Restaurant Business Loans: Financing Options for Your Business

by | Nov 23, 2021 | Small Business | 0 comments

Restaurants have been hit hard in the past year and a half. The effects of the pandemic have put some restaurants in a precarious position. Now perhaps more than ever, restaurants are looking for additional capital to help them get back on their feet and get operations to where they were before the pandemic.

Fortunately, several online and alternative lenders are willing to work with small businesses and restaurants to help them get the cash they need to sustain their organization. And beyond just a selection of lenders willing to work with restaurants, there are also a few different options for financing choices. From equipment loans to lines of credit, you need to figure out which solution makes the most sense for your restaurant and then ensure that you are prepared to submit the best application packet that you can, thereby giving you the best chance of approval. Below we break down a few of the more popular restaurant loan options.

Why Get a Loan for Your Restaurant?

The great thing about obtaining financing from a small business lender is that there is generally quite a bit of flexibility regarding what you can do with the funds. Some restaurants, for example, may use the money to hire more personnel. After all, your people are what keep your restaurant running smoothly. Others might use the funds to remodel their restaurant, order inventory in bulk, and thus capitalize on discounts, or you could even use the cash to launch a new marketing campaign to entice more patrons. However you decide to use your small business loan, we’re guessing it couldn’t come at a better time.

In determining which financing option is right for you, figure out how much you need, how quickly you need it, and what purpose the money will be used. Then, it’s about doing your homework, potentially talking to a few different lenders, and finding the ideal financing solution for you.

1) Line of Credit. Taking out a line of credit for your restaurant could make the most sense. Why? A line of credit is there when you need it. So, for example, versus a short-term loan which you get in one lump sum and then have to pay back within a period of a few months or a year, a line of credit is available whenever you need cash. You draw the amount of money your restaurant requires from the general line exactly when you need it. And then, upon paying that money back, it is again available for you to use. This is what is called a revolving line. The other good thing about getting a line of credit is that you are only paying interest on what you take out—not on the total amount of the available line.

2) Equipment Loan. Among the most popular types of loans for restaurants are equipment loans. Some people think of equipment loans and automatically assume it is for heavy equipment or tech equipment. While these fall under the category of uses of an equipment loan, they can also be used to purchase restaurant equipment. For example, if you need a new refrigeration unit, a new grill, even a new POS, an equipment loan can be used to purchase any of these things. The benefit of an equipment loan is that the equipment being purchased is often used as the collateral to secure the loan, meaning the loan can be a bit easier to get than some other loan types.

3) SBA Loans. Many restaurant owners will turn to SBA loans to help them out when cash is needed. The U.S. Small Business Administration partially backs an SBA loan. If a client defaults, the lender can recover up to generally 80% of its losses because the SBA has guaranteed the loan. This makes the applicant more attractive, especially if they’ve been rejected for a loan. Choosing the SBA route may make the most sense. The loan terms and rates are pretty beautiful with SBA loans; keep in mind, they can take a bit longer to get. So if you need cash quickly, this might not be the best option for your restaurant.

4) Short-Term Loan. Yet another popular option as far as restaurant loans is a short-term loan. As the name suggests, this is for shorter-term uses. So, if your company needs money to purchase supplies in bulk, then you might consider a short-term loan. While the rates can be higher with loans of this nature, remember, you are paying it off over a shorter term—generally anywhere from 6 months to 18 months (though some can be for a longer duration).

First Union Lending Wants Your Restaurant to Succeed

We are in business to help our clients succeed and grow. This is why we do what we do. We offer numerous lending options to restaurants across the US. With fast and flexible loans, we can sometimes get you the cash you need within just two days—yes, we do work that quickly. Call today and let’s get started together!

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Only U.S.-Based Businesses are Eligible