Restaurant Equipment Financing

Whether you’re launching your restaurant business for the first time or looking to grow, you’re going to need reliable equipment to keep your customers coming back. Fortunately, you don’t need to foot the entire cost yourself.

Restaurant equipment financing, or restaurant equipment loans, make it easier to access the supplies you need.

What Is Restaurant Equipment Financing?

Restaurant equipment financing, or restaurant equipment loans, is a type of business funding that allows entrepreneurs to buy the equipment, machinery, and supplies they need to launch or operate their eatery.

Restaurant equipment loans cover between 80% to nearly 100% of the equipment or machinery you need for your business. You’ll be able to obtain and start using the materials right away, with your debt being broken down into more manageable payments to be repaid over time. 

With restaurant equipment financing, the materials you’re purchasing will also act as collateral for your loan. In other words, your restaurant equipment loan will be secured by the same equipment you are buying. In most cases, you won’t need to provide additional collateral or risk your personal finances for this type of funding.

This is good news, especially if you don’t have high-value assets on hand or you’re just launching your business. In fact, restaurant equipment financing is especially common among new businesses and startups.

What Are the Best Restaurant Equipment Financing Options in 2022?

SBA Loans

Small Business Administration (SBA) loans are government-backed financing options with special benefits just for small businesses. With SBA loans, the government covers a portion of your outstanding balance in case you default.

Lenders receive an extra layer of security this way, which translates to lower interest rates for you.

SBA loans feature low-interest rates and lengthy terms. They can be used to cover just about any type of business expense, including operating costs, real estate purchases, and equipment financing.

SBA loans have their own set of requirements on top of the ones imposed by your lender. For starters, you’ll need to meet the SBA’s size standards as well as the following criteria:

• For-profit business
• Located and operated within the United States
• Business owners must have invested equity
• No debt to the U.S. government
• Owners can’t be on parole

There are two main SBA loan programs that can be used for restaurant equipment financing: SBA 7(a) loans and SBA 504 loans.

SBA 7(a) Loans

SBA 7(a) loans are one of the SBA’s most popular programs. These loans have funding amounts as high as $5 million, which can be used for a large variety of business purchases. Repayment periods can range between 10 to 25 years.

504 Loans

Another popular long-term, fixed-rate financing program, 504 loans come with financing amounts as high as $5 million. Funds can be put towards major assets that promote a business’s growth, including restaurant equipment. You can even use a 504 loan to refinance other outstanding business loans and equipment loans.

Term Loans

Term loans are structured in such a way that you’ll receive a lump sum of capital upfront, which will be repaid over regular installments for a predetermined period of time. If this sounds fairly standard, it’s because most business loans are structured as term loans.

You can use term loans to fund a variety of different business expenses and projects. With restaurant equipment financing, you’ll need to have an exact figure in mind of how much your new equipment will cost.

From there, your lender will approve the machinery and make sure it guarantees the loan. If for some reason, you are unable to keep up with your payments, the lender will retain the right to seize the equipment to recuperate their funds.

Business Line of Credit

Business lines of credit are somewhat similar to credit cards, except they feature higher funding limits and more affordable interest rates.

The great thing with business lines of credit is that they are very flexible, you can use the funds for whatever business expenses you see fit. Plus, with a revolving line, you’ll be able to access capital again up until your limit as you pay down your balance.

What Are the Benefits of Financing Your Equipment?

No Personal Collateral Requirements

There are occasions where some lenders, especially banks, may insist you provide a down payment in exchange for your equipment financing loan. However, it’s far more common that you won’t be obligated to pledge your personal assets for collateral in exchange for this loan type. That’s because the equipment you are financing will act as collateral for the loan itself, leaving your finances out of the equation.

Less Expensive Over Time

When you lease restaurant equipment, you may face lower upfront costs. However, over the long run, it’s likely to become a cash drain. Payments with restaurant equipment loans may seem higher on a month-by-month basis, but the difference is that they allow you to build equity in the asset. This isn’t the case with leasing. You’ll save on your costs in the long run when you go the equipment financing route.

You’ll Own the Equipment

When you own your restaurant equipment, you have the freedom to use it as you see fit. Plus, a portion of your payments is going towards building up ownership in an asset. When the time comes, you may be able to sell your equipment for an upgrade or use it as collateral for another type of financing in the future.

What Equipment Can Be Financed?

Whether you need to finance restaurant furniture or purchase décor, restaurant equipment financing allows you to obtain all the necessary equipment and machinery you need to start your eatery or keep it operating at its full potential. This includes but isn’t limited to:

• Ovens
• Grills
• Refrigerators and freezers
• Food prep counters
• Food processors
• Storage supplies
• Cooking tools; cutting boards, woks, pans, pots, etc.
• Serving tools

How Do You Qualify for Restaurant Equipment Financing?

The requirements you’ll need to meet in order to qualify for restaurant equipment financing can vary greatly depending on the type of lender you work with. Banks and credit unions are known to have the strictest requirements. You’ll likely need good credit (at least a score of 680 or more), a business history, and strong revenue.

You’ll find more flexibility when you work with online lenders. National Business capital, for example, maintains a network with over 75 different online lenders. You could qualify for funding with as little as

No minimum credit score

If your business is at least 6 months old, you can effectively waive the credit score requirement. Otherwise, you’ll need a minimum of a 650 FICO score.

0 to 6 months of business history

Most lenders want to see at least one year of business history. However, National maintains options for businesses as young as 6 months. Plus, if you have a credit score of 650 or higher, you could waive this requirement altogether. That means you can get restaurant equipment financing when you’re just starting out!

$120,000 in annual sales

You’ll need at least $120,000 in gross annual sales or $10,000 in monthly gross sales. However, if your FICO score is 650 or higher, you can work around this requirement.

Is It Hard to Get Financed for Equipment?

How hard it is to get financed for equipment depends on the type of lender you work with as well as your own qualifications. Banks and credit unions have the strictest requirements, which means it can be difficult to get approved for a restaurant equipment loan by these lenders.

You’ll find more flexibility and higher approval rates when you work with an online lender. Online lenders are also well known for being faster at processing your application. While banks and credit unions can take weeks, online lenders may be able to get you the funds you need to purchase your restaurant equipment in as little as 3 days.

What Is the Interest Rate on Restaurant Equipment Loans?

Interest rates on restaurant equipment loans can be anywhere from 3.75% or higher. The interest rates you’ll receive will depend on the type of lender you work with, the loan type, as well as your own qualifications.

In general, you can expect the lowest rates from SBA loans and lenders like banks. These loans can start from about 3.75% and onwards. Online lenders tend to be slightly pricer. Restaurant equipment loans from online lenders can start at 6%.

In general, having good credit (above 650) and strong revenue will put you in the best position to secure lower rates. Sometimes, contributing a down payment towards your restaurant equipment loan can also help bring costs down.

Can I Get Restaurant Equipment Financing With Bad Credit?

Yes, it is possible to get restaurant equipment financing even with bad credit. In order to achieve this, you’ll need to work with an online lender rather than a bank – since the latter tend to be extremely rigid when it comes to qualifications.

How to Apply for Fast Equipment Funding

For business owners with questions about how to obtain restaurant equipment financing, please call us at (888) 488-4769, or apply online by filling out our simple 1-minute application here to receive funding in as little as 24 hours.