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Restaurant Loans: The 10 Best Options For Small Businesses 2019

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Restaurants have a (somewhat unfair) reputation for being especially risky businesses that are hard to get off the ground. The good news is that restaurant business loans aren’t especially hard to find, even if you’re looking for a loan to start a restaurant.

Want to know how to get restaurant financing or how to get a loan to open a restaurant? Below, we’ll look at how to finance your restaurant with working capital. For restaurant owners who are specifically looking to finance restaurant equipment, we have a companion post on restaurant equipment leasing.

Comparing The Top 10 Loan Options

LenderMax. Borrowing AmountReq. Time in BusinessReq. RevenueReq. Credit ScoreNext Steps
$5 millionVaries$1.50 for every $1 borrowed640Read Review
$5 millionVaries--670Read Review
$100,0002 years$100K/yr620Read Review
fundation logo$500,00012 months$100K/yr660Read Review
$5 million6 months$10K/mo550Read Review
$500,0006 months$10K/mo550Read Review
$500,0009 months$42K/yr550Read Review
$5 million6 months$120K/yr600Read Review
kiva logo$10,000N/AN/AN/ARead Review
avant logo$35,000N/AN/A600Read Review

Where To Get Restaurant Business Loans

Most traditional and alternative lenders, at least on paper, offer restaurant lending services. Typically, business owners will find the best small business loans and restaurant funding from a bank or credit union with whom they have an established relationship. In most cases, they’ll offer the best rates and terms.

If your business is too risky for a traditional lender, or you have a less than perfect credit score, however, there are still restaurant financing options in the form of alternative lenders.

The Cost Of Restaurant Financing

Before we look at your restaurant funding options, you want to be able to compare the offers you might come across.

Here are some of the data points business owners should consider when comparing restaurant loans:

  • Term Length: The amount of time you have to pay back your loan. The longer the term, the higher your interest or factor rate will usually be.
  • Interest/Factor Rate: A percentage or decimal multiplier that determines the amount of money you have to pay back. For short-term loans, this may be a flat fee rather than interest that accumulates over time.
  • 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. In most cases, it will be deducted from the amount of money you receive from the lender.
  • Administration Fee: This is a fee charged to maintain or set up your account. It may be a percentage or a flat fee. Sometimes charged in place of an origination fee.
  • APR: Annual percentage rate represents what your effective interest rate over a year would be. This can help you determine how expensive a product is relative to another.
  • Payment Schedule: If you’re used to monthly billing, you may be surprised to hear that some lenders expect payments weekly or even daily. May sure you’re prepared for whatever terms you accept.
  • Collateral: An asset, property, or cash deposit used to secure a loan. Not all loans require collateral.

Types Of Restaurant Business Loans

Restaurant loans and related products come in a few different forms. When you’re looking for a lender, you’ll also want an idea of the type of financial product you’re seeking. All of these products will get you the money you need, but with different terms. Some are cheaper; others are more versatile. Some have lower monthly payments but longer repayment terms and higher rates, and some are more available to restaurant owners with bad credit.

  • Term Loans: Term loans are for a specific amount that, once received, is paid off in regularly scheduled installments (they’re also sometimes called installment loans). Medium and long-term loans usually accrue interest over time while short-term loans have flat fees.
  • Lines Of Credit: Lines of credit are a bit like credit cards. You’ll be approved for credit up to a set limit. You can draw on your account as often as you want as long as you stay below your limit, paying interest only on the outstanding balance. Lines of credit are good for maintaining cash flow.
  • SBA Loans: As is the case for other business types, there are Small Business Administration loans for restaurants. These loans are partially guaranteed by the SBA, allowing you to access better rates. Just bear in mind that the application process is usually more complicated and often slower.

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  • Merchant Cash Advance: MCAs aren’t technically loans, but can serve as the financial product of last resort for businesses with bad credit but steady credit card revenue.
  • Equipment Leasing: If you’re looking to finance restaurant equipment, you also have the option to lease it, which you can read about in more detail in our restaurant equipment financing article.

Restaurant Loans For Start-Ups

Borrowers who are looking for start-up restaurant financing will face a narrower band of options, but you aren’t completely out of luck. Conservative lenders may still consider approving a loan to start a restaurant if you have a good business plan, a solid personal credit score, and are able to put some of your own money into the mix. Additionally, some alternative lenders offer loans specifically geared toward brand new businesses.

Restaurant Loan Providers

5 C's of Credit: What Lenders Look For

Not sure where to start looking for small business loans for restaurants? Here are some lenders to consider:

For Borrowers With Good Credit

Wells Fargo

As big banks go, Wells Fargo is one of the easier institutions for small businesses to work with. Due to their size and resources, they can offer a wide range of products for restaurants of any size. Their credit restrictions are higher than those of most alternative lenders and they require you to show strong month-to-month revenue, but they’re more accessible than many of their conservative competitors.

Chase

Chase has a reputation for offering some of the best business loan rates out there. The trick will be qualifying for one of these loan products. Despite its size and prominence, Chase is very conservative about who they lend to. You’ll also need to have a branch near you as you’ll need to go to your local branch to apply.

StreetShares

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If you don’t have a bank in your area with whom you’ve built a good relationship, you can still find good rates with online lenders. StreetShares is a bit more selective than many of their competitors, but they offer loans and lines of credits at reasonable rates with no collateral.

Fundation

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Fundation is another option for borrowers with good credit who would prefer to avoid dealing with a traditional bank. Fundation offers both installment loans and lines of credit with no collateral needed. Just be prepared for a slightly lengthier application process than you’ll typically experience with alternative lenders.

For Borrowers With Bad Credit

Lendio 

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Lendio is an online lending platform that matches businesses with lending partners. This is a handy service for restaurant owners who don’t have a lot of time to compare loans on their own, or who have bad credit. Lendio’s pool of potential lenders is big enough that you’re more likely than not to find one willing to work with you, even if you haven’t been in business very long. If you’re looking for a loan to open a restaurant, however, you may have to look elsewhere.

OnDeck

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LoanBuilder doesn’t offer as many products as some of the other lenders on the list, but they do give you the freedom to tweak the terms of a short-term loan to your liking. Combined with relatively low qualifications and integration with PayPal’s infrastructure, working with them should be pretty painless.

BlueVine

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If your company is profitable, but you haven’t been in business long enough to build up a good credit score, BlueVine might be the lender for you. Rather than offering installment loans, BlueVine gives you the option of getting a line of credit or, if you do a lot of B2B business, invoice factoring. Just be aware that their lines of credit aren’t available in every state.

For Borrowers Opening A Restaurant

Kiva

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If you’re coming up blank with ideas about how to get a loan to start a restaurant, Kiva is one possible solution. Kiva is a nonprofit microlender that operates worldwide. Rather than measuring your income and credit, Kiva uses a process called “social underwriting” to measure your community standing and character. Best of all, the loans have zero interest.

So what’s the catch? Well, Kiva uses a type of crowdfunding to finance your loan, which means you’ll be waiting longer to get your funds than you would with most other lenders. You’ll also be limited to a maximum of $10,000, which may not cut it for your business plan. If you have some of your own money to put into your new business and just need to make up that last few thousand dollars, though, it’s worth a look.

Avant

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Another way around the time in business restrictions you’ll often encounter when seeking new restaurant business loans is to forget the “business” part and get a personal loan. While you won’t be able to borrow the large amounts that you can with a business loan, they can get you a modest ($1,000 – $35,000) amount of money with which to start a restaurant.

Note that you’ll still have to show a strong income relative to the amount of money you’re seeking. Additionally, Avant cannot currently lend to individuals in Colorado, Iowa, Vermont, or West Virginia.

Final Thoughts

If you didn’t find what you were looking in our examples above, don’t fret! We’ve barely scratched the surface of the resources restaurants can tap to find funding. If you don’t have much in the way of collateral, you can try to get an unsecured business loan.

If you’re looking to finance restaurant equipment, check out our resources on leasing and equipment loans. Good luck hunting for restaurant business loans! Do your research and you’re sure to find something that fits your needs.

Chris Motola

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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