge per employee if you have over 10 employees

A ROBS costs nothing to set up unless you use a ROBS provider, which we recommend. Most ROBS providers charge setup and monthly fees to maintain the plan and help you administer it correctly. This setup fee is around $5,000, with a monthly service charge up to $150 for maintenance so that your ROBS remains in compliance. Although this is the only funding option with a maintenance cost, it also has no interest, making it very affordable.

What a ROBS for Restaurant Financing Is Missing

A ROBS offers business owners an interest-free funding option for their restaurant. However, your business needs to be organized as a C corporation and must remain in compliance with extensive rules set by various agencies. If your business only needs financing for a specific piece of equipment, rather than general funding, consider applying for restaurant equipment financing instead.

Where to Get ROBS for Restaurant Financing

You can complete a ROBS on your own, but it can be a complicated transaction that is difficult to navigate without an experienced professional. And you do not want to make mistakes when you’re funding a business with your 401(k). Instead, we recommend you partner with a ROBS provider that has worked through hundreds of ROBS transactions.

Restaurant Equipment Financing

If you need to buy appliances, tables, chairs, fixtures, or other equipment for your restaurant, then an equipment lease or loan is probably the best way to do it. It’s a good option for all borrowers, even applicants with relatively low credit scores, and the loan is secured by the equipment itself.

What Restaurant Equipment Financing Offers

Equipment financing funds the purchase of large equipment with a long shelf life. The equipment serves as collateral for the loan and you’ll typically get repayment terms up to seven years. An equipment lease gives you the option to buy the equipment at the end of your term and with a loan, you’ll own the equipment as soon as you pay it off.

Restaurant Equipment Financing Terms

The typical terms for restaurant equipment financing are:

• Financing amount: $10,000 to $500,000 (up to 95% of equipment costs)
• Repayment term: Two to seven years, based on the expected useful life of the equipment
• Payment frequency: Monthly
• Funding speed: Two to five business days

Equipment loans offer similar funding amounts and can offer longer repayment terms compared to short-term restaurant loans. You can get up to $500,000 in funding for restaurant equipment with a repayment term that is typically in line with the useful life of the equipment. Funding takes a little longer than a business loan, typically requiring two to five days.

Restaurant Equipment Financing Minimum Qualifications

The typical minimum qualifications for restaurant equipment financing are:

• Credit score: At least 600
• Collateral: Equipment being financed
• Down payment: At least 10%
• Other requirements: No bankruptcies, foreclosures, or repossessions on your credit report

The minimum qualifications for restaurant equipment financing are similar to a short-term loan, requiring a personal credit score of at least 600. The major difference is that the equipment you finance will act as collateral for the loan, making this financing option much less flexible. You also must provide a down payment of at least 10% to qualify.

Restaurant Equipment Financing Costs

The typical costs of restaurant equipment financing are:

• Interest rates: 6% to 9%
• Fees: Varies by lender, but there is typically an origination fee

Equipment financing is an affordable alternative to other loan options. Since the equipment is used as collateral by the lender, the interest rate is often less than even an SBA loan. Your interest rate will depend on what type of financing you get, but will typically range from 6% to 9%. For example, an equipment loan will cost more than an equipment lease, but you’ll own the equipment after you pay it off.

What Restaurant Equipment Financing Is Missing

An equipment loan or lease is the lowest cost method of financing new or replacement equipment for your restaurant business. However, your equipment will act as collateral for the loan and the funding can’t be used to pay additional employees or to make the necessary expansions to accommodate the new equipment. Consider getting a line of credit in addition to an equipment loan or lease to cover those expenses.

Where to Get Restaurant Equipment Financing

If you have a relationship with a local bank, that is the first place you want to ask about a restaurant equipment loan. If your bank doesn’t provide a loan, or you cannot meet the minimum requirements to qualify, then a specialized equipment dealer is another option to consider.

How to Determine How Much Restaurant Financing Is Needed

Before you apply for a restaurant loan, you should determine how much capital you need so you don’t overborrow. Restaurants have thin margins, and overborrowing could damage the long-term stability of your business. However, knowing how much you need can be difficult if you’re trying to start a restaurant from scratch.

Milena Thomas, an outsourced CFO and Professor of Corporate Finance at Walsh College, says:

“If restaurant owners have done things right from the start and have been keeping proper books, the task of determining if and how much financing will be needed in the coming year is greatly simplified. Creating a cash flow projection for the next 12 months will reveal any shortfalls and from that point, based on the amount needed and what it will be for, this will determine the source of funding the restaurant should try to secure.”

She also told us that restaurants need to critically consider any expenditures and ensure they are truly necessary, so that the cost will provide increased revenues in the long run. Her example was to consider if new equipment expands the menu or increases efficiency. You can run the numbers on the potential increased revenues before you make the capital expenditure.

Breaking even, dollar for dollar, is not a good enough metric for estimating your financing needs. Any loan comes with interest rates that will vary with the loan and the creditworthiness of the borrower, so any estimates have to include those interest expenses in any break-even analysis.

RestaurantOwner.com provided some primary startup and operating costs you should consider when assessing how much you need to borrow. Many of these costs can be good to help established restaurants ballpark what you need for working capital, but it would be more accurate for you to calculate your needs based on your current financials.

Common Restaurant Startup Costs

All the costs above will vary based on the restaurant, operations, and location. Jim Laube, President of RestaurantOwner.com, says he has seen food truckers get into business for as little as $10,000, whereas fine dining restaurants can cost millions of dollars.

How to Get Approved for Restaurant Loans

For decades, the conventional wisdom was that restaurants were high-risk businesses with high failure rates. However, in the last few years, it’s become clearer that restaurants are not riskier than any other business, as long as the owner plans and executes a sound business plan.

However, restaurants have plenty of challenges that prevent this from happening. They’re in a regulated industry and have small margins. One big mistake could bring down the whole business if you don’t plan and have access to working capital when you need it. The problem is making sure you qualify for financing when your business needs it.

Four tips for improving your odds of receiving restaurant financing are:

1. Stay Up-to-Date With Your Business Finances

Business owners often struggle to find time to do everything they feel needs to be done. One area of importance is keeping up to date with business financials because cash flow is often king. However, not staying on top of this important task can cost you penalties now and the opportunity to get financed later.

Christian Moreno from GoKapital says:

“Factors such as timely filing taxes, paying licensing fees, staying up to date with your rent or mortgage, managing payroll, and maintaining positive cash flow will better position owners to qualify for a restaurant business loan. Common financial trip-ups that hurt an establishment’s chances of obtaining funding include tax liens, late rent or mortgage payments, and excessive overdrafts in bank statements.”

Having an automated accounting software, or even a bookkeeper or accountant overseeing the financial side of the business, will ensure that your restaurant qualifies for working capital whenever you need it.

2. Be Able to Show Your Capital Needs in Detail

Many long-term lenders will only lend what they think you need because they don’t want you to take on more debt than necessary. Instead, lenders want to ensure your ability to pay them back. Having a detailed list of necessary expenses over the next year and being able to back it up is key to negotiating a higher borrowing amount.

Stephanie O’Rourk, Partner at CohnReznick, says:

“Operators looking to expand their brand through either traditional debt vehicles or equity capital raises need to first understand the financial capital that is truly required to open their new locations and expand their infrastructure to support their growth. More often than not, operators are focusing on the hard and soft costs (architect, legal, and design fees, security deposits, construction costs, equipment, furniture, and fixtures) associated with the build-out of the new locations and underestimate the pre-opening costs as well as the working and human capital needs that are required to adequately support their expanded operations.

“I always encourage my clients to develop both a generous capital budget (which includes construction contingencies) as well as a conservative cash flow model (which accounts for the potential for both negative outliers as well as the expansion of their current infrastructure). A proper budget will ultimately establish the financial capital required to successfully launch and maintain the growth of their brand. It is always better to beat those budgets than not meet them.”

These expected losses should be included in the working capital need. It is unrealistic to expect a restaurant to be fully operational on day one of opening, and declining losses during startup are understandable in many markets. Be sure to ask for the total working capital needed when you open, not what you think will be needed at the time of application.

3. Preserve Operating Cash

If you’re going to apply for long-term financing, then you must convince the lender you can sustain your business with or without capital for the short term. This gives the lender confidence in your ability to repay the loan and will increase your chances of getting funded. This isn’t applicable to short-term loans, but SBA or other traditional lenders will want to see this type of preparation.

According to Lee Speronis, JD, CHE, CHIA, and Associate Professor at Husson University:

“In order to raise capital, restaurant owners will need to demonstrate that they have 90 days’ operating cash. This is considered a minimum safe level. If the owner does not have 90 days’ operating cash, raising capital could be problematic. Credit is also an important issue that could trip restaurant owners up. If a restaurant owner has not established credit or has overextended himself or herself on credit, getting additional capital will be more difficult.”

4. Separate Your Business & Personal Expenses

One of the biggest mistakes small business owners make is merging their personal and business finances. If you have a legal entity for your business, then you likely created it to protect your personal assets from anything that happens in that business. The problem is that when you decide to commingle funds between your business and personal accounts, you’re “piercing the corporate veil” into your personal life.

This means you and your business are one and that any liability your business has can become your own personal liability. You don’t want to get sued because of your business and you don’t want to put your personal assets at unnecessary risk. Instead, make sure you have a business checking account and a business credit card separate from your own.

Buying an Existing Restaurant or Franchise

Buying an existing restaurant is often easier to finance because you can use seller financing. This means the current owner will provide you with a loan to cover the full or partial cost of the restaurant. You can combine seller financing with an SBA loan, ROBS, or pretty much any other restaurant financing in this article.

If you buy an existing restaurant, you’ll want to protect yourself by making sure you either have five to seven years left on your lease or by negotiating a long-term lease before closing. Restaurant success depends on location, so you don’t want to jeopardize the current business you’re buying by having to move shortly after you take over.

Purchasing a restaurant franchise is yet another possibility. It’s often less expensive than buying an independent restaurant because the parent company will provide your concept, marketing plan and materials, and brand recognition. If you go this route, make sure you carefully read through the franchise disclosure document, which will lay out your estimated startup and operating costs.

Pros & Cons of Restaurant Financing

Whether you need lower minimum qualifications, a quick funding time, or long repayment terms for a large project, there is a restaurant loan that has you covered. However, be wary of the impact interest payments have on cash flows, be sure to plan for how long funding will take, and remember that some restaurant funding options have significant collateral requirements.

Pros of Restaurant Financing

The advantages of restaurant financing are:

• There are multiple restaurant financing options available: There are multiple restaurant funding options your business can qualify for, including short-term loans, SBA loans, lines of credit, and equipment financing. Each is best for a unique situation like renovations, expansions, regular expenses, and new equipment, respectively.
• Long repayment terms are available: Newer restaurants don’t always have sufficient capital to make a large monthly payment but need significant funding to cover operations costs and equipment. With short-term restaurant loans, you can get funding for up to three years and for longer terms, an SBA loan can offer up to 10 years.
• Some options have low minimum qualifications: Not all restaurant owners have perfect credit and not all restaurants generate a large amount of revenue. Restaurant loans are available to borrowers with credit as low as 600, and the minimum annual business revenue requirement is only $100,000.

Cons of Restaurant Financing

The disadvantages of restaurant financing are:

• Interest payments can compound a cash flow problem: If your business is experiencing a shortage of cash flows, sometimes getting a loan may make the problem worse. This can also happen if borrowers don’t account for the seasonality of their business and properly plan for slower seasons.
• Funding can take weeks to secure sometimes: Although getting an SBA restaurant loan can be an inexpensive option based on the low rates and long repayment terms, it also takes up to 90 days. With an online lender, your business can apply today and have funding as soon as tomorrow.
• Collateral is often required: Whether you are getting an SBA loan or applying for equipment financing, you will be required to provide collateral. This reduces the capital you have to grow your business. Fortunately, there are short-term loans, without a hard collateral requirement, that you can get.

Understanding which restaurant financing options are best for your business is an important step in taking advantage of the benefits of financing while minimizing the downside. Our article does not cover every single option and there are many more available, including business credit cards and crowdfunding that your business can potentially take advantage of.

Restaurant Business Loans for Small Businesses

Financing Type	Best For
Short-term Loans	Restaurant businesses needing short-term funding for solve cash flow problems.
Business Line of Credit	Restaurant owners needing a credit line for recurring expenses.
SBA Loans	Restaurant owners with a 680 or higher credit score needing long-term capital.
ROBS	Starting or buying a restaurant by using at least $50,000 in retirement savings.
Business Credit Cards	Businesses needing a small and flexible credit line with perks and rewards.
Equipment Financing	Restaurant businesses looking for capital to purchase large equipment.

Frequently Asked Questions (FAQs) About Restaurant Loans

In this article, we covered the restaurant loans available to small businesses to fund working capital, large projects, and equipment. With any financing, there will be questions we did not answer in the article. We’ve compiled the top questions from around the web and answered them below. If we haven’t answered your question, ask it in the Fit Small Business forum.

The most frequently asked questions about restaurant loans are:

Do banks give loans for restaurants?

Banks regularly provide loans to restaurants, especially if the loan being applied for is an SBA guaranteed loan. It is typically easier to qualify if your restaurant is more established, you have a strong personal credit score, and your business is generating substantial revenue.

How can I get a loan for a new restaurant?

To get a loan for your restaurant startup, you can work with a traditional bank that funds SBA loans. However, keep in mind that you will often need significant collateral to qualify and that you will need to show substantial experience in restaurant management for consideration.

How can I finance a restaurant with no money?

If you want to open a restaurant, but you don’t have capital available to you, consider setting up a crowdfunding campaign to fund your restaurant. You can offer backers of the campaign equity, rewards, or interest for their contributions. You can also get funding from an angel investor in exchange for equity in the restaurant.

Bottom Line: Restaurant Loans

Restaurant loans can be a good way to get your new business off the ground or to provide some working capital to buy new equipment and keep you operating during a cash flow gap. A small term loan or business line of credit is great for short-term needs. An SBA loan is good for prime borrowers looking for long-term capital.

OnDeck can help established restaurants looking for working capital. It offers both short-term loans and business lines of credit, and will work with you to determine your needs. You could prequalify for up to $500,000 in financing by filling out a basic online application that takes about 10 minutes. If approved, it could fund you in as quickly as one day.

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