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Best Options for Restaurant Equipment Financing

Managing a successful restaurant means monitoring a lot of moving parts, including chefs, wait staff, the specials and, of course, the equipment.

And there’s good news: Restaurant consultant David Kincheloe notes that it’s often easier to qualify for restaurant equipment financing than other types of financing because the transaction produces collateral. When you finance an oven, you can use that oven to secure your loan.

Brand-new big-ticket items such as stoves, refrigerators or dishwashers typically last seven to 10 years, a prime length for mid- or long-term financing. Because equipment financing often comes with a high annual percentage rate, Kincheloe doesn’t recommend using it to buy smaller items (like microwaves) unless you can bundle them with a larger purchase.

We’ve rounded up our recommendations based on how long you’ve been in business.

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If you’ve been in business for 1+ years.

If you’ve been in business for 2+ years.

And while equipment financing is a great way to invest in the tools you need to prepare your menu efficiently, you need to make sure you’re actually due for an upgrade. Kincheloe, president of National Restaurant Consultants, says owners sometimes jump at low monthly payments, even if they don’t need new equipment, and they forget to consider a loan’s APR. “You can end up spending a lot of money for something you didn’t necessarily have to,” he says.

If you’ve been in business for 1+ years

OnDeck provides capital to restaurants that are beginning to simmer but haven’t been in business long enough to reach a full boil. According to the company, roughly 12% of their financing is used in the restaurant industry, and with term loans accessible with just a 500 minimum credit score, it could be a good option for restaurateurs who are still finding their footing. However, it’s important to note that OnDeck term loans max out at three years, so they’re best used for short-term equipment financing needs.

If your revenue is growing after you’ve been established for a year, you may be able to lean on StreetShares for a term loan to help get your kitchen up to par. Though the company caps loan size at 20% of your annual revenue, it says that equipment purchases is one of the main reasons their borrowers take out a loan. To qualify, you need at least $25,000 in annual revenue and a minimum 600 personal credit score.

Dealstruck is another option if you’ve been in business a year or more. The lender can provide restaurants with term loans up to $500,000. To qualify, you need at least $150,000 in annual revenue and a personal credit score starting at 600. Dealstruck lets owners bundle different loan products, so you can also access the lender’s inventory line of credit for nonperishable items.

Good option for:• Bad personal credit
• Businesses with strong cash flow
• Retail or food service businesses• Good personal credit
• Smaller equipment purchases
• Good personal credit
• Businesses looking for financing flexibilityDo you qualify?• 500+ personal credit score
• 1+ year in business
• $100,000+ annual revenue• 600+ credit score
• 1+ year in business
• $25,000+ annual revenue• 600+ credit score
• 1+ year in business
• $150,000+ annual revenue
Borrow:$5,000 to $500,000$2,000 to $100,000Up to $500,000

APR:9% to 98%9% to 40%14% to 38%
Get startedat OnDeckGet startedat StreetSharesGet startedat Dealstruck

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If you’ve been in business for 2+ years

SmartBiz helps connect you with coveted SBA loans, which have lower APRs and more favorable terms than those offered by many alternative lenders. They also have more stringent qualifications, which means they’re most suitable for established restaurant owners who are ready to invest in new, high-end gear.

For established businesses, Funding Circle also offers competitive APRs. Rates start at 8%, but they can hit double digits. If approved, you can get funding in as fast as 10 days (compared to SmartBiz, which typically takes several weeks) making it a prime option for restaurateurs looking to cash in on flash sales or equipment discounts.

Good option for:• Good personal credit
• Low rates
• SBA loans• Good personal credit
• Established businesses
• Growth capital
Do you qualify? • 600+ personal credit score for loans $30,000 to $150,000
• 650+ score for loans over $150,000
• 2+ years in business
• $50,000+ annual revenue
• 620+ personal credit score
• 2+ years in business
• No minimum annual revenue required
Borrow: $30,000 to $350,000$25,000 to $500,000
APR:7% to 8%8% to 33%Get startedat SmartBizGet startedat Funding Circle
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Find and compare the best small-business loans

If you’re still on the hunt for small-business loan options, NerdWallet has curated a list of loans to help meet the various needs of business owners. Evaluating lender trustworthiness, market scope and customer experience, we’ve sorted them into categories pertaining to your revenue and how long you’ve been in business.

Compare business loans

Jackie Zimmermann is a staff writer at NerdWallet, a personal finance website. Email: jzimmermann@nerdwallet.com. Twitter: @jackie_zm

Updated Nov. 4, 2016.

The article Best Options for Restaurant Equipment Financing originally appeared on NerdWallet.