Managing a successful restaurant means monitoring a lot of moving parts, including chefs, waiters, the menu and the equipment. Finding the right financing for that equipment can cement the success of your venture and give you one less thing to worry about.
And there’s good news: Restaurant consultant David Kincheloe notes that it’s often easier to qualify for restaurant equipment financing than other types, because the transaction produces collateral. When you finance an oven, you can use that oven to secure your loan. Loans for restaurant expansions or repairs may be harder to come by.
Jump to our recommendations:
- You own a new restaurant and have a 600+ personal FICO score
- Your restaurant is 2+ years old and has $100,000+ annual revenue
- You’re an established restaurant owner with strong finances and you want low rates
Brand-new big-ticket items such as stoves, refrigerators or dishwashers typically last seven to 10 years, a prime length for mid- or long-term financing. However, equipment financing often comes with a high annual percentage rate — the true cost of borrowing including all fees. So Kincheloe doesn’t recommend using it to buy smaller items, such as microwaves, unless you can bundle them with a larger purchase. Your financing strategy is important, so make sure you’ve determined how to get the most out of your money before you buy restaurant equipment.
Check out some of our picks for restaurant equipment financing:
Your restaurant is new and you have 600+ personal credit score: Dealstruck
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Minimum qualifications |
Typical borrower |
|---|---|---|
| Personal credit score | 600 | 660 to 700 |
| Time in business | 1 year | About 5 years |
| Annual revenue | $150,000 | About $1 million to $2 million |
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Dealstruck requires that all of its clients have a minimum of one year in business, making it a good financing choice if your restaurant is just starting to simmer. The lender can provide restaurant startups with capital to upgrade the kitchen while they continue to find their footing. It also offers both term loans and inventory lines of credit, letting owners bundle different loan products to meet multiple financing needs. It’s important to note, however, that inventory lines of credit from Dealstruck can be used only for nonperishable items.
DEALSTRUCK’S LENDING TERMS FOR LOANS
- APR: Prime rate plus 11% to 28%
- Loan amount: $50,000 to $250,000
- Loan duration: 6 months to 4 years
Your restaurant is 2+ years old and has $100,000+ in annual revenue: Fundation
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Minimum qualifications | Typical borrower |
|---|---|---|
| Credit score | 600 | 680 to 720 |
| Time in business | 2 years | 5 to 10 years |
| Annual revenue | $100,000 | $250,000 to $750,000 |
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If you’re a more experienced restaurant owner, the speedy nature of the Fundation application process can help you access financing fast — which may come in handy when that high-end stove you’ve been eyeing goes on sale. You can get approved for a four-year term loan of between $20,000 and $500,000 in three to five days. Fundation also gives you the option to refinance and borrow more after making regular payments for nine months — six months, if you have a yearlong term loan.
Nerd tip: Fundation may not be for you if you prefer monthly payments. You’ll make your loan payments through automatic deductions from your bank account twice a month.
Fundation’s lending terms
- APR: 8% to 30%
- Loan amount: $20,000 to $500,000
- Loan duration: 1 to 4 years
You’re an established restaurant owner looking for a long-term, low-rate loan: SmartBiz
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Minimum qualifications |
Typical borrower |
|---|---|---|
| Personal credit score | No minimum listed, but most borrowers have at least a 600+ personal FICO score | Average is 705 |
| Time in business | 2 years | About 10 years |
| Annual revenue | No minimum listed, but most borrowers make at least $50,000 | About $1 million |
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SmartBiz helps connect you with coveted SBA loans, which have lower APRs and more favorable terms than those offered by many alternative lenders. They also have more stringent qualifications, which means they’re most suitable for established restaurant owners ready to invest in new, high-end gear. Because quality equipment is a long-term investment, SmartBiz’s long-term loans (10 years) could be a good fit — especially since you aren’t charged a penalty for prepayment.
SmartBiz’s lending terms
- APR: 7% to 8%
- Loan amount: $30,000 to $350,000
- Loan duration: 10 years
Restaurant equipment financing: Next steps
Ready to scrutinize your restaurant’s equipment needs? If so, equipment financing is a great way to invest in the tools you need to prepare your menu effectively. But don’t get sidetracked by low monthly payments.
Kincheloe, president of National Restaurant Consultants, says owners sometimes jump at low monthly payments without considering a loan’s APR. “You can end up spending a lot of money for something you didn’t necessarily have to,” he notes.
Find and compare the best small-business loans
If you’re still on the hunt for small business loan options, NerdWallet has curated a list of loans to help meet the various needs of business owners. Gauged on trustworthiness, market scope and user experience, we’ve sorted them in categories based on revenue and how long you’ve been in business.
Jackie Zimmermann is a staff writer at NerdWallet, a personal finance website. Email: jzimmermann@nerdwallet.com. Twitter: @jackie_zm
To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
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