Business Loans For Restaurants

Here’s a detailed overview of the top 7 Business Loans and financing options every restaurant owner should consider before using your own working capital. Restaurant fail within the first three years due to lack of working capital. Don’t use your working capital for fixed assets, construction buildout, or for equipment. Finance that and use your working capital to make sure you have ample of ammo in the bank for payroll, inventory and other unforeseen expenses.

1.   Merchant Cash Advance (Future Receivable Sale)

Purpose: Merchant Cash Advance provides a lump sum payment in exchange for a portion of future revenue or credit card sales. Terms can be daily, weekly and short-term. However, you have quick access fast and renews when it’s paid down.

Features: Repayment is made through a percentage of daily credit card transactions, with no fixed term. Or, fixed daily or weekly with a fixed term. Terms typically are short and approval is based on you’re the last 3 to 4 months of revenue.

Benefits: Fast access to capital and repayment is flexible based on sales volume. Credit not a factor. Industry is not a factor for some lenders. Most can qualify with very little documentations.

2.   Equipment Finance Agreement

Purpose: To finance outright any business-related equipment.

Features: Typically secured by the equipment itself, with fixed interest rates and repayment terms that match the useful life of the equipment.

Benefits of equipment finance agreement: Enables businesses to acquire essential machinery and tools without large upfront costs. Unlike Fair Market Value or Dollar Buyout Leases, Equipment Finance Agreement (EFA) doesn’t have any end of term buy out option. You automatically have ownership of the asset upon completion of the agreed term.

3.   Business Line of Credit

Purpose: Provides access to a line of credit that businesses can draw from as needed for various purposes.

Features: Revolving credit, like a credit card, with flexible repayment terms. Interest is paid only on the amount used and time borrowed.

Benefits: Ideal for managing cash flow, covering short-term expenses, or handling emergencies. Peace of mind is priceless for small business owners.

4.   Commercial Loan

Purpose: General-purpose loan for business expenses, often used for real estate, equipment, or expansion.

Features: Can be secured or unsecured, with varying terms and interest rates depending on the lender and business creditworthiness. Long-term low-rate loans.

Benefits: Larger loan amounts with potentially lower interest rates for qualified businesses. Have tight Loan-to-value is in place unlike the other loans that don’t consider collateral.

5.   Business Credit Card

Purpose: To manage everyday business expenses and improve cash flow management.

Features: Revolving credit with a credit limit, rewards programs, and potential for building business credit and personal credit.

Benefits: Convenience, rewards, and short-term financing without needing to secure collateral.

6. Business Term Loan

Purpose: To borrow a term loan to finance specific large projects or investments.

Features: Lump sum disbursement with fixed or variable interest rates and a predetermined repayment schedule. Predictable payments and terms.

Benefits: Offers predictability with fixed payments and is often used for expansions, renovations, or substantial purchases. Use on a per project or venture basis without giving out equity or profit.

7.   SBA LOANS

Purpose: Small Business Administration-backed loans for various business needs, including working capital, equipment, and real estate.

Features: Longer repayment terms and lower interest rates due to government guarantees. Includes popular programs like 7(a) loans and 504 loans.

Benefits: Harder qualification criteria and favorable terms compared to traditional loans. Must have skin in the game. Need good credit, down payment or additional collateral.

For more personalized advice and detailed information on financing options, restaurants are one of the riskiest but most often have the most startups knowing how risky running a restaurant can be. However, if you get lucky and you’re overcome the difficulties, and the challenges that comes to operating a restaurant without the help of funding, more power to you. But not every is luck. So if you operate a restaurant and is considering growing, the next thing that comes to mind is how are we going to pay for it? Are you new, established? Do you have current stream of revenue from your other locations, if any? Companies should consult with financial experts or reach out to providers like Liberty Capital Group when you’re deciding to gain access to capital.

A business loan broker, like Liberty Capital, can guide you to the right loan for both short-term and long-term funding solutions. Let us help you find the ideal funding option efficiently, saving you time and effort. Liberty Capital Group, Inc. offers a range of financing solutions tailored to meet the diverse needs of business owners.