Which Type of Restaurant Financing is Right for You?

Last Updated on July 12, 2017

Whether your customer base is comprised of fine diners or fast foodies, the fact remains that sooner or later you’re going to need a cash infusion to keep your restaurant strong and successful. However, knowing which type of restaurant financing is right for you can be confusing.

To point you in the right direction, here are six restaurant financing options to research and analyze as you move forward towards a decision:

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Top 6 Restaurant Financing Options

  • Small Business Administration (SBA) Loans: The good news is that the SBA offers loan programs for restaurant owners (along with other types of businesses). The bad news is that competition is very high, and annual funding is typically 100% allocated by September/October each year. What’s more, the application process is very long — often taking several months and involving dozens of documents — and both excellent personal and business credit are necessary. If you don’t meet these requirements, or if you can’t afford to wait months for a loan to (potentially) materialize, then an SBA loan isn’t a viable option.
  • Working Capital Loans: Working capital loans are lump-sum loans with predictable and fixed (typically monthly) repayment amounts. These can be short-term or long-term loans, depending on needs and goals. As with merchant cash advances, working capital loans are unsecured, impaired/bad credit is not a deal-breaker, and a few months of credit history is usually enough to get approval.
  • Restaurant Business Line of Credit: A business line of credit provides on-demand access to funds (up to the available limit). Interest is only charged on the drawn amount rather than the full amount available, which is why many restaurant owners establish one before they need the funds. Similar to both merchant cash advances and working capital loans, business lines of credit are unsecured, bad/impaired credit is OK, and a few months of credit history is fine.
  • Merchant Cash Advances: Sometimes referred to as “business cash advances,” merchant cash advances aren’t technically loans. Rather, they’re an advance on future payment card (debit and credit) sales.Here’s how they work: an agreed upon amount of cash is advanced to a restaurant owner. At the end of each business day, a small fixed percentage of payment card sales is automatically transferred to the lender. In this way, when sales are above average, a little bit more is transferred and the loan is closer to being paid back in full. Conversely, when sales are below average, there is more cash available on-hand to cover expenses and invest in revenue-generating tactics and strategies (e.g. advertising, promotions, etc.).Unlike conventional bank loans, merchant cash advances are unsecured, which means no collateral is required. Bad or impaired credit is also typically fine, and only a few months (rather than a few years) of credit history is necessary.
  • Inventory Financing and Equipment Financing: Inventory financing is a loan used to purchase inventory, which is then used as collateral to secure the loan. Equipment financing works the same way, except the purchased assets (and collateral) is equipment rather than inventory.
  • Conventional Bank Loans: Conventional bank loans (and credit union loans) have the same good news/bad news story as SBA loans. Yes, restaurant financing is available. But no, it’s certainly not easily available. In fact, banks have even more stringent lending requirements than the SBA, and all loans must be secured with sufficient collateral. This means that in the event of a missed payment, your personal and/or business assets may be immediately seized and liquidated to cover the debt.

How to Apply for Restaurant Business Loans

At National Business Capital, we provide restaurant owners across the country with merchant cash advances, working capital loans, business lines of credit, inventory financing and equipment financing to help them stay strong and successful.

To learn more, contact our team today for your free, no obligation consultation or fill out our 1-minute application below to get the process started. You’ll receive an approval decision within 24 hours!

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!


About the Author, Megan Capobianco

Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.