Get The Commercial Kitchen Equipment You Need With The Help Of One Of These Equipment Lessors
The best equipment lessors offer excellent rates, fast funding, and flexible buyout options. Here are our picks for best equipment leases.
Chris has been writing about small business topics since 2003. In 2015, he joined Merchant Maverick, where he writes about business financing, payment processing, and demographic trends in entrepreneurship. Chris has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.
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Chris MotolaChris has been writing about small business topics since 2003. In 2015, he joined Merchant Maverick, where he writes about business financing, payment processing, and demographic trends in entrepreneurship. Chris has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.
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Chelsea Krause is a writer who specializes in accounting, payroll, and small business loans. She has been with Merchant Maverick helping small business owners manage their finances since 2016. She is a QuickBooks Certified User and former eCommerce store owner. Her accounting expertise has been quoted in Forbes and her work appears in Startup Nation, Small Business Bonfire, and Women on Business. Chelsea graduated summa cum laude with a BA in English & Creative Writing from George Fox University and studied abroad at the University of Oxford as well. She currently resides in Boise, Idaho.
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Chelsea KrauseChelsea Krause is a writer who specializes in accounting, payroll, and small business loans. She has been with Merchant Maverick helping small business owners manage their finances since 2016. She is a QuickBooks Certified User and former eCommerce store owner. Her accounting expertise has been quoted in Forbes and her work appears in Startup Nation, Small Business Bonfire, and Women on Business. Chelsea graduated summa cum laude with a BA in English & Creative Writing from George Fox University and studied abroad at the University of Oxford as well. She currently resides in Boise, Idaho.
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Commercial kitchens require a substantial capital investment in equipment. While some restaurants may prefer to buy outright, an equipment lease may be the better option in some cases. This is especially true when it comes to equipment that needs to be frequently replaced or upgraded.
If you’re getting your restaurant up and running, you may not have the time to independently research every vendor out there to determine their suitability. Why not leave that part to us? Here are a few solid equipment financing options.
Top 4 Equipment Lessors For Restaurants Equipment & More
The best equipment lessors offer excellent rates, fast funding, and flexible buyout options. Here are our picks for best equipment leases, from providers like US Business Capital and Lendio.
Lendio is an aggregator of business financing — the company matches customers to the right financing from its network of over 75 business funders. You tell Lendio who you are and what you’re looking for, and Lendio presents you with offers suited to your needs, saving you the work of finding financing on your own. Lendio will run a soft credit check on you during this process, but this will not affect your credit score. According to Lendio’s customer service agreement, the process of presenting you with offers should take no longer than 72 hours. Lendio’s partners offer a variety of business financing, including equipment leases.
Lendio Services
Lendio offers just about every kind of financing a business could need:
Equipment financing up to $5 million
Short-term loans up to $500,000
Term loans up to $2 million
Lines of credit up to $500,000
Merchant cash advances up to $200,000
SBA loans up to $5 million
Lendio Rates & Fees
Lendio’s rates and fees vary based on product type and the lessor you select.
Lendio Eligibility Requirements
Eligibility requirements may vary from lessor to lessor within Lendio’s network. Lendio recommends a credit score of at least 550 to apply, but you can generally expect more and better offers the higher your credit score is.
Why We Chose National Business Capital For Best Equipment Lessor
National Business Capital is another lending marketplace that allows businesses to apply to multiple funders through a single application. In addition, National Business Capital will assign you an advisor to help maximize your chances of finding a match within their network. This can be very helpful for businesses who haven’t previously used an aggregator to find a lease.
National Business Capital Services
National Business Capital offers a wide variety of financial products through its network:
Equipment financing up to $5 million
Business terms loans up to $5 million
Business lines of credit up to $5 million
SBA loans up to $5 million
National Business Capital Rates & Fees
National Business Capital’s rates may vary depending on the lessor you’re paired with. Interest rates start at 7.5%.
National Business Capital Eligibility Requirements
National Business Capital has the following eligibility requirements:
1 year in business
580+ credit score
$500,000 in annual revenue
Note that National Business Capital does offer equipment financing to businesses less than a year old if they have a credit score of 650+.
Why We Chose US Business Funding For Best Equipment Lessor
Businesses looking for short-term equipment leasing options should give US Business Funding a close look. With a wide variety of buyout options, US Business Funding allows businesses to easily upgrade or refinance equipment as needed.
Additionally, US Business Funding is willing to work with businesses as young as six months old, a market segment that can often struggle to find equipment financing.
US Business Funding Services
US Business Funding offers the following services:
Equipment loans and leases up to $50 million
SBA loans up to $5 million
Term loans up to $10 million
US Business Funding Rates & Fees
APRs for US Business Funding equipment financing start at 3.5%.
US Business Funding Eligibility Requirements
US Business Funding’s eligibility requirements for equipment financing are as follows:
For businesses that would rather work with a traditional lender CIT , a division of First Citizen’s Bank, is a good choice. While CIT’s eligibility requirements are on the high side, the lessor does offer expedited applications and quick funding times similar to those of an online lender.
CIT offers both capital and operating leases and can accommodate a wide variety of industries, including restaurants. Seasonal businesses in particular will appreciate that CIT offers deferred payments for qualifying lessees.
CIT Services
CIT offers equipment leases up to $1 million in terms of up to 72 months.
When reviewing business financing products, Merchant Maverick gathers and examines aspects of each lender, including interest rates, term length, fees, borrower requirements, customer reviews, etc. We compare the lender to other similarly situated companies in the industry and assign them a score based on our research.
For this list, we looked exclusively at funders who offer equipment leases, giving additional credit to funders that offer a variety of leasing buyout options. These options give lessees the flexibility to own or rent their equipment as needed.
How Restaurant Equipment Leasing Works
When considering your equipment lease options, it’s important to fully understand your choices.
While equipment loans work pretty much like any other type of loan, equipment leases merit some further explanation. With an equipment lease, you’re paying a fee to borrow the equipment from the lessor (the leasing company) as opposed to paying down a loan to purchase the equipment. At the end of your lease, you generally must return the equipment to the lessor, though you may be offered the option of purchasing the equipment after your lease term ends.
This arrangement carries with it several advantages:
You don’t have to make a large down payment for the equipment in question.
You can switch out your leased equipment for an updated version in the case of certain leases.
You have some flexibility with regard to how the equipment appears on your accounting books.
Leases are more likely to cover additional expenses like delivery and installation.
However, leases carry some drawbacks with respect to loans as well. Leases tend to carry larger interest rates than loans, so you may end up paying more for your equipment overall than with a loan.
Types Of Equipment Leases
Common types of equipment leases offered by lessors include:
FMV Lease
A fair market value (FMV) lease backloads your payments to the end of the lease, so you’ll see smaller monthly payments than you would with a similar equipment financing agreement (EFA) or loan. At the end of your lease, you have the option to buy the equipment for its fair market value. Alternatively, you can return the equipment to the lessor, which is typically what happens.
This type of lease is most well-suited for equipment that depreciates and needs to be replaced frequently.
Variations on this lease include the 10% buyout lease, which sets the residual at the end of the lease to 10% of its initial value rather than fair market value.
$1 Buyout Lease
With a $1 buyout lease, you’ll pay off the cost of the equipment — plus interest — over the course of the lease. At the end of the term, you’ll owe exactly $1 — a mere formality. Once you pay this residual, you’ll own the equipment in full. A $1 buyout lease is similar to a loan in terms of structure and cost. It’s sometimes called an equipment finance agreement.
$1 buyout leases are strictly used to buy agreement.
Leaseback
A leaseback, or sales-leaseback, involves the lessor buying an asset from the lessee and then leasing it back to them. This is essentially a way to continue to use an asset while no longer technically owning it. It’s often done for a cash-infusion.
Restaurant Equipment Leasing FAQs
What’s the difference between leases and loans?
If you want to own restaurant equipment long term — unless you can somehow buy it with cash — you’re looking at one of two categories: loans and leases.
Equipment loans function similarly to other types of medium-to-long-term loans, with a few caveats. The asset, in the case of equipment loans, will serve as some or all of the collateral. Equipment loans rarely cover the entire cost of the asset (expect somewhere around 80%), so be prepared to make up the shortfall.
You may be thinking of leases as mainly a way to rent equipment, and they can absolutely be used that way, but it’s actually possible to use them to purchase assets outright.
Generally speaking — and be aware that the industry is full of exceptions — loans will have lower interest rates but won’t cover the entire cost of the equipment (80% is typical). Leases, on the other hand, will cover everything, sometimes even soft costs like shipping and installation, but typically at a higher interest rate.
As far as interest rates go, what you can consider “reasonable” will vary based on your credit and business history. Generally speaking, however, you want to approach an equipment financing arrangement that offers an APR above the teens with caution.
What kind of lease is right for restaurant equipment?
Since leases tend to be a bit easier to come by, we’ll spend a little more time on them. Leases fall into two broad categories: capital (or finance) leases and operating leases. Some lessors will only offer one or the other.
Capital leases function largely as alternative loans, meaning that if you get a capital lease, your intent is to own the product. Capital leases are good for equipment that doesn’t depreciate very quickly and which you can envision yourself still using many years from now — a reach-in refrigerator or a flat-top grill, for example.
The title to the equipment will be usually be transferred to you, the lessee, along with all of the responsibilities and benefits of ownership. Most of the big differences between types of capital leases involve different balances between monthly payments and the residual (the amount of money you’ll have left to pay at the end of the lease). The smaller your monthly payments, the larger your residual.
Operating leases are more like rentals. These leases tend to be a shorter period of time. In this case, the lessor will usually retain ownership of the equipment. While you typically can still buy the equipment at the end of the lease, this tends to defeat the purpose of the operating lease. More commonly, you’ll return the equipment to the lessor, who will then resell it or lease it out again. This is a good choice for equipment that needs frequent upgrades, becomes obsolete quickly, or that you only need for a short period of time.
How much does restaurant equipment leasing cost?
Obviously, the biggest cost of your equipment will be the price tag of the refrigerator, mixer, or whatever item you are financing. Unfortunately, with equipment financing, you’ll be incurring some additional charges:
Interest: This is usually the APR of the loan or lease, although some lenders may use a flat rate instead. In either case, the longer your term length, the more money you’ll be spending on the item.
Origination Fee: This is a closing fee some lenders charge in addition to interest. It’s either a percentage of the amount you’re borrowing (1% – 5% is typical) or a flat fee. This fee is more common with loans than leases.
Administration Fee: This is a fee charged in addition to interest to maintain your account. It may be a percentage or a flat fee. It’s more common with leases than loans.
Down payment: A payment you’re expected to make at the time of closing. This is either the portion of the cost that an equipment loan didn’t cover or, in the case of leases, the first (and sometimes last) month’s payment.
Residual: At the end of a lease this is the amount of money you’d owe if you were to purchase the equipment. In the case of capital leases, the residual may be a trivial formality ($1, for example). In the case of operating leases, it may be substantially higher, typically the fair market value of the asset.
Can I lease restaurant equipment if I have a startup?
A start-up restaurant, or one with poor cash flow, may have trouble getting business equipment, but there are lenders and leasing companies that will work with you in less-than-ideal situations. Potential financers include local and national banks, alternative lenders, and captive lessors. Some lenders even have specific equipment leasing programs.
Can I lease equipment if I have bad credit?
In theory, yes. In fact, it’s usually easier to lease equipment with poor credit than it is to buy. Whether or not a lessor is willing to finance your equipment will ultimately depend on their own guidelines, your credit history, the amount of time you’ve been in business, your business’s revenue, the equipment you’re seeking to lease, and the vendor you’re going through.
Be aware, however, that the lower your credit is, the higher your interest rates will probably be. Make sure the terms of your equipment lease agreement aren’t too stringent before you take on obligations you may not be able to meet.
Final Thoughts
Hopefully, you now have a better sense of how you can go about renting or owning kitchen equipment. Restaurant equipment leasing is a complex field to navigate, but financing is not hard to get if you know where to look and have a good idea what you can afford in terms of lease payments or loan repayments.
Once you do find a good leasing company or lender, make sure you read your contract or lease agreement very carefully. If you’re not ready to get cooking just yet, check out our equipment financing comparisons.
Chris has been writing about small business topics since 2003. In 2015, he joined Merchant Maverick, where he writes about business financing, payment processing, and demographic trends in entrepreneurship. Chris has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.
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Merchant Maverick’s ratings are editorial in nature, and are not aggregated from user reviews. Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships.
Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity. The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author’s alone.
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