Restaurant Business Loans

A Guide To The Best Restaurant Business Loans

Restaurant Business Loans

Restaurant Business Loans


If you reside in a large town, you may have seen a lot of restaurant businesses being established and stop operating after only a short period. As much as hotel and restaurant businesses are popular, it actually doesn’t mean that there are no risks involved. There are quite a number of reasons why restaurant businesses fail after only a short lifespan. Some of the businesses are seasonal, and this makes it hard for them to retain their staff since they only come and go depending on the season. Besides the staff, there is also the issue of equipment which can break down when you least expected it. If your customers enjoy the local dishes, they may not know if the ingredients increase in prices. If you fail to be consistent in the type of meals you provide and especially during the peak seasons. Don’t forget that the competition is also tough, and a little financial distress is likely to get you out of business. Luckily, all these problems can be solved by restaurant business loans.

Choosing the Best Restaurant Business Loans

Whether you have a start-up or already established business that you want to renovate or expand, finding the best restaurant loans is as important as the business itself. Starting a restaurant business is hard enough, and it is even more difficult to access a traditional bank loan. If you have a restaurant business in the current economy, you can only succeed if you fight for what you want. A number of things will make you attractive to lenders. Apart from the large collateral requirements, you also should have several years of experience and a good credit score to qualify for a business loan. Only a small percentage of restaurant owners can meet all these requirements. But if you have a great idea accompanied by a great business plan, it can be much easier for you to get a loan for your business. If you don’t have any of these, it also does not mean that you don’t qualify for any of the loan options available. If you are not lucky to get a loan from one lender, there is always another lender who is looking for a business to finance. It is only a matter of taking your time and being patient enough to find the best lender to work with.

When shopping around for the best loan for your business, it is important to compare different loans options to work with a lender who suits your business and personal needs. Lenders offer different rates and varied loan terms, and some can work well for your business than others. The most common types of restaurant business loans include:

  • Factoring
  • Restaurant specific loans
  • Equipment loans


The factoring industry has been around for centuries, but not many businesses are aware of this financing option. This is an option where a business sells its invoices to a financing company (referred to as a factor or factoring receivables company) to raise immediate capital. Factoring can be used by large, small, established and startup restaurants.

How does invoice factoring works?

When you sell your invoice to a factoring receivables company, you will be provided with an advance rate of between 70%-90% of the invoice value. Once the company collects the invoice from your customer, they will forward the remaining percentage, less the agreed upon factoring fee. Invoice factoring is a short-term lending option to help businesses meet their immediate financial needs. It is an easy way to get working capital for your restaurant without taking long-term loans that could be paid for years. Factoring companies put more value in the customer’s creditworthiness than the business credit history.

Restaurant equipment loans

You may not be in need of working capital, but you want to purchase a major piece of equipment to improve the business operation. In this case, you may need a loan to purchase the equipment. Just like any other equipment, restaurant equipment is equally expensive and can take a large percentage of your revenue. This is where loans that are specifically designed for restaurant equipment come in. Depending on your business credit history, you can find lenders who are willing to offer between 80%-100% financing. The money, however, will only cover the purchase of the equipment plus the taxes incurred. The loans come with average interest rates and are short-term in nature.

Restaurant-specific loans

These are loans that are specifically designed for restaurant businesses. The loans are offered by both online lenders and traditional financial institutions. These funds can be used for any business need like restocking inventory, expansion, furnishings among others. The size of the loan determines the loan term and rate of interest. Smaller loans tend to have a shorter loan term compared to large loan amounts.

Small Business Administration, SBA loans

The restaurant industry can also be financed by SBA loans. But as much as these loans can come in handy, qualifying for an SBA loan may not be easy. If you are lucky to qualify, you will be required to provide collateral and personal guarantees. Since a percentage of the loan is guaranteed by Small Business Administration, the loans are less risky to the lender.
Other lending options available for restaurant businesses include working capital loans, inventory financing, merchant cash advance and line of credit.

Best restaurant business loans 2018

Restaurant management is expensive, but not every restaurant needs will require you to take huge amounts of debt or long-term financing. This includes little things such as repairing a piece of equipment or making repairs. But ultimately, the type of financing you choose will entirely depend on your business size and needs. There are many lenders who provide small business loans for restaurants. Here are the top restaurant financing providers in 2018.

  1. Kabbage
    If you need a short-term loan for small purchases, Kabbage is one of the best solutions. The lender provides lines of credit for amounts between $2,000 and $250,000 to be used as working capital. You don’t need to have an excellent credit score to qualify for the loan. But compared to other loans options, Kabbage restaurant loans attract a high APR of 24%-99%. It only takes a few minutes to several business days for funds to be approved.
  2. StreetShares
    With StreetShares, you can receive term loans ranging from $2,000-$250,000 and business line of credit of $5000-$250,000. The company also factors invoices for amounts up to $2 million. The APR ranges from 9%-40% with a term loan of between 6 to 36 months. You can receive funding within 5 business days after approval.
  3. SmartBiz
    SmartBiz can be a good financing option for restaurants if you want to make big investments, including opening a new branch in a new location. This is because they provide large loan amounts with longer repayment terms. SmartBiz provides SBA loans through their online platform with low rates ranging from 8.53%-9.83% APR. Compared to other lending options online, the application process requires a lot of documentation and it can take a longer time to receive the funds.
  4. Credibility Capital
    Just like SmartBiz, Credibility Capital also provides large loan amounts with affordable interest rates. The loan amount ranges from $10,000-$350,000 with an APR of 10%-25%. The loan has a repayment term of 1, 2 or 3 years. On average, it takes 7 business days to access the funds.
  5. OnDeck
    OnDeck can be the best solution if you need a loan with quick approval rate to improve your cash flow. The application process is done online, taking as little as 10 minutes. Restaurants can receive term loans of up to $500,000 with a loan term of 16-99 months. The loan attracts an APR of 16.7%-99.4%. To qualify, you should have a credit score of 500+. You may risk paying a higher rate of interest if you have a poor credit score.

What You Need to Know before Applying for a Restaurant Loan

Before starting your loan application, it is first important to know how the process works. Here are some of the things to need to consider;

  1. When you need the money
    If you need the money to pay employees or purchase important equipment, you do not need to delay the process. Many fast business loans are available that can enable you to acquire immediate funds for your restaurant. In case you still have time to wait before taking the business loan, it is important to do background research before applying for one. In most cases, business loans that entail a lot of paperwork are more affordable.
  2. The purpose of the money
    You also have to know why you need the money before starting the loan application. By coming up with a concrete reason why your restaurant needs funding, you will know whether it is the best financing option available for your business at the time. Also, by having the reason before engaging in the loan application, you will be able to pick the most suitable loan product for the restaurant business.
  3. Are you ready for the process?
    It is important to assess your readiness for the loan search and application. Loan application entails a rigorous process that requires time and commitment. Starting a loan application when you are not ready might reduce your chances of being approved.
  4. Are all available options considered?
    You additionally need to consider all available loan products. If you need to buy equipment, you can easily take a business loan, but for general financing needs, the situation is less complex. Short-term loans represent different objectives and they also come with varying rates, terms and fees. In this regard, it is important to shop for the best option before settling on a specific restaurant loan.
  5. Consider possible questions the lenders would likely ask.
    You also need to know what the lenders would be looking for before approving your loan. Once you have the possible questions to be asked by the lenders then you are good to go. For a small business loan, lenders are more likely to approve a loan if your business is profitable. To prove that your restaurant business is a smart investment, a lot of documentation and information is required. General requirements for a small business loan can be answered by finding solutions to the following three questions:

    • How long have you been in business?
      This will help lenders find the essence of your business and if it deserves funding. To make your application considerable, indicate the uniqueness of the business, make a projection of the business in the future and lastly, show that you are mature enough to manage the business.
    • How well do you manage money?
      Lenders will be interested to know how good you are at managing finances. If you prove that you are responsible with money, you can easily have your loan approved.
    • Are you a trustworthy borrower?
      Here, the lender will consider your credit score. If you have poor credit score, chances are that you will only qualify for high interest loans. If your credit score is attractive, you can easily find a lender who is willing to provide funds at affordable rates.


Restaurant business loans help in running the business in the case of insufficient funds. There are different types of restaurant business loans depending on the restaurant size and needs. To get the best loan product, it is important that you compare loans from different lenders. To increase your chances of approval, ensure that you provide all the information and documents required by the lender when applying for the loan. As a rule of thumb, only apply for the loan if you can afford to make payments on time.

Restaurant Business Loans

Restaurant Business Loans

Alex Darwin