Get The Commercial Kitchen Equipment You Need With The Help Of One Of These Equipment Lessors
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It’s not easy to turn any new business into a success story, but getting a restaurant off the ground and into the black is especially daunting. Between the long hours, lunch and dinner rushes, and staffing requirements, you’ll likely have your hands full planning the logistics of your business. But before you can start cranking out metric tons of food, you’ll need commercial kitchen equipment.
Unless you’re independently wealthy, most restaurant owners will have to look into restaurant equipment leasing and/or loans in order to purchase the ovens, ice machines, and grills you need. Don’t let your business suffer for want of the right commercial kitchen equipment. With the right financing, that reach-in freezer can be yours!
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.
Learn More About Our Top Picks
| Company | Summary | Next Steps |
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Lendio is an aggregator of business financing -- the company matches customers to the right financing from its network of over 75 business funders. | |
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Currency (formerly Currency Capital) is an aggregator of equipment financing offers for restaurant owners. Currency's lender network is relatively accommodating of new businesses. Currency's network offers equipment leases as well as loans. | |
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Crest Capital offers equipment financing directly, not through a network of affiliated firms. Crest prides itself on openness and transparency, and its website boasts much more information on its products than do many vendors. | |
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Direct Capital is an equipment financer for more established restaurants. You must have at least two years' worth of business history, a credit score of at least 680, and monthly revenue of at least $100K to qualify. | |
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eLease is primarily for businesses looking to own their equipment; most of their leases are equipment finance agreement (EFAs) and last between two to four years. Along with EFAs, eLease offers $1 buyout and fair market value leases. |
Read more below to learn why we chose these options.
1. Lendio
Lendio
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Lendio doesn’t actually originate loans or leases. So why is Lendio on this list?
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.
To apply for an equipment lease, Lendio requires that you have six months of business history behind you, a credit score of 550, and a revenue stream of $10K/month. These requirements are less strenuous than those of many equipment lease vendors. Additionally, while many equipment loans require you to make a down payment, many of Lendio’s partners do not.
Origination fees will depend on the lessor you are matched with, while interest rates start at just 2%. Borrowing amounts run from $2K to $5 million.
With Lendio’s relatively accommodating requirements, highly-rated customer support, and easy application process, Lendio is a great resource for small and large restaurants alike.
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2. Currency
Currency
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Currency (formerly Currency Capital) is another aggregator of equipment financing offers for restaurant owners. Like Lendio, Currency’s lender network is relatively accommodating of new businesses. However, unlike Lendio, Currency’s network offers equipment leases as well as loans.
Currency requires that you have a credit score of at least 585, six months or more of business history, and a revenue stream of $75K/year.
Currency’s loans range from $5K to $2 million. Interest rates will vary depending on the lender you’re matched with but will range from 6% to 24%. Origination fees will range from 0% to 5%, with other fees being dependent on the lender and your level of risk. You may be required to pay a down payment as well.
You must have no recent bankruptcies to qualify for equipment financing through Currency’s platform. Additionally, the funding process may take a week or two, so it’s not the quickest game in town.
Currency primarily serves small and medium-sized businesses, so if your restaurant meets the revenue stream requirements and you don’t need rapid funding, check out Currency. Unfortunately, Currency reveals next to nothing on its website about the nature of its loans and leases.
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3. Crest Capital
Crest Capital
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Unlike the previous two options listed here, Crest Capital offers equipment financing directly, not through a network of affiliated firms. Crest prides itself on openness and transparency, and its website boasts much more information on its products than do many vendors.
Crest’s equipment leases (loans are not offered) require you to have at least 24 months of business history under your belt, so it’s not a financing option for younger restaurants. You’ll also need a credit score of 650 or higher. Funding is offered in amounts between $5K and $500K, term lengths run from 24 to 72 months, and interest rates start at 5%. Just be aware that Crest charges a $275 administration fee on top of your other payments.
Crest offers a nice variety of capital and operating lease options:
- $1 buyout
- 10% purchase option
- Fair market value leases
- Guaranteed purchase agreement
- First-amendment leases
- Operating leases
Crest’s offerings should suit more mature restaurants well, but the credit and time-in-business requirements make Crest’s leases less suitable for younger restaurants and owners with iffy credit.
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4. Direct Capital
CIT Direct Capital Equipment Financing
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Direct Capital is another equipment financer for more established restaurants. You must have at least two years’ worth of business history, a credit score of at least 680, and monthly revenue of at least $100K to qualify. Borrowing amounts run up to $500K, terms go from 6 to 72 months, and interest rates start at 5.49%.
Direct Capital doesn’t offer quite as many leasing options as Crest, but they do offer the basics in the form of a $1 buyout lease, fair market value leases, and net terms. This funder also provides working capital loans. Expect to have to pay between a 0%-5% origination fee as well as any fees associated with shipping and handling.
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5. eLease
eLease Equipment Financing
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eLease is an online vendor of equipment financing, offering both leases and loan-like equipment financing agreements (EFAs). Unfortunately, eLease doesn’t post definitive borrower guidelines. However, eLease proclaims its willingness to work with new businesses and even companies that have had a recent bankruptcy.
eLease is primarily for businesses looking to own their equipment; most of their leases are equipment finance agreement (EFAs) and last between two to four years. Along with EFAs, eLease offers $1 buyout and fair market value leases. Expect to pay an administrative fee as well as your first and last month’s payment up front.
Financing amounts run from $3K to $500K, term lengths are from 2 to 5 years, and interest rates go from 4% to 35%.
eLease is a versatile equipment financer offering potentially competitive rates. However, relatively few user reviews of the company exist, so bear in mind that the company’s reputation has not been well-established.
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How Restaurant Equipment Leasing Works
It’s easy to be overwhelmed by the sheer quantity of financing options available to a would-be borrower or lessee. Consider whether you’re looking to own or buy the equipment. Is it something you’ll still be using 10 years from now, or will you be trying to sell it in three? Do you want the asset to appear on your books for tax purposes, or do you want it to be considered an operating expense?
When considering your equipment financing 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
- Leasing typically carries lower monthly payments than a loan
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.
Common types of equipment leases offered by lessors include:
- Fair Market Value (FMV) Lease: Use a piece of equipment under an FMV lease, and you’ll be borrowing the equipment for a set term while making regular payments. Upon the expiration of the term, you can either return the equipment or purchase it at its 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 quite similar to a loan in terms of structure and cost.
- 10% Option Lease: A 10% option lease works just like a $1 buyout lease, except at the end of the term, you can purchase the equipment for 10% of its costs. As this will obviously come to more than one dollar, a 10% option lease typically carries lower monthly payments than a $1 buyout lease.
Knowing what kind of lease (or loan) you’re seeking can help you quickly narrow down your list of potential lessors. Thankfully, finding companies that offer equipment financing isn’t hard. Additionally, most equipment financers are willing to finance kitchen equipment. More challenging is finding a financer that:
- Lends to a customer with your credit rating
- Lends to a customer who has been in business for your amount of time
- Offers a lease or loan that meets your needs and business goals
Yes, you’ll have to undergo a credit check (hopefully a soft one) during the application process. And while equipment financers typically have time-in-business and revenue requirements as well, some companies can be flexible with these requirements if you have good-to-excellent credit and finances.
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.
Note, there are important accounting differences between each type of lease.
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.
If you’re new to the restaurant business and seeking guidance, Merchant Maverick’s reviews and blog posts on the subject can get you started.
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.
In Summary: Best Restaurant Equipment Leasing Companies
- Lendio: Lendio is an aggregator of business financing -- the company matches customers to the right financing from its network of over 75 business funders.
- Currency: Currency (formerly Currency Capital) is an aggregator of equipment financing offers for restaurant owners. Currency's lender network is relatively accommodating of new businesses. Currency's network offers equipment leases as well as loans.
- Crest Capital: Crest Capital offers equipment financing directly, not through a network of affiliated firms. Crest prides itself on openness and transparency, and its website boasts much more information on its products than do many vendors.
- CIT Direct Capital Equipment Financing: Direct Capital is an equipment financer for more established restaurants. You must have at least two years' worth of business history, a credit score of at least 680, and monthly revenue of at least $100K to qualify.
- eLease Equipment Financing: eLease is primarily for businesses looking to own their equipment; most of their leases are equipment finance agreement (EFAs) and last between two to four years. Along with EFAs, eLease offers $1 buyout and fair market value leases.
Chris Motola
Finance Writer at Merchant Maverick
Chris Motola is a writer, programmer, game designer, and product of NY. These days he's mostly writing about financial products, but in a past life he wrote about health care and business. He's a graduate of the University of Central Florida.
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Helpful post.
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Your post is very helpful. Thank you for sharing these tips.
This comment refers to an earlier version of this post and may be outdated.