Restaurant Loans: What Financing Options Do Restaurant Owners Have?

Last Updated on May 30, 2017

Restaurant owners know that it’s only a matter of time before they need additional cash to take care of emergency repairs, hire new staff, purchase equipment and inventory, run advertising and promotional campaigns, and the list goes on. As such, it’s not a question of if they’ll need restaurant loans, but when, how fast, and how much.

Here is an overview of five restaurant loans that can make the difference between struggling to survive, and elevating to the next level:

restaurant loans: what kinds of options different restaurant owners have

Top 5 Restaurant Loan Financing Options

  • Conventional Bank Loans

Conventional bank loans offer relatively lower interest rates and total cost of borrowing compared to the other restaurant loans (aside from SBA loans). However, getting a conventional bank loan is extremely difficult on the post-Great Recession landscape. Virtually flawless credit is required, along with two (or sometimes more) years of business history. The application process is complex and time consuming, all loans usually have to be secured by collateral, and there are early repayment penalties. For all of these reasons, conventional bank loans aren’t in the mix of available or desirable restaurant loans for many borrowers.

The good news is that if you obtain an SBA loan (which are facilitated by banks), you’ll typically enjoy a relatively low interest rate and a fairly long repayment period compared to a conventional bank loan. The bad news – as you may already discovered if you’ve already explored SBA restaurant loans – is that competition is fierce, the application is complicated, and it can take several months for an application to snake its way through a very bureaucratic process. As such, if funds are needed urgently (i.e. within the next six months), the SBA likely isn’t a viable source of restaurant loans.

Technically, merchant cash advances aren’t restaurant loans — they’re an advance against future revenues. Here’s how they work: funding is provided to restaurant owners, and a small percentage is automatically paid back at the end of each day, based on that day’s credit card transactions. When sales are strong, a little more is paid back towards the loan. When sales are sluggish, there’s more cash-on-hand to cover shortfalls and make investments in revenue-generating projects and programs (e.g. advertising, promotions, extended hours, etc.). Unlike an SBA loan, applying for a merchant cash advance is rapid and streamlined, excellent credit isn’t mandatory, and there’s no collateral.

Working capital loans are straightforward loans that are paid back via a fixed amount each week, month (or other frequency as mutually agreed upon by the lender and borrower). They’re typically for longer-term financing needs, although shorter-term restaurant loans are possible. Like merchant cash advances, the application process is streamlined, impaired credit or even a past discharged bankruptcy is typically not a deal-breaker, and there’s no collateral.

A business line of credit is ideal for restaurant owners who want immediate and ongoing access to cash. As such, it’s advisable and beneficial to apply before a spending need arises. Unlike other types of restaurant loans, you only pay for what you use.

Learn More

At National Business Capital, we proudly provide restaurant owners of all sizes across the country with restaurant loans – including merchant cash advances, working capital loans, and business lines of credit – that keep their business strong, and on-track for growth and success.
If you’re looking for a restaurant loan, fill out our 1-minute application or contact our team today for your no-obligation consultation. Discover why we’re the funding partner that restaurant owners choose, trust and recommend!

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.