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Equipping your new restaurant’s kitchen or dining room can cost a lot — between $50,000 and $150,000 on average. Restaurant business owners will need commercial kitchen equipment like stoves, ovens, and grills, as well as cold storage like refrigerators, freezers, walk-in coolers, and ice machines. A commercial oven alone can cost thousands of dollars. That’s why it’s often essential to look into financing solutions when you’re entering the restaurant industry.
Even if you are already operating and need to upgrade one piece of equipment, it’s good to know what restaurant equipment financing options may be open to you. Learn what financing programs there are, your best options, and how to apply in this article from Nav’s experts.
Financing options for restaurant equipment loans
Many restaurant owners turn to small business loans that can be used for purchasing restaurant equipment — anything from fryers to dishwashers to dining sets is usually covered. Depending on the type of equipment you need to buy and how much you need to borrow, you can look into the following types of funding:
- Term loans
- Business lines of credit
- Equipment financing
- SBA loans
- Business credit cards
- Merchant cash advances
Equipment startup loans for restaurants can help just before a new establishment opens. Borrowers also turn to restaurant improvement loans when they are already operating their restaurant but need to make upgrades and enhancements. Using funding for larger purchases helps free up cash flow needed to cover everyday food service expenses, like groceries and payroll.
Compare your options from trusted business lenders
There are an overwhelming number of lending choices out there, and it can be hard to know what type to choose and who you can trust. Here are some of the best options to fund your restaurant equipment purchases.
Term loans
Business lines of credit
Merchant cash advances
Using Nav is the fastest and easiest way to compare restaurant equipment loans and other funding options that you know you can trust. Simply enter your business details securely and we will curate your top options for you, instantly.
How to apply for restaurant equipment financing
Knowing how to apply when you need funding to buy new equipment or upgrade existing equipment is essential. However, the exact application process depends on the lender. Bank loans tend to have longer, more complicated applications than the more simple applications offered by online lenders.
You’ll usually need to provide your personal credit score, your time in business, and your annual or monthly revenue before lenders will be able to make a credit decision. Also, you may need documentation to prove that you’re a registered business (an LLC or C-Corp, for example).
Fees and rates
The cost of debt you’ll pay will depend on your circumstances. The fees and rates you pay depend on your personal credit score, your business details, and what you’re applying for. With business funding, you’ll often need to make daily or monthly payments, depending on the repayment terms of your restaurant equipment loan agreement. And you might need to make a down payment.
Term loans will charge interest, and higher credit scores can allow lenders to offer you lower interest rates. Having bad credit might mean you’ll pay higher interest rates. Lines of credit usually charge interest (typically only on what you borrow) and a draw fee each time you borrow money, but not always. Always research your terms carefully to understand what you’re signing up for, and use Nav to help you find the right financing for your needs.
Frequently asked questions
What can restaurant equipment loans be used for?
You can use a restaurant equipment loan to pay for all the equipment your kitchen needs to operate and prepare food, as well as the needs for your restaurant as a whole. Customer seating, lighting, and waitstaff and hostess equipment like a point of sale (POS) device are all appropriate uses of these funds. If you’re unsure what you can use the loan for, ask your lender.
What is restaurant equipment leasing?
It is possible to lease, or rent, restaurant equipment. You’ll pay a monthly fee to an equipment leasing company to use its equipment, which can be more affordable up-front but may cost more over time. This is a great option if there’s a piece of equipment you only plan to use for a short period.
What’s better: equipment leasing vs. equipment loans?
The answer depends on what you qualify for and what your repayment terms look like. If you have bad credit, you may be better off leasing equipment. But it’s best to compare the total cost of the two options over time before you make a decision. Sometimes a smaller monthly payment with leasing will end up costing you thousands more over time.
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Tiffany Verbeck
Content Manager
Tiffany Verbeck is a former Content Manager for Nav. She uses her 8 years of experience writing about business and financial topics to oversee the production of Nav’s longform content. She also co-hosted and managed Nav’s podcast, Main Street Makers, to bring small business owners together to share tips and tricks with a community of like-minded entrepreneurs.
Previously, she ran a freelance business for three years, so she understands the challenges of running a small business. Also, she worked in marketing for six years in a think tank in Washington, DC. Her work has appeared on sites like Business Insider, Bankrate, and Mission Lane.
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