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 Top 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
Intermediate-Term Loan by Kapitus
Great for established businesses looking for large capital amounts.
Pros
- Repayment term of 2-6 years for those who qualify
- Favorable payment plans for businesses with $250k+ annual revenue
- Specialty loan programs for medical practices.
Cons
- Some repayment structures require weekly payments
- Favorable terms for 3+ years time in business.
Funding Amount
Cost
Repayment Terms
Funding Speed
SBA Loan by SmartBiz
For high cost projects with long repayment. No immediate funds needed.
Pros
- APR as low as 11.25% with monthly repayment plans up to 10 years
- Ability to be pre-approved and review terms and conditions before needing to provide a full list of financial documents.
Cons
- Lengthy application process (30-60 days) with lower approval odds
- Requires more documents than other Bank Loan products.
Funding Amount
Cost
Repayment Terms
Funding Speed
Business lines of credit
Line of Credit by Fundbox
Nav recommends this product as a great solution for newer small businesses looking for a fast application process and access to a flexible LOC product. Bonus: When you click 'Apply now," we'll securely pass over your info, making applying with Fundbox a breeze. Only answer a few additional questions on their end and you're good to go.
Pros
- 625 minimum personal credit score
- No impact to credit score to apply (soft pull only)
- No draw fees
- Fast approval and funding, with funds available as soon as the next business day
- Use as much as you need, only pay interest on what you use
- Fundbox reports payment activity to all the major commercial credit bureaus via the Small Business Financial Exchange (SBFE), which can help strengthen a business's credit profile.
Cons
- Must have a business checking account with a minimum balance of $500
- May require large weekly payments (0.4% - 0.7% of the original draw amount per week) due to the short repayment duration.
Funding Amount
Cost
Repayment Terms
Funding Speed
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Flex Line by Revenued
Revenued utilizes revenue-based financing to provide working capital to businesses based on their revenue, not traditional factors like an owner’s personal credit score. Since launching, they’ve provided over $1 billion in funding to 30,000 + small businesses. Expand your access to working capital while only paying for what you use with the Revenued Flex Line. Bonus: When you click 'Apply now," we'll securely pass over your info, making applying with Revenued a breeze. Only answer a few additional questions on their end and you're good to go.
Pros
- No minimum credit score to apply. Approvals up to $500,000. 24/7 access to funds online and only pay for what you use. No application fee, no draw fee, no annual fee.
Cons
- At least $20k in monthly deposits is required for best offer. Not available for Sole Proprietorships.
Funding Amount
Cost
Repayment Terms
Funding Speed
Merchant cash advances
Business Cash Advance by Rapid Finance
A viable option for businesses looking for growth capital up to $600,000. Costs will vary based on your risk profile. This is a good product to get your foot in the door with a lender, with growth opportunities with Rapid Finance’s other products
Pros
- Application is quick and easy
- Receive funds within hours of approval
- No business lien placed
- No application fee
- Can get approved for both a line of credit and term loan and accept both at the same time
- Flexible repayment options.
Cons
- Loan amounts are based on monthly revenue.
Funding Amount
Cost
Repayment Terms
Funding Speed
Business Cash Advance by Credibly
Credibly offers flexible repayment plans with fixed rates, based on future receivables. Ideal for seasonal businesses and those with high credit card processing volumes.
Pros
- Fixed payments
- Offers the ability to pre-qualify without affecting your credit.
Cons
- Must have at least $25,000 a month in sales, Max repayment term is 15 months
Funding Amount
Cost
Repayment Terms
Funding Speed
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.
FAQs on Restaurant Equipment Loans
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
Digital Marketing Copywriter, Nav
Tiffany Verbeck is a Digital Marketing Copywriter for Nav. She uses the skills she learned from her master’s degree in writing to provide guidance to small businesses trying to navigate the ins-and-outs of financing. Previously, she ran a writing business for three years, and her work has appeared on sites like Business Insider, VaroWorth, and Mission Lane.