Restaurant Business Loans

Restaurant Business Loans

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    Grow Your Business with Restaurant Business Loans

    Running a restaurant is a rollercoaster ride of highs and lows. Some days, the place is buzzing with customers, while others are unexpectedly quiet. Despite the uncertainty, one thing remains constant: the need to cover expenses and keep operations running smoothly.

    Restaurant business loans give you the necessary funds to operate during slow periods and capitalize on growth opportunities – expanding your space, upgrading equipment, or hiring additional staff.

    At SMB Compass, we understand the unique challenges restaurant owners face. Our goal is to provide tailored financing solutions to meet your specific needs. Whether you need funds for expansion or dealing with broken equipment, we’re here to help you find the best restaurant business loans in the market so you can focus on what you do best – serving up unforgettable dining experiences for your customers.

    Ready to apply for a Restaurant Business Loan?

    What is a Restaurant Business Loan?

    A restaurant loan (or restaurant financing) is a business loan tailored to your restaurant’s unique needs. Restaurant owners can use the funds to cover day-to-day expenses, equipment purchases, expansion, renovations, inventory, and tech improvements or as a financial cushion during the slower periods of the year. 

    Every restaurant business owner will agree that a strong cash flow is the key to success. Without working capital, it’s impossible to run a profitable restaurant. Restaurant business loans offer a reliable solution when you need that extra boost to maintain smooth operations and pursue growth.

    How Restaurant Business Loans Help Your Business

    A restaurant loan (or restaurant financing) is a business loan tailored to your restaurant’s unique needs. Restaurant owners can use the funds to cover day-to-day expenses, equipment purchases, expansion, renovations, inventory, and tech improvements or as a financial cushion during the slower periods of the year. 

    Every restaurant business owner will agree that a strong cash flow is the key to success. Without working capital, it’s impossible to run a profitable restaurant. Restaurant business loans offer a reliable solution when you need that extra boost to maintain smooth operations and pursue growth.

    • 1. Improve Marketing

      Neglecting your online presence means missed opportunities. A mobile-friendly, content-rich website and an active social media presence boost visibility, attracting more customers. But quality comes at a cost.

      Creating a fully functional website with advanced ordering capabilities, real-time order status updates, and integrated customer reviews doesn’t come cheap. When you need capital to invest in these initiatives, SMB Compass can help you choose the best restaurant funding to scale your business. 

    • 2. Renovate / Expand Your Restaurant

      A restaurant business loan is ideal if you’re looking to renovate, repair, or expand your restaurant to make it look more presentable and profitable.

      Expanding your restaurant means more room to seat and serve more customers daily. Improving the kitchen and storage area means that business operations become more organized and efficient, resulting in fewer mistakes, faster orders, and happier customers.

    • 3. Purchase Inventory

      Offering a variety of dishes keeps your customers happy. However, limited funds can make it tough to restock ingredients regularly. Restaurant business loans can help fill the gaps. You’ll be able to purchase enough ingredients and other supplies to create different dishes to keep your customers happy and satisfied.

    • 4. Hire Restaurant Staff

      Customers notice when a restaurant is understaffed, which directly impacts their experience. Poor service can deter them from returning and recommending your establishment.

      To avoid this, hiring more staff – servers, hosts, cooks – ensures that there are enough hands to provide top-notch service. But hiring can be costly. With a restaurant business loan, you can build a team capable of delivering excellent service, ultimately improving your restaurant’s reputation and customer satisfaction.

    • 5. Create a Loyalty Program

      Building and maintaining customer loyalty is essential for long-term success. When customers trust your establishment, they become powerful advocates who spread the word about your restaurant.

      One effective way to foster this loyalty is by implementing a loyalty program. By offering rewards and incentives for repeat visits, such as discounts and freebies, you encourage customers to come back for more. Not only does this increase their likelihood of becoming regular patrons it prompts them to share their positive experiences with friends and family and effectively market your restaurant for you.

    • 6. Buy New Equipment

      Your once-new kitchen equipment will eventually get worn down. Depending on the state of your machinery, you may need to set some funds aside for repairs, or if it’s beyond repair, you’ll have to replace the equipment altogether.

      By applying for a restaurant business loan, you will have the capital to purchase or repair equipment. You can even use the equipment you’re going to purchase as collateral, depending on the type of loan you apply for.

    Ready to apply for a Restaurant Business Loan?

    Top Restaurant Business Loans for You

    SMB Compass will work closely with you to help you find the best restaurant business loan depending on your business needs. Here are our top picks for businesses in the restaurant industry:

    Business Line of Credit

    With a business line of credit, lenders set a maximum credit amount, and your business only has to repay the sum you’ve withdrawn (plus interest). For example, if you are approved for a $100,000 line of credit and you’ve only spent $20,000 in the first month, you only need to pay the $20,000 and the interest.

    Like a credit card, business lines of credit is revolving. This means once the debt is paid, your line of credit is automatically renewed so you can use it again. The terms of this loan depend on your business credit, personal credit, and cash flow. Lenders prefer applicants with strong cash flow and great operating history.


    Available Working Capital During Slow Seasons

    Seasonal businesses can benefit much from a business line of credit. You’ll have the cash to pay for operational expenses and more during slower seasons.

    Only Pay for What You Use

    Regardless of the credit limit offered to you, you only need to pay for the money you used. Also, you can repay the loan anytime since lenders don’t charge a prepayment penalty.

    Seize Business Opportunities

    If you’re faced with an opportunity that’s too good to pass up, you can use the funds from a business line of credit to seize opportunities and take your business to the next level.


    Low Loan Amounts

    Compared to other types of loans, lines of credit have a relatively low borrowing limit. If you need money for new equipment, expansions, or renovations, you might benefit more from another type of loan.


    While a business line of credit isn’t as expensive as business credit cards, it does have a higher interest rate. Some lenders even carry hidden fees that could significantly increase the cost of the loan. SMB Compass will help you find honest and transparent lenders that actually care about your business.

    More Challenging to Qualify

    You need to submit financial statements, personal and business tax returns, bank account details, business documents, and more. In most cases, you’ll need a strong credit rating and at least two years of business history.

    Equipment Financing

    The equipment you’re using contributes much to the quality of service and food you offer. Restaurant equipment financing provides your restaurant the funds you need to purchase new equipment - ovens, tabletop stoves, freezers, etc.

    Our team of trusted advisors will work closely with you to determine the terms of your loan. Factors affecting your loan approval rates will depend on the personal credit, the business's trade history, the company's financial strength, and the type of equipment purchased.


    Flexible Terms

    Equipment loans generally have more flexible terms compared to traditional loans. In other words, you can negotiate the terms with the lender, especially if your credit rating exceeds the minimum credit score requirement.

    Quick Turnover

    You don’t have to wait months to receive the capital you need to purchase equipment. We’ll connect you to fast and efficient lending companies so you can quickly buy the equipment you need. Our approval time can be as fast as 24 hours.

    Improve Credit Rating

    Equipment financing can help you build and improve your credit rating by making payments on time. That way, you’ll better position yourself for better loan terms in the future - even those from an alternative lender.


    Risk Involved

    Just like any other loan, equipment financing comes with risks. You need to ensure that you can repay the loan until the end of the agreement. Otherwise, the bank or alternative lender will confiscate the equipment and use it as payment for the loan.

    Limited to Equipment Needs

    As the name suggests, restaurant owners can only use equipment loans to purchase or lease a piece of equipment.

    May Require Personal Guarantee

    A personal guarantee is the restaurant owner’s legal promise to pay for the loan personally. Lenders may ask for one as additional security for the loan. That means that if your business cannot pay off the loan, the lenders may come after your personal assets.

    SBA 7(a) Loans

    The Small Business Administration (SBA) guarantees a certain percentage of SBA loans for restaurants. A small business loan for a restaurant makes an SBA 7(a) loan ideal for small business owners seeking financing to grow their business.

    You can use the SBA 7(a) loan to improve marketing efforts, acquire commercial real estate, open another location, or make it through an off-season. There are no strict restrictions on how business owners can use the funds. Loans for restaurants offered by the Small Business Administration (SBA) can cover almost any business expense.

    SMB Compass will work with you to set competitive terms, rates, limits, and repayment schedules that suit your business needs, preferences, and goals.


    Low Down Payment Requirements

    Most lenders require a substantial down payment to secure a loan. For 7(a) loans, lenders can accept lower down payments. This allows you to preserve personal assets and free up working capital that would’ve been used as a down payment.

    Easy to Obtain

    The SBA guarantees 75% to 85% of the loan. That means that the federal government will cover the agreed-upon percentage, reducing the risk on the lender’s side and incentivizing them to approve your application.

    Lower Interest Rates and Long Repayment Terms

    The SBA sets the maximum interest rate for their loan programs to protect small business owners and help them afford their options. The lenders use this as a basis for the interest rates they set on the SBA Loans. Regardless of the interest rate, 7(a) loans generally have lower and longer repayment terms.


    Laborious Application Process

    If you apply for an SBA loan, you’re going to work with SBA-approved lenders rather than the SBA itself. SBA 7(a) loans often take three months to approve.

    Often Require Good Credit

    Lenders are very strict when it comes to credit and business history. You generally need a credit rating of 620 or higher to increase your chances of approval. Plus, you’ll also have to demonstrate an excellent financial track record.

    Personal Collateral

    Liens on properties, especially commercial real estate, are typical for SBA loans. If you have valuable personal assets, lenders may ask you to use them to secure a loan. They could seize your property if you fail to repay the loan.

    Business Term Loans

    A business term loan is the classic loan structure. Lenders give you a lump sum, and you repay the loan in fixed monthly payments throughout an agreed-upon period. You can use the funds from a business term loan for almost every business need, including working capital, commercial real estate, equipment purchases, emergency expenses, or hiring more employees.


    Higher Loan Amounts

    Regardless of the lender you’re working with, business term loans often have higher loan amounts than other financing options. You can qualify for up to $5 million.

    Lower Interest Rates

    Unlike short-term financing options, business term loans charge lower interest rates and annual percentage rates (APRs).

    Budget Your Cash Flow Properly

    Since you repay the loan in fixed monthly payments, you can properly budget your finances, ensuring you can repay the loan throughout the repayment term.


    Personal Guarantee

    SBA Loans require a personal guarantee to borrowers to offset the risk they’re taking. This means you agree to be personally liable if you default on the loan.

    Higher Credit Limit

    Lenders will also check personal and business credit and your financial history. Before applying, make sure that your credit history is updated and that your score meets the minimum credit requirement.

    Profitable Business History

    Lenders also need to know that your business is profitable. They usually need at least two years of financial history.

    How to Apply for a Restaurant Business Loan through SMB Compass

    You can count on SMB Compass to help you find the right loan from the right lending company. If you’ve decided to move forward and apply, we’ve outlined the steps you need to take below:

    1. Prequalify for a Loan by Filling Out Our Online Application

    To start the application process, fill out a simple application detailing your name, restaurant’s name, email, phone, and loan amount. Once you’ve submitted your application, our financial experts will reach out to you and ask you for more information about your business’s goals and needs.

    2. We Will Find a Reputable Lender for You

    Once we can assess what you’re looking for, our financial experts will pair you with an experienced and reputable lending company that has experience in your industry. The lending company will assess your eligibility, considering your credit score, time in business, revenue, and other factors.

    SMB has secured funding for 1000+ businesses from across the U.S., and we’re confident that we can find the best lending company for your restaurant.

    3. Compare Different Offers with Our Financial Experts

    Comparing different loan offers from different lenders claiming to be the best can be overwhelming.

    That’s why our lending experts will patiently walk you through every detail of your offers. Our financial specialists are trained to assess and spot the very best restaurant loans for you.

    4. You Choose the Loan that’s Best for You

    After you’ve compared all your options, it will be easier for you to confidently move forward with your decision. You can compare the different financing options recommended, and decide which one best suits your current situation.

    Don’t worry. Our team at SMB Compass will be with you along the way. We can answer questions, provide more information about each option, and walk you through the nitty gritty of business loans. That way, you’ll be able to make a more informed decision. 

    5. Work on Running Your Business

    Depending on the type of restaurant financing you choose, you’ll be able to receive funding within 24 to 48 hours.

    Once the funds are deposited into your account, you can use them immediately. With access to enough working capital, you can focus less on the financing side and go back to growing and expanding your restaurant business.

    Ready to apply for a Restaurant Business Loan?

    Tips on How to Get a Loan to Start a Restaurant

    • 1. Make a Business Plan

      Almost all potential lenders ask for a business plan when applying for a business loan. Lenders want to know how prepared you are to start a restaurant business. Make sure to include the following information in your business plan:

      • Description of the restaurant

      • Proposed location and potential customers

      • Kitchen and front house staffing plan

      • Competitor information

      • Pricing, customer service, and food you plan to offer

      • Executive summary including goals for first-year profit

      • Projected income, expenses, and profits for at least three years

    • 2. Find Your Niche

      Since restaurant businesses are a very common venture, competition is tough and lenders doubt if you can pull it off. Finding a niche sets you apart.

      For instance, you might want to open a pizza shop if there are no pizzerias in your area. This narrows down your target audience and assures lenders that your business will be profitable.

    • 3. Know Your Costs

      It’s extremely important to state an estimate of the amount you’d want to borrow when you apply for a loan. If you ask for less than what you need, you might not be able to address the needs of your restaurant. Asking for more, on the other hand, would plant doubt in lenders, which may lead to the rejection of your loan.

      Even if you’re not opening your doors yet, you should already know how much you need to keep your restaurant’s operations up and running. Be sure to calculate the costs of your payroll, equipment, utilities, and real estate.

    • 4. Prepare Financial Information

      Private lenders and the Small Business Administration need to verify your financial information before issuing a loan. Lenders would want to see your credit report, bank statements, proof of income, and tax returns from the past three years. Keep these documents readily available in case the lender asks for it.

    • 5. Work on Building Your Credit

      One of the biggest red flags for lenders is a poor credit history. If you’re a start-up business, it’s possible that you will not be able to qualify for a larger and more comprehensive business loan. Your credit score will tell lenders how responsible you are in paying your debts. Essentially, it determines your creditworthiness.

      To qualify for loans, having a credit score of 650 or higher is best. Aside from that, you should also make sure that you don’t have past bankruptcies. Paying your loans on time, checking your credit report regularly, and decreasing your credit utilization ratio are some ways to improve your credit score.

    Common Questions. Straight Answers.


    The short answer is no. As long as you can meet the requirements and submit the necessary documents to the lenders, you can qualify, and get approved for restaurant loans. It’s also easier to qualify for loans from online lenders than traditional lenders since online lenders are willing to take on more risk and may work with businesses with poor credit scores or less stellar financial records.