Restaurant Financing

In many ways, the COVID-19 pandemic has devastated the restaurant industry in the USA, but it didn’t end it. Thanks to quick reactions and effective financing instruments, many restaurants owners managed to keep their business afloat and reinvent their dream to more significant success. This guide reviews the most essential business loans available for restaurants owners.

You can have the best menu, most professional staff, a great location, and a fantastic business plan, but your restaurant’s success depends on getting the right funding on time. Restaurant financing can help you realize your dream!

Even with Covid limitations, running a restaurant can be rewarding, but studies show that 60% of restaurants will close in the first year. On the other hand, 90% of restaurants that make it past the first 5 years will stay in business for over 10 years!

Restaurant business loans are all about getting the right type of funding for your business and making sure it flourishes well beyond the 10-year mark. But with so many options available, you might be feeling a little lost. Don’t worry, we’ve got you covered. mCashAdvance has put together a quick guide to answer all your questions about restaurant business loans. Keep reading to learn more!

Common Types of Restaurant Business Loans

There are several types of restaurant business loans available to help your restaurant get to the next level. We’ve compiled a list of the most common restaurant loans to help you find the right funding solution.

1. Small business loans for restaurants- These traditional restaurant business loans usually come with a fixed loan term and interest rate. Most restaurants are classified as small businesses unless your restaurant is part of a franchise. You’ll make monthly payments to your lender until you fully repay the loan. Small business loans for restaurants are one of the most common types of restaurant financing. You can use these loans for nearly anything to grow your business: a new location, renovations, supplies, or hiring staff.
2. SBA Loans for Restaurants- These restaurant loans are backed by the government’s Small Business Association. They are designed to help small business owners invest in their businesses’ growth. Interestingly, restaurants are actually the #1 industry that the SBA grants funding to! SBA loans for restaurants come with excellent interest rates and reasonable repayment terms, but require a lot of documentation. Check if your restaurant is eligible for SBA loan here.
3. Restaurant loans for bad credit- The restaurant business can be tough at times, and your credit score might reflect that. You may be worried this will make it difficult to borrow money for your restaurant. However, many lenders offer restaurant loans for bad credit so that restaurant owners like you can get the necessary funding. Keep in mind these loans have higher interest rates and shorter repayment terms to balance the increased risk of lending.
4. Inventory financing– These loans are specifically for purchasing stock for your business, like cooking ingredients and cleaning supplies. Because they have a predefined use, they may come with better interest rates and terms. However, you need to be sure that you’ll put the money towards inventory, as they are strictly for this purpose. Learn more about these loans here.
5. Working Capital for Restaurants- These loans are designed to help with cash flow problems. As you know, restaurants tend to be seasonal businesses, so owners can face this problem quite often. These loans provide working capital for restaurants to pay rent, salaries, and purchase inventory even during a revenue slump. 

Small business loans for restaurant owners

Restaurants are a cashflow sensitive type of business, and often restaurant owners need to deal with cash flow gaps derived from the nature of the restaurant operation. One example is the gap between the payment for ingredients and the time when the restaurant gets the money. Restaurant business average profitability factor is between 5% to 10%. mCashAdvance mainly offer small business loans for restaurants but we can also help restaurant owners get approved for free payment processing, helping them to eliminate the 4% credit card transaction fees.  The combination of capital injection and instant saving has already helped thousands of restaurants across America to stay in business. 

Restaurant Equipment Financing

If you own a restaurant, you’ll want to outfit your kitchen with the best restaurant equipment to help your chefs whip up the fine cuisine your customers rave about. The thing is, top-notch equipment usually comes with a top-dollar price tag – often way over your monthly budget. Luckily, restaurant equipment financing can help you spread out the costs so you can properly outfit your kitchen more affordably.

A restaurant equipment financing loan gives you the money you need to purchase the equipment up front. Then you make monthly repayments to your lender at a fixed interest rate for the duration of your loan term. Here are a few facts to consider about this type of financing:

Restaurant Equipment Leasing

If you’re not ready to commit to buying a new piece of equipment, a great alternative is restaurant equipment leasing. This is a great option if you want to try out specialist kitchen equipment you’re not sure if you’ll keep. Additionally, restaurant equipment leasing may be a smarter option if you know you’ll consistently upgrade your equipment. Some lenders may also allow you to buy the equipment at a reduced price at the end of your lease.

How to Qualify for Restaurant Loans

Every lender has its own set of qualifying criteria for restaurant loans, but here are some basic guidelines:

Most lenders require these things before they will approve your restaurant loan application. If you apply for quick restaurant funding with a higher credit score, higher monthly revenue, and longer time in business, you’ll boost your chances of acceptance. Furthermore, you may be able to secure better loan terms, so it’s always wise to try and improve your credit score.

Restaurant Startup Financing

When you’re first opening your business, you’ll need restaurant startup capital for expenses like rent, utilities, supplies, and staff. Furthermore, all of these costs add up before your first customer pays for his meal. However, your restaurant won’t yet meet the criteria for traditional restaurant loans, so you’ll want to apply for restaurant startup financing. This is a special type of loan to help start a restaurant business and can range from bakery startup equipment financing to a business loan to open a cafe. Since lending money to startups is risky, these loans often come with high interest rates. Additionally, one of the most critical aspects of your application will be a solid business plan to show your lender how you intend to turn his investment into profit. Restaurant startup financing can be the key factor in turning your restaurant from a dream into a reality.

Unfortunately, most restaurants fail in their first year of business due to a lack of proper funding. You now know to avoid this fundamental mistake and choose the right financing to help your business flourish. We hope you’ve enjoyed our guide and gained the tools you need to make an informed decision about restaurant business loans. We wish you the best of luck!

Restaurant Financing FAQ’s