Restaurant Business Loans

A business line of credit gives you access to flexible, revolving funds when you need them for your restaurant. With a line of credit, you borrow what you need, pay down the balance and the funds are replenished so you can use it again without reapplying. Many restaurant owners find a line of credit helpful to bridge cash flow gaps, manage payroll and purchase the inventory they need to keep their kitchen running.

Many lenders offer business term loans for small businesses like restaurants. Term loans are usually offered by banks, credit unions and online lenders. Generally, the process of getting a business term loan from an online lender is much quicker than a traditional bank. Many restaurant owners will use a term loan to improve their kitchen space or dining area, purchase inventory, or replace kitchen equipment like an oven or freezer.

A merchant cash advance is a funding option often suitable for businesses, like restaurants, that frequently handle credit card transactions. With this type of financing, the cash advance provider evaluates the restaurant's previous debit and credit card sales to decide the funding amount and terms of repayment. Repayment is then automatically deducted daily from the restaurant's bank account. This deduction is a set percentage (referred to as the factor rate) of the restaurant's credit and debit card sales.

Business credit cards work similarly to personal credit cards, and some even offer rewards. This borrowing method is ideal for managing occasional small business expenses. Experienced restaurant owners often use these cards alongside other funding methods. Establishing a robust credit history and maintaining a good personal credit score can lead to more diverse loan opportunities for restaurant business owners.

Equipment financing is another way to finance the purchase of business equipment besides just using a loan or line of credit. Any tangible asset used in business operations can be considered business equipment. For restaurant owners, this can mean an oven, deep-fryer, commercial refrigerator or even kitchen shelving units.

As a business owner, the financing option you're likely most familiar with is a traditional bank loan. A bank loan typically requires collateral to secure the loan, and the application process tends to take several weeks. The length of the loan can be anywhere from 2 - 20 years. While the interest rates on a bank loan can be attractive, restaurants may find it difficult to meet stricter bank requirements for a loan. Restaurant owners may also find the process too slow for their cash flow needs.

Although the SBA is not a lender, it can help business owners secure financing through participating banks and credit unions (among others). The SBA Loan Guarantee Program looks for borrowers who might not otherwise meet the more rigid criteria required by a bank. If your restaurant is an established business with a few years under its belt and your personal credit score is above 680, this could be an option for your business. However, the application process tends to take several weeks, so restaurant owners may find this too slow for more immediate needs.

It's hard to predict rental dynamics in real estate. A commercial real estate loan protects you from the uncertainty of rising rents in the future and allows you to make structural changes to the property without butting heads with the landlord. From the lender's standpoint, a commercial real estate loan is the safest bet because the property itself is collateral that will cover the loan in case of a default.