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The 8 Best Loans For Restaurants In 2020 (Plus Tips To Improve Your Chances Of Being Approved)

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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 aΒ companion post on restaurant equipment leasing.

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Company Summary Next Steps
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.

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OnDeck is one of the bigger names in alternative online lending and a solid choice for borrowers with fair credit (600+) and decent cash flow.

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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.

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Kabbage is known for its fast application process and flexible line-of-credit-like loans. You can borrow up to $250,000 through Kabbage, with draw lengths of 6, 12, or 18 months. Each month you'll repay a fraction of the principal you've drawn, plus a fee.

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QuarterSpot has funded a lot of restaurants in their time. If you've been in business for at least a year and have a credit score of 550 or greater, there's a good chance they can help you.

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Other Featured Options:

  • Currency: If you're looking to finance kitchen equipment, it's worth taking a look at Currency. Currency doesn't typically originate loans or leases, instead offering them through one of their many partner lenders.
  • Fundation: Fundation offers both installment loans and lines of credit with no collateral needed (although you will have to sign a personal guarantee and agree to a UCC blanket lien). You can borrow up to $500,000 with a loan or $100,000 with a line of credit.
  • SmartBiz: For those interested in SBA loans, but overwhelmed by the onerous process of applying for them, SmartBiz can help you have your cake and eat it too.

Read more below to learn why we chose these options.

1. Lendio

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.

As online lenders go, Lendio is on the slow side. The company promises results within 72-hours, which admittedly isn’t a terribly long time, but if you need money immediately it may make more sense to directly apply to a lender.

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2. OnDeck

OnDeck



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OnDeck is one of the bigger names in alternative online lending and a solid choice for borrowers with fair credit (600+) and decent cash flow. Just be aware that their factor rates use a per month formula rather than a flat fee, which can make them a little bit difficult to compare to many of their competitors.

OnDeck offers installment loans and lines of credit. Overall, the lines of credit are usually a better deal, offering flexibility at a rate competitive with other online lenders (11% and 63%).

OnDeck is known for processing applications very quickly; you’ll usually know if you’ve been approved that day and, if you’re successful, should have your money within a day or two after that.

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3. LoanBuilder

LoanBuilder



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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.

Loanbuilder charges a flat rate between 2.9% and 18.72% of the amount you borrow, and unlike many alternative lenders, it’s the only fee they charge. With the ability to borrow up to $500,000, Loanbuilder can potentially cover most of the costs you’ll run into, so long as you can meet the fast 13 – 52-week repayment schedule.

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4. Kabbage

Kabbage



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Kabbage is known for its fast application process and flexible line-of-credit-like loans. You can borrow up to $250,000 through Kabbage, with draw lengths of 6, 12, or 18 months. Each month you’ll repay a fraction of the principal you’ve drawn, plus a fee.

Kabbage’s fee structure is fairly straightforward, and the company takes pains to make sure you have all the information you need to make an informed decision about their product. You can also prefigure your costs using their online loan calculator. That said, Kabbage isn’t cheap, so you’ll want to make sure it’s the best deal you can get under your current circumstances.

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5. QuarterSpot

QuarterSpot



Not Yet Rated

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QuarterSpot has funded a lot of restaurants in their time. If you’ve been in business for at least a year and have a credit score of 550 or greater, there’s a good chance they can help you.

QuarterSpot offers a short-term loan product available in 6, 9, 12, 15 or 18-month terms. Like most other short term lenders, they charge a flat fee rather than an interest rate; you’ll pay back the principal plus a fee of 10% to 40% of the borrowing amount. They also assess an origination fee between 1% – 4% of the borrowing amount. Unlike many of their competitors, QuarterSpot amortizes their fees on a daily basis, so you can save money by paying off your loan early.

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6. Currency

Currency



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If you’re looking to finance kitchen equipment, it’s worth taking a look at Currency. Currency doesn’t typically originate loans or leases, instead offering them through one of their many partner lenders. They’re similar to Lendio in this way, but more focused on equipment financing.

Term lengths range from a year to 60 months, and you can conceivably get financed up to $2 million (assuming you qualify). Interest rates and fees vary by the lender you’re paired with, but you can expect them to fall somewhere between 6% and 24%.

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7. Fundation

Fundation



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Fundation offers both installment loans and lines of credit with no collateral needed (although you will have to sign a personal guarantee and agree to a UCC blanket lien). You can borrow up to $500,000 with a loan or $100,000 with a line of credit.

With APRs between 7.99% and 29.99%, you’re looking at some of the better rates you’ll find in the alternative lending market.Β Just be prepared for a slightly lengthier application process than you’d typically experience with alternative lenders. You’ll also need to have pretty decent credit to qualify, with the cutoff coming around 660.

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8. SmartBiz

SmartBiz



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For those interested in SBA loans, but overwhelmed by the onerous process of applying for them, SmartBiz can help you have your cake and eat it too.

SmartBiz doesn’t originate loans, and instead hooks clients up with a member of their SBA-approved lending network. One of the more useful services they offer is evaluating your candidacy for an SBA loan before you waste time filling out the mountains of paperwork that go into approval.

To qualify, you’ll need to have a personal credit score of at least 650 and a business credit score of at least 150.

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Why Restaurant Loans Are Hard To Get

On paper, it’s rare to find a lender that absolutely will not finance restaurants. In practice, however, traditional lenders may be reluctant to lend to small businesses (which includes the vast majority of restaurants), or may find the restaurant industry too risky to lend to unproven businesses.

Another issue is that, given the speed at which many traditional lenders operate, you may not be able to get financing on the time scale that you need it. If a vital piece of equipment in your kitchen breaks down or needs to be replaced, your business may not be able to survive a long interruption.

Improve your chances of getting financing by following the advice below.

How To Improve Your Chances Of Being Approved

While getting financing can be challenging, there are a number of steps you can take to increase your chances of being approved.

Understand Your Finances

Knowing precisely how much money your business needs to function (costs, revenue, etc.) removes a lot of the uncertainty from your business and makes it easier to ask for a reasonable amount of money from your prospective lender. It can also help you avoid needing financing in the first place.

You can make this process a lot easier by choosing the right accounting software.

Make A Business Plan

Making a business plan isn’t just a way to outline your goals and vision for your business. It’s also a way to signal to prospective lenders that you’re playing for keeps. Showing that you’ve isolated a target market and have a good sense of your competition can demonstrate that you aren’t being, shall we say, overly optimistic about your ability to repay your loans.

Not every lender will ask to see one, but it never hurts to have one on standby.

If the task of writing a business plan sounds daunting, keep in mind that you don’t necessarily have to write a tome. Start with a one-page business plan, which is both less daunting to write and easier for others to read.

Pick The Right Lender

If you’ve made it this far through the post, you probably have a sense of the types of financing available to you. Time is a resource, and you don’t want to waste it applying for financial products that you won’t qualify for. You also don’t want to get stuck with a loan that’s a bad fit for your business.

If you’ve been around for a while and built strong business relationships with your local banking institutions, you’ll have a much easier time qualifying for traditional lending (and the better rates that go with it). Newer restaurants, or those that need money very quickly, may need to turn to the alternative lending market.

Pick a lender that:

  • Works with businesses in your credit range
  • Works with businesses of a similar age
  • Offers a product that can deliver money to you when you need
  • Offers a product that you can reasonably repay within its term length
  • Offers the type of product you’re looking for (short-term loan, line of credit, equipment financing, etc.)
  • Offers you the best rate your circumstances will allow

Be Prepared With The Right Documents

As you might expect, most lenders aren’t just going to throw money at everyone who shows up at their front door. They’re going to want to confirm you are who you say you are, and that you’re a reasonable risk.

Not every lender requires the same documents, but you can save yourself some grief by knowing, and being able to verify, the following:

  • A brief explanation of what you need the loan for
  • Your personal credit score
  • Your business’s starting date
  • Your monthly and annual revenue
  • Bank statements (typically three months worth)
  • Current debt obligations (other loans you’re paying back, etc.)
  • Proof of ownership

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.

In Summary: Best Small Business Loans For Restaurants

  1. Lendio: 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.
  2. OnDeck: OnDeck is one of the bigger names in alternative online lending and a solid choice for borrowers with fair credit (600+) and decent cash flow.
  3. LoanBuilder: 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.
  4. Kabbage: Kabbage is known for its fast application process and flexible line-of-credit-like loans. You can borrow up to $250,000 through Kabbage, with draw lengths of 6, 12, or 18 months. Each month you'll repay a fraction of the principal you've drawn, plus a fee.
  5. QuarterSpot: QuarterSpot has funded a lot of restaurants in their time. If you've been in business for at least a year and have a credit score of 550 or greater, there's a good chance they can help you.
  6. Currency: If you're looking to finance kitchen equipment, it's worth taking a look at Currency. Currency doesn't typically originate loans or leases, instead offering them through one of their many partner lenders.
  7. Fundation: Fundation offers both installment loans and lines of credit with no collateral needed (although you will have to sign a personal guarantee and agree to a UCC blanket lien). You can borrow up to $500,000 with a loan or $100,000 with a line of credit.
  8. SmartBiz: For those interested in SBA loans, but overwhelmed by the onerous process of applying for them, SmartBiz can help you have your cake and eat it too.
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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