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Restaurant Loans

Whether it's purchasing equipment or building customer loyalty, restaurant financing could help you grow your restaurant business.

This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

From managing employees to dealing with seasonal revenue and food costs, being in the restaurant industry isn't easy. Restaurant owners often juggle spending heavily on inventory and equipment, plus hiring and training staff that may turn over regularly. Maintaining the marketing required to attract new customers while continuing to engage with regular clientele costs time and money.

With fluctuations in working capital, a restaurant loan could help fill gaps in cash flow.

Benefits of restaurant funding

Restaurant loans could help secure funding for many business needs, such as equipment upgrades, changes in payroll, increases in inventory, and emergency spending. Understanding the biggest benefits of restaurant funding — and the many available options — can help a business owner find the best option for their business.

Keep in mind that all restaurant loans are not the same – lenders may have varying criteria and requirements, so be sure to find the loan with the features you care about and prepare accordingly.

Meet seasonal needs

Many restaurants are seasonal businesses where the amount of revenue coming in fluctuates throughout the year. Restaurant owners often need extra funding to prepare for the upcoming season.

A restaurant loan could help with hiring and training seasonal staff, purchasing inventory, and creating seasonal advertising to prepare for the busiest time of the year. This funding may also help business owners during a slow season by covering costs to meet immediate needs.

Upgrade, repair, or purchase more equipment

Restaurant equipment inevitably needs repairs, updates, and replacing. Whether or not these expenses are planned, business owners might use a restaurant loan to upgrade or repair equipment and keep their business running smoothly. A restaurant equipment loan could also pay for equipment to meet increased demand or to open multiple locations.

Launch a website or marketing campaign

Although every business hopes to enjoy positive word-of-mouth advertising, many restaurants still need to develop external campaigns to bring in new customers and retain current customers.

A restaurant loan could give business owners the funds to cover ad buys and run customer loyalty campaigns. Restaurant owners might also use short-term loans to hire a photographer to take new images of the space and menu items for websites and social media.

Grow the business

Business growth and expansion, while exciting, may prove unmanageable if either occur faster than they are able to be financed.

Restaurant owners might use small business loans to help grow their small business. They may consider purchasing new equipment, hiring and training more staff, buying additional inventory, leasing more space, or ramping up marketing. Financing may also fund renovations to an existing space or equipment upgrades in anticipation of future business growth.

Types of restaurant business loans

Starting a restaurant isn't the easiest task, nor is getting funding. However, a business owner could take steps to improve their chances with a lender, including having collateral, a down payment, proven restaurant experience, or a solid credit score.

One important step to finding the best fit to fund a business is defining the business needs. The list of needs could then be matched to the various funding options.

Small business loans for restaurants

Many banks and lenders offer small business loans for startups and growing companies. With a small business loan, a business receives funding up front and pays it back in installments — plus interest — over time. Lenders may consider business and personal financial history and credit score for qualification.

Restaurant owners might use small business loans to hire more staff during a busy season, launch a new marketing campaign, or cover bulk orders of food and supplies.

Business line of credit for restaurants

Restaurant owners may open a business line of credit to access funds as needed up to a certain credit limit. Since a borrower only pays loan fees on the funds they use, this could offer a good option for restaurant startups with fluctuating financial needs. For example, a business line of credit could be used to cover emergency expenses or prepare for seasonal surges in customers.

SBA loans for restaurants

Restaurant owners could try to qualify for a U.S. Small Business Administration loan or SBA loan through their bank or preferred lender. SBA loans are like traditional loans, but they're guaranteed by the SBA. This means that businesses with poor or minimal credit history may potentially use SBA loans to access funding without posing as much risk to their lender.

The approval process for SBA loans could take months. Applicants may be asked to provide a range of documents, such as financial statements and business plans.

Online lenders for restaurants

Restaurant owners could use a range of lending platforms to quickly apply for online loans. Online lending offers flexibility and ease of access for businesses that need short-term or long-term financing.

Compared to traditional lenders, online lenders may offer quicker application processes and more options for repayment terms, so a business may be able to get funding without the long wait. Restaurants, for instance, might use online loans to help with short-term operational costs and sudden changes in cash flow.

Equipment loans for restaurants

Equipment loans are a financing option designed to cover the cost of equipment purchases. Restaurant owners might consider an equipment loan to cover their equipment costs but should note that any additional costs — like delivery, handling, and installation — may need to come from another source.

Equipment loans usually come with fixed interest rates, allowing the business owner to plan for the payments. Repayment terms for equipment loans commonly span up to three years but might fluctuate based on the expected lifespan of the equipment.

How to get a business loan for a restaurant

Each restaurant business loan comes with its own application process. Here are some general steps to apply for a loan:

  • Choose the loan option that makes most sense for the business needs.
  • Research lenders, taking into account their loan terms, repayment plans, interest rates, and fees.
  • Fill out the restaurant business loan application and submit it online.

Have this information on-hand while filling out an application for a business loan for a restaurant:

  • Business and personal credit scores
  • Bank statements
  • Balance sheets
  • Profit and loss statements
  • Business plan
  • Employer Identification Number
  • Licenses and permits
  • Lease or ownership documents
  • Proof of collateral if needed

Restaurant Loan FAQ
What credit score do you need for a restaurant loan?

Lenders may require a good business credit score before they approve a restaurant loan. A high business credit score demonstrates that the business owner has a healthy credit history and the ability to make payments on time. Some lenders might approve businesses with low credit scores, but they may charge higher interest rates or fees.

The highest credit score a business could have is 100. A good business credit score usually ranges from 80-100 and shows lenders that the business owner is a low-risk borrower.

Could I use a merchant cash advance to finance my restaurant?

A restaurant owner could use a merchant cash advance (MCA) to finance their business. An MCA isn't technically a loan because of its payments structure. The borrower receives a lump sum up front and then the lender takes a percentage of their credit card sales until the debt is repaid.

While MCAs are often easy to set up, they may come with high interest rates and fees. MCAs are also not regulated like traditional loans, so research potential lenders and terms thoroughly.

American Express offers the American Express® Business Line of Credit, and you can click here to learn more. Note that the American Express Business Line of Credit may have different eligibility criteria, terms and features from the lending products that are discussed above in this article.

The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.

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