Best Restaurant Loans of 2019

Getting financing for your restaurant can be crucial for growing your business. Whether you’re buying new kitchen equipment, remodeling your dining room or managing cash flow gaps, we have researched over 20 lenders and compiled a list of our top picks for the best restaurant loans.

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Best Loans to Open a Restaurant

Most entrepreneurs rely partially or fully on their own personal savings to start a business, and new restaurants are no exception to this. However, there are other funding options available.

SBA and Bank Loans

SBA
SBA

We’d only recommend pursuing a bank or SBA loan if you have a great business plan and previous success in the restaurant or food services industry -- but if you do, they can be great sources of affordable funding. Qualifying for a traditional loan, whether from a bank or credit union backed by the SBA, is particularly difficult for a new business or startup, and it’s even harder for restaurants and food service businesses given their historically higher failure rates. However, if you’ve already opened or managed a successful restaurant, then you may be able to get a bank or SBA loan. The SBA also has both a Community Advantage and microloan program that may be better fits for a new business than a traditional SBA 7(a) loan.

Qualifying for a bank loan as a new business will be primarily based on your business plan, previous track record in the industry and how much "skin you have in the game." Lenders will want to see a well-thought out business plan with detailed financial projections, market analysis and competitor research. You will also need to show your previous successes in the restaurant or food services industry, especially since restaurants are more likely to fail than many other types of new businesses. And because it’s a new business, most lenders will expect you to use some of your own money to fund your business before they will offer you money.

Best for: Borrowers with a proven track record in the restaurant or food services industry.

  • 4.6% - 8.75% interest rates (SBA)
  • Terms up to 25 years
  • Loans up to several million
  • Funds in several weeks
  • Strict eligibility requirements

Other Funding Options to Consider

Besides getting a loan, which can be very difficult to do as a new business or startup, we recommend considering the following options:

  • Use personal funds: Most new entrepreneurs use their own personal savings to fund some or all of their new business. In fact, many lenders will want you to use your own money before they consider giving a loan.
  • Loans from family and friends: Getting a loan or investment from a family member or friend can be a great way to supplement the personal funds or other money you’ve used to start your business. However, make sure you manage the money responsibly (and repay if it’s a loan) to not risk your personal relationships.
  • Small business or personal credit card: Applying for credit card, whether a business or personal card, is primarily based on your credit score, which makes them a good option for startups. Some cards may offer an introductory 0% APR or sign-up bonuses in addition to cash back or points.
  • Find a business partner: Another option for getting funds is to find an investor or business partner. If you choose this route, make sure to carefully evaluate the potential partner. You want to make sure you work well and can succeed together.

Best Restaurant Expansion Loans: SmartBiz

We recommend a commercial real estate SBA loan from SmartBiz for business owners who can qualify for a traditional SBA loan, but want a faster application and funding process. SmartBiz makes SBA 7(a) loans for commercial real estate in amounts from $500,000 to $5 million for 25 years, but can provide funding in as quickly as 30 days from loan approval. Like with other SBA commercial real estate mortgages, there are some stipulations on the loan. For one, the building being purchased must be at least 51% owner-occupied. The loan can also not be used to fund new construction, only to purchase an existing property.

Besides the quicker funding time, these loans benefit from the low interest rates set by the Small Business Administration. Currently, APRs range from 5.85% to 8.95%. To qualify for a SmartBiz commercial real estate loan, you must have a personal credit score above 675 and be a U.S. citizen or permanent resident. You must be in business at least two years with enough cash flow to support repayment, and you cannot have had any bankruptcies or foreclosures in the last three years, any current outstanding tax liens or prior defaults on government backed loans.

Best for: Borrowers who can qualify for an SBA loan, but want an online or faster application process.

  • Interest rates of 5.85% - 8.95%
  • $30,000 - $350,000
  • Terms of 10 years
  • Funding time: As fast as 7 days
  • Strict eligibility criteria

Best Restaurant Equipment Loans

Purchasing freezers, stoves, ovens and other restaurant equipment can be expensive, and many restaurant owners choose to finance these purchases.

SBA 7(a) or 504 Loans

SBA
SBA

For restaurateurs with established businesses looking to make a large investment in equipment, few things beat an SBA loan. The reason? SBA loans have competitive interest rates, long terms and large loan amounts. Both the 7(a) loan and the 504 loan program are great for purchasing equipment or machinery, providing loan amounts up to several million with terms from 10 to 25 years. Interest rates on 7(a) loans are 6.25% to 8.75%, and rates on 504 loans are even lower around 4.6% to 4.8%. To apply for an SBA loan, you’ll need to go through your bank or credit union. You can also find SBA lenders in your area using the SBA LINC tool.

Getting approved for an SBA loan will mean an involved application process and more eligibility criteria. Compared to applying for an online business loan, the application process for an SBA will likely require more documentation and paperwork, and it will take longer to receive a loan decision (though the SBA offers expedited loans through the Express program). Qualifying is also based on the traditional 5 "C"s of lending: credit, character, capital, capacity and conditions. This means you’ll need to have a good credit score, a demonstrated ability to repay (and history of doing so), good collateral and a financially sound business.

Best for: Established restaurateurs looking to make a serious investment in new equipment, fixtures or machinery.

  • 4.6% - 8.75% interest rates
  • Terms up to 25 years
  • Loans up to several million
  • Funds in several weeks
  • Strict eligibility requirements

Currency

Currency
Currency

Like SBA loans, Currency is also great for serious investments in restaurant equipment or machinery, but the lender has less strict eligibility criteria and faster funding times. Another thing that we like about Currency is the lender focuses solely on equipment financing and partners with well-known equipment and machinery companies to provide a seamless loan experience. Because Currency is a marketplace of lenders and banks, requirements will vary by lender. However, you’ll need to show some cash flow or revenue and have at least a fair credit score to increase your chances of qualifying.

Through Currency, you can finance equipment from $50,000 to $15 million up to five years. These loans come with very competitive APRs from 3% to 20% and monthly repayment. Among the websites Currency partners with are eBay, Caterpillar, Iron Planet and Proxibid. If you purchase equipment on eBay, for instance, you’ll be able to apply for financing directly on eBay’s website.

Best for: Expensive equipment purchases for borrowers who may not qualify for a bank or SBA loan.

  • Interest rates of 1.40% - 10.1%
  • $50,000 - $5 million
  • Terms of Up to 5 years
  • Funding time: As fast as one day
  • Eligibility requirements vary

Fundation

Fundation
Fundation

We think Fundation is a great choice for smaller equipment purchases, especially if you want get funds or pay off your loan more quickly. The lender provides business term loans from $20,000 to $500,000 with maturities as short as one year (the maximum maturity is four years), and there are no prepayment penalties. Approval and funding is fast: Fundation typically funds loans within three days or less. APRs at Fundation are also competitive compared to other online lenders, starting at 7.99% with a maximum rate of 29.99%. Each loan does come with an origination fee of 3% to 5% of the loan amount.

To qualify for one of these loans, you’ll need to be in business at least one year with three or more employees and $100,000 in annual revenue. For loans of $75,000 or more, Fundation requires borrowers have a credit of 640 or more. For loans under this, you only need a minimum personal credit score of 620. While Fundation does not have any specific collateral requirements, the lender will file a UCC-1 against your business, and you will be required to personally guarantee the loan.

Best for: Smaller equipment purchases, especially if you want fast funding or to pay off your loan quickly.

  • Interest rates of 7.99% - 29.99%
  • $20,000 - $500,000
  • Terms of 1 - 4 years
  • Funding time: As fast as one business day
  • Strict eligibility requirements

Best Working Capital Loans for Restaurants

From ordering food and beverage ingredients to making payroll, a working capital loan or line of credit can help with any cash flow gaps in your business.

Small Business Credit Cards

Every business owner should have a business credit card, and restaurateurs are no exception. Small business credit cards are perfect for all those small, ongoing purchases you make every month, and if you pay in full each month, you won’t have to pay interest. The other main benefit of getting a business credit card is the perks. Most business credit cards will offer cash back, points or miles on almost every item you purchase, with many also offering a starting sign-up bonus. Typically, sign-up bonuses require you to spend a certain amount of money within the first few months of having the card to earn a lump-sum of points or miles. For example, you may be required to spend $5,000 in the first three months to earn 80,000 points.

Qualifying for a small business credit card is based primarily on your personal credit history. To get a high-end business credit card, you’ll need to have a good to excellent credit score and history. Chase, American Express and Capital One all have great business credit cards with high sign-up bonuses and good reward rates. If you don’t have a great credit score, there are some secured business credit cards on the market, but you will have to make a deposit as collateral and your line of credit will be the same as your deposit.

Best for: All restaurateurs, especially those with great credit.

  • APR range: 13% - 20%
  • Offer sign-up bonuses or 0% introductory APR
  • Earn cashback or other rewards

LendingClub

LendingClub
LendingClub

We think a LendingClub line of credit can be a great choice for working capital for your restaurant, because the lender offers high line amounts, competitive rates and more relaxed underwriting requirements. With LendingClub, you can take out a line of credit from $5,000 to $300,000 with each draw being repaid monthly over a 25 month term. APRs at LendingClub are currently between 7.77% and 35.11%, which is competitive with what other online lenders offer. Each line of credit does come with a line fee of 1% to 2% of the amount drawn.

To qualify at LendingClub, your restaurant will need to be two years old with at least $75,000 in annual revenue. As the borrower, you must also own at least 20% of the business, be a U.S. citizen or permanent resident and personally guarantee the line of credit. LendingClub also looks for borrowers with personal credit scores of at least 620. Because LendingClub is a marketplace lender, it may take a littler longer to fund your loan offer than other online lenders.

Best for: Restaurateurs who need a large, long-term line of credit.

  • Interest rates of 9.77% - 35.98%
  • $5,000 - $300,000
  • Terms of 1 - 5 years
  • Funding time: 7+ business days
  • Lenient eligibility requirements

Kabbage

Kabbage
Kabbage

For restaurateurs that may have trouble qualifying for a working capital loan elsewhere, we recommend considering a line of credit from Kabbage. Unlike many other lenders, Kabbage relies mainly on your business’s financials to approve you for a loan, using your business bank account, bookkeeping software and even social media accounts, which can be great news for growing restaurants. Moreover, there are no strict credit requirements to qualify at Kabbage; rather, you’ll need to be in business one year with at least $50,000 in annual revenue to qualify for up to $100,000 (businesses that want more than $100,000 will need to be at least three years old with $500,000 in annual revenue). The more revenue you can demonstrate, the better, as this can help you get approved for a higher line amount.

Kabbage provides lines of credit from $2,000 to $150,000 with either six- or 12-month terms. Repayment is made monthly and based on the principal amount plus a monthly fee. For example, if you have a line of credit for $12,000 with a 12-month term, you would repay principal of $1,000 each month. You would also pay a monthly fee between 1.5% to 10% each month, which would be anywhere from $180 to $1,200 in this example. Typically, the monthly fee will be higher in the first few months of repayment.

Best for: Borrowers who may not be able to qualify for a traditional line of credit.

  • Interest rates of 20.00% - 80.00%
  • $2,000 - $250,000
  • Terms of 6 or 12 months
  • Funding time: As fast as same day
  • Lenient eligibility requirements

Summary of Our Top Picks

For quick comparison, we summarized our top picks based on what you need for your restaurant -- whether that’s purchasing kitchen equipment, filling cash flow gaps or remodeling your restaurant.

Best for…LenderRates
Opening a restaurantSBA or bank loanVaries
Personal funds or funds from friends, family or investorN/A
Credit cards13% - 20%
Expanding your restaurantSmartBizPrime Rate + 1.50% - 2.75%
Purchasing equipmentSBA 7(a) or 504 loan4.6% - 8.75%
Currency1.40% - 10.1%
Fundation7.99% - 29.99%
Working capitalSmall business credit card13% - 20%
LendingClub9.77% - 35.98%
Kabbage20.00% - 80.00%

How to Find the Best Restaurant Loans

When getting funding for your restaurant, you have a lot of options when it comes to loans and other financing products. We recommend borrowers think about what they are using the money for as this will help you decide how much money to borrow and what kind of loan to get. In general, term loans are better for investments in your business, such as purchasing new equipment or opening a new storefront. Lines of credit are better for ongoing working capital expenses, such as purchasing food and beverage inventory or making payroll. You can get a line of credit from a lender or in some cases, your vendors or suppliers. Another popular type of funding is invoice factoring, where you receive an advance on your unpaid accounts receivable. Invoice factoring can be a good stop-gap for any cash flow issues or interruptions.

Before you apply for a loan, make sure to get your documents in order. Most lenders will want to see some financial and tax documents for your business, including profit and loss and cash flow statements and tax returns. Banks, in particular, will also want to see a business plan for how you are going to use the loan proceeds and be successful in growing your business through these funds. A majority of lenders will also look at your personal credit score, with some evaluating your business credit score as well. The stronger your pitch is to a lender, the more likely you are to get approved, and if approved, to get a lower interest rate or better terms.

Rebecca Wessell

Rebecca is a Product Manager at ValuePenguin, focusing on small business lending and personal loans. She was a financial services and data management consultant at Ernst & Young.

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