Top Options for Restaurant Equipment Financing

Published June 24th, 2024 by River Point Capital

More and more Americans are dining out at restaurants again, to the tune of $1.34 trillion in purchases in 2022 alone.

What does this mean for your restaurant? For starters, it means you'll need equipment you can rely on. But what are the best restaurant equipment financing options?

Join us as we look into financing options, including traditional bank loans, equipment loans, leasing, and more.

Restaurant Equipment Financing

Restaurant equipment financing helps businesses acquire the necessary tools without paying the full amount upfront. This type of financing is tailored for purchasing items like ovens, refrigerators, and other essential equipment. Instead of using a large chunk of your capital, you can spread the cost over time.

Traditional Bank Loans

Traditional bank loans are a common option for restaurant equipment financing. Banks usually offer the lowest interest rates and the most favorable terms. However, securing a loan from a bank can be challenging.

Banks often have strict approval requirements, such as a high credit score and a strong business history. You'll also probably need substantial annual revenue. This makes bank loans more accessible to established businesses rather than startups or those with less-than-perfect credit.

The application process for a traditional bank loan can be lengthy. It typically involves a thorough review of your financial statements, business plan, and credit history.

Despite the rigorous process, the benefits of lower interest rates and longer repayment terms can make the effort worthwhile. These loans can be used for a wide range of equipment purchases, from kitchen appliances to furniture and fixtures.

One of the main advantages of traditional bank loans is the predictability of fixed interest rates and set repayment schedules. This stability can help businesses plan their finances more effectively.

Another benefit is that banks often provide higher loan amounts compared to other financing options. This is useful for purchasing expensive equipment.

Equipment Loans

Equipment loans are designed specifically to help businesses purchase the equipment they need. Unlike traditional bank loans, equipment loans use the equipment itself as collateral.

This can make it easier to qualify for an equipment loan even if you don't have perfect credit. The lender is more willing to approve the loan since they can repossess the equipment if you fail to make payments.

One of the main advantages of equipment loans is the speed of approval. Many lenders can process applications within a few days.

This quick turnaround is beneficial if you need to replace a broken piece of equipment or take advantage of a time-sensitive deal. The repayment terms for equipment loans are also flexible. They typically range from one to seven years, depending on the lender and the cost of the equipment.

Interest rates for equipment loans can vary. They are usually higher than traditional bank loans but lower than those offered by online lenders.

It's a good idea to shop around and compare rates from different lenders to find the best deal. Some lenders might also offer fixed interest rates, which can help you plan your budget more effectively.

Another benefit of equipment loans is they don't require a down payment. This can be particularly helpful for businesses that need to conserve cash flow. The equipment itself serves as collateral, which reduces the risk for the lender and eliminates the need for a large upfront payment.

Leasing Options

Leasing equipment is a popular option. It allows you to use the equipment without having to purchase it outright.

This can be beneficial if you're looking to preserve cash flow or avoid a large initial expense. Instead of paying the full cost upfront, you make monthly payments over a set period. At the end of the lease, you may have the option to purchase the equipment at a reduced price, return it, or upgrade to newer models.

Leasing provides flexibility. As technology and equipment standards evolve, leasing allows you to keep your restaurant up-to-date.

Another benefit is the potential for lower monthly payments compared to financing a purchase. Leasing companies often include maintenance and service in the lease agreement, which can save you money on repairs and upkeep.

But over time, leasing can be more expensive than buying, as you are essentially paying for the use of the equipment rather than building equity. Also, you may not have the same tax benefits when leasing.

SBA Loans

SBA loans are a popular choice. These loans are partially guaranteed by the Small Business Administration, which helps reduce the risk for lenders. Because of this guarantee, SBA loans often come with lower interest rates and more favorable terms than traditional bank loans.

One of the main types of SBA loans used for equipment financing is the SBA 7(a) loan. This loan can be used for various business purposes, including the purchase of restaurant equipment.

The application process for an SBA loan can be more detailed and time-consuming than other financing options. It typically requires a comprehensive business plan, financial statements, and a good credit score.

Despite the lengthy process, the benefits of lower interest rates and longer repayment terms can outweigh the initial effort.

Online Lenders

Online lenders have become a popular choice for restaurant equipment financing. These lenders offer a more flexible and faster approval process compared to traditional banks.

If you need quick access to funds or have less-than-perfect credit, online lenders can be a good option. They often have more relaxed qualification requirements, which makes them accessible to a wider range of businesses.

One of the main advantages of online lenders is the speed of funding. Applications are usually processed quickly, and funds can be available within a few days.

However, the interest rates for online loans can be higher than those of traditional bank loans or SBA loans.

Restaurant Loans and Financing Options

Exploring various restaurant equipment financing options can help your business find the best fit for its needs.

At Riverpoint Capital, we've built strong relationships with borrowers and partners across a variety of industries. Regardless of your company's size, Riverpoint Capital ensures the same high level of attention to detail, planning and analysis to help your company grow!

Get in touch today to find out how we can help with your equipment financing!

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