Your Guide To Restaurant Financing

restaurant financing

Whether your restaurant business is just getting off the ground, or has become so popular that you need additional locations or to expand operations, there may come a time as restaurant owner that you need to secure restaurant financing.

While there are plenty of competitive financing options available to restaurateurs, the breadth of choices can make it difficult to determine which funding partner is the right fit for your business. Use this guide as a resource to evaluate which restaurant financing options may be a fit for your business, and to make sense of the terms, features and benefits they entail.

Consider the financing application criteria

Different funding partners and the types of financial solutions they offer your business can vary significantly, but most will likely want restaurant owners to provide some form of proof that speaks to the restaurant’s business performance, financial management and future potential. Application criteria may include:

  • Financial performance and corresponding financial statements for the past several years
  • A formal business plan
  • Financial forecasts
  • An established business credit history
  • A minimum credit score

If your restaurant business is a startup, doesn’t have an established business credit history or several years of consistent financial performance, an alternative financial solution may be the ideal fit. That’s because many alternative funding partners use tools such as predictive modeling and data aggregation to determine small business financing approval, rather than the lengthy application and underwriting process that’s still used by many traditional financial institutions.   

Consider whether you have assets to secure financing

Determine if your restaurant business has any assets such as equipment or real estate that could be used as collateral to secure the restaurant financing you need. If your business doesn’t have tangible assets, you may want to consider alternative financing solutions that may use accounts receivables as a means to underwrite the loan. Some alternative lenders may also consider your future credit and debit card sales as a way to repay the amount of financing you access, if approved.

Research and compare financing terms and conditions

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Predetermine how much funding you need to access, when and how you want to be able to use, for what purpose, and what the financing may cost to access in terms of rates and fees, before you pursue funding.

restaurant financingThe costs, fees, terms and conditions, and repayment plans for restaurant financing products vary based on the solution you pursue, but it’s important to understand how they compare to one another — and how well they align with your restaurant businesses goals and objectives — before you commit to any one solution. Some traditional financial institutions may offer competitive terms and interest rates, for example, but require that you make a fixed monthly payment to repay the funding accessed.

If your restaurant is fairly new, tends to be subject to seasonal demand, or has vendors who are historically slow to pay, a fixed monthly payment could present cash flow strains that put your business’s financial stability at risk. By contrast, some alternative financing partners offer products that are designed to support fluctuations in demand or sales by taking a small amount of money from the restaurant’s daily or weekly sales to repay the financing the restaurant chooses to use.

Consider when (and how) you want to access restaurant financing

Nearly 80 percent of small business owners surveyed said a speedy application and easy access to funds are key priorities when choosing a financing partner. Generally speaking, traditional financial institutions may require a lengthy underwriting and loan approval process, while some alternative financing partners may rely on digital application and funds transfer processes that take no more than a few days to complete. If your intent is to have access to funding to support cash flow shortages, or you intend to pursue a time-sensitive opportunity, consider whether the financing partner’s timeline for securing funds aligns with your business needs.

Options abound when it comes to securing restaurant financing, but your business history, current business model, goals and specific financing needs are important to consider to ensure you find the right partner. Consider these basic questions as you review your restaurant financing options.

A Guide to Small Business Financing was created by Lendr


Tim Roach is a co-founder of Lendr, a provider of merchant cash advances for small to midsize businesses. Roach holds a B.S. in Finance from Linfield College, and served in the United States Navy at Seal Team One. Before joining Lendr, Roach founded Oak Street Trading, a proprietary trading firm, in 2002.