Your Guide to Restaurant Business Loans

Written by Banks Editorial Team
5 min. read
Written by Banks Editorial Team
5 min. read

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Being in the restaurant industry can be a challenging business. There’s more competition now than ever, making it difficult for restaurant owners to see consistent cash flow year-round. From essential operating expenses that must be covered to paying staff, lack of financing is one of the reasons many restaurant businesses fail. 

However, with restaurant loans, small business owners can get the financing they need to get their business up and running. This guide will explore the best loan options for restaurant businesses, how to qualify for one, and where to apply. 

Flexible and Fast Small Business Loan Quote

Reasons for a Restaurant Business to Get a Loan 

Many small businesses get restaurant financing for various reasons, including:

  • Open A New Location: Expanding your operations can be a great experience, but it can also be costly. A restaurant loan can help you cover expansion costs, such as purchasing new equipment and inventory, hiring more staff, and even marketing your brand.
  • Hiring More Employees: As your business thrives, you need more chefs, waiters/waitresses, bartenders, mixologists, and dishwashers to meet your growing demand. Whether your business is growing fast or you want to open a new location, a restaurant loan can help you hire and train more staff. 
  • Stocking Up on Inventory: Having enough inventory is crucial to keep your restaurant business going. Often, you’ll need additional funds to ramp up your inventory during peak seasons. A restaurant business loan can help you achieve this. 
  • Renovating or Remodeling: Giving your restaurant a fresh look once in a while needs funding. With a restaurant business loan, you can do basic updates from painting to adding an outdoor patio. 
  • Buying or Upgrading Equipment: Purchasing new kitchen equipment, such as ovens, fryers, or dishwashers, is pretty expensive. Whether you’re looking to purchase a new piece of equipment or need an upgrade, a restaurant equipment loan will help you get the equipment you need to keep your business running smoothly.
  • Paying Operational Expenses: As with any other business, restaurants have operational expenses to cover, which can be so high sometimes. However, with a small business loan, restaurant business owners can cover these expenses with ease.
  • Managing Seasonal Needs: Many restaurants experience seasonal ebbs and flows, making it difficult to maintain a positive cash flow year-round. A restaurant financing option like a loan can help meet your seasonal needs.
  • Rebranding and Marketing: A business that employs marketing is likely going to attract more customers than one that is not. Running marketing campaigns or social media ads can be expensive. With a restaurant business loan, you can rebrand and market your new business to bring in new customers and maintain current ones.

What Loans are Best for Restaurant Businesses?

There are several restaurant financing options for business owners in the restaurant industry. 

SBA Loans

One of the most popular loans for restaurateurs is SBA loans, especially micro-loans and the SBA 7 (a) loan. 

The U.S. Small Business Administration backs these loans, meaning you have the regulatory protection you need for your startup or established business. SBA microloans are ideal for startups or restaurants needing small capital of up to $50,000. SBA 7 (a) loans have a much higher loan limit of up to $5 million.

However, it’s important to note that SBA loans are difficult to qualify for. As a restaurant business owner, you must meet various strict requirements, and even if you do, it can take longer to get funding.

Flexible and Fast Small Business Loan Quote

Small Business Term Loans

A term loan is a funding solution that gives you access to money repayable within a set period of time plus interest. Restaurant business owners can use term loans to meet their short-term and long-term goals. 

A small business term loan through Mulligan Funding is one of the most flexible forms of financing. With a seamless online application, you can get approval as soon as a few hours. (1) The funding you need can be had as soon as one business day after approval. (1)

Equipment Financing

Restaurant equipment financing is a loan program that can help restaurateurs purchase the equipment they need. Typically, the equipment acts as collateral for the loan, and lenders can seize it if you default. But once you repay your loan in full, you own the equipment outright.

Inventory Financing

Your restaurant business can’t operate without inventory. Inventory financing provides the funding you need to stock up inventory. In addition, the inventory itself serves as collateral for the loan, making it easy to qualify for this type of financing.

Invoice Factoring

If you have outstanding invoices from your customers, you can sell them at a discount to a third party, usually an invoice factoring company, in exchange for a lump sum amount of cash. The factoring company is responsible for collecting the due invoices from your customers and then takes its fee and gives you the balance.

Working Capital Loans

A working capital loan is a short-term loan that offers businesses fast access to cash to cover everyday operations, such as payroll, rent, taxes, and other overhead costs. You can qualify for a working capital loan through Mulligan Funding and get the funding as soon as one business day after approval. (1) Want some even better news? You don’t need hard collateral to back up the loan, and Mulligan Funding works with borrowers with imperfect credit.

Business Line of Credit

Business lines of credit are very similar to business credit cards, where you can borrow up to a certain limit and pay interest on only what you draw. If you’re unsure how much loan you need for your restaurant funding needs, a business line of credit might be a good option to consider since you can draw as little or as much money on a needed basis. 

Is It Hard to Get a Loan for a Restaurant? 

Restaurant business loans can be difficult to get since many lenders, especially mortar banks and credit unions, perceive the restaurant industry as volatile. However, it’s easy to qualify for a restaurant loan through online lenders because of their lenient requirements. 

How To Qualify for Restaurant Loans

You must satisfy certain requirements to qualify for a restaurant loan. Some of the common requirements that affect restaurant business loan approval include: 

Business Operating History

The first thing lenders look at when evaluating your eligibility for restaurant financing is how long you’ve been in business. The longer your time in business, the higher your chances for approval. Generally, lenders prefer to work with small business owners that have been operating for one to two years. 

Proof Of Revenue/Profit

Lenders require proof of business revenue to verify that you’ll be able to repay your loan. So you’ll need to provide your lender with 12 to 24 months of business bank statements or profit and loss statements.

Personal and Business Credit Scores

Your personal and business credit score also determines whether you qualify for a restaurant loan or not. The minimum credit score requirements vary by lender, but high personal credit scores and business scores improve your odds of approval. 

Personal and Business Documents

Lenders also want to see your personal and business paperwork to verify that the business belongs to you. This can include tax returns, current profit and loss statements, business licenses along with other certifications.

Collateral and Business Plan (for some)

Depending on the lender, you may need collateral to back up the loan. Some even require a comprehensive business plan detailing company objectives and how you plan to use the funds.

Where To Apply for Restaurant Loans

You can apply for a restaurant loan through traditional banks or credit unions. However, these financial institutions find lending to restaurant business owners risky. With online lending partners like Mulligan Funding, though, you will get fast approval for restaurant financing. (1) You can get a small business term loan or a working capital loan as soon as one business day after approval. (1)

Request a free quote for restaurant financing options through Mulligan Funding. (*)

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Approval and funding speed refer to applications submitted during normal business hours (Monday-Friday, 9 AM – 5 PM PT.) Most approvals happen within a few hours on completed submissions. Delays could occur due to unforeseen circumstances or if additional information or verification is required.

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Approval and funding speed refer to applications submitted during normal business hours (Monday-Friday, 9 AM – 5 PM PT.) Most approvals happen within a few hours on completed submissions. Delays could occur due to unforeseen circumstances or if additional information or verification is required.

×

Approval and funding speed refer to applications submitted during normal business hours (Monday-Friday, 9 AM – 5 PM PT.) Most approvals happen within a few hours on completed submissions. Delays could occur due to unforeseen circumstances or if additional information or verification is required.

×

Approval and funding speed refer to applications submitted during normal business hours (Monday-Friday, 9 AM – 5 PM PT.) Most approvals happen within a few hours on completed submissions. Delays could occur due to unforeseen circumstances or if additional information or verification is required.

×

Approval and funding speed refer to applications submitted during normal business hours (Monday-Friday, 9 AM – 5 PM PT.) Most approvals happen within a few hours on completed submissions. Delays could occur due to unforeseen circumstances or if additional information or verification is required.

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Final loan decision may be subject to underwriting by FinWise Bank.

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