Restaurant small business loans are sometimes needed quickly due to equipment failure, seasonal sales dropping, working capital needs, or other emergencies in the industry. When in need of money, restaurant owners turn to finance to achieve those working capital needs.
The first step in evaluating restaurant loans is to look at the various options available for a restaurant and apply for the most attractive terms that fit the need. Some options, like a traditional bank loan, business line of credit, and Small Business Administration loans, are great products with great terms but require weeks to process and approve a restaurant loan. Let's face it; bank loans take time. When time is of the essence for small business owners and restaurant business loans are needed quickly, those options just aren’t on the table, so it’s important to know what quick restaurant loans are available.
Whether restaurant small business owners need access to restaurant business loans fast or not, it’s important to identify the money’s use. Step number one is identifying needs, then evaluating the loan options.
Let's get started! Below is a list of the most common fast restaurant business loans, which we have broken down by terms, best uses, time frame to fund from application to funds in your business bank account, and pros and cons.
Best Fast Business Loans for Restaurants
Like any small business owner, restaurants require a lot of investment and sometimes immediate cash. Traditional bank loans can take a long time to get your money approved, but there are other alternative lending options that you get you a business loan in a jiffy:
- Small Business Loans (Term Loans)
- Merchant Cash Advance
- Line of Credit
- Equipment Loans
1. Short-Term Small Business Restaurant Loans
Short-term small business loans have a simple and quick application process making it common option when you need access to capital for your restaurant fast. Qualifications and requirements are not as strict as traditional bank business loans or business lines of credit. Usually, the only requirements to get a quote are a one-page application and three most recent bank statements, which are much less than traditional restaurant business loans, which would need a lot more paperwork and explanation, as well as financial statements.
Short-term business lenders’ primary focus is a business owner’s credit and the business bank statement health. Their ability to turn around an offer from an application and business bank statements is only hours, not days or weeks. Typical turnaround times for fast business loans range from 3 to 6 business hours.
Usually, once an offer is accepted, you must sign an agreement and then allow the business lender or funder to conduct funding verifications, which can be as little as a couple of hours to a full day before funds will hit your business bank account. However, that’s quick and fast business funding compared to a bank's traditional restaurant business loan options.
But the fast turnaround can come at a cost, as short-term restaurant business loans have shorter terms and higher rates, so a restaurant owner must consider the value of the funding closely.
How Fast Can I Get a Short-Term Business Loan?
- Same day to 24 hours
Qualifications
- Annual Revenue over $180,000
- Minimum Credit Score of 500 and above
- Over 6 months in Business
- No Tax Returns or Financial statements are typically required
Use of Money
- Equipment repair
- Working capital
- Emergency cash flow needs
- Operating expenses and inventory
- General facility repairs
Terms
- Terms from 6 to 18 months
- Factor rates from 1.18 to 1.45
- Weekly or daily (M-F) payments
- Origination fees
Pros
- High approval rates
- Low credit standards
- Low documentation requirements
- Cheaper than merchant cash advances
- Speed of process (takes a day or two)
Cons
- Higher cost
- Shorter terms
- Frequent payments
2. Cash Advance Restaurant Funding
Also known as merchant cash advances, this financing product is actually a future sales purchase receivables agreement. The restaurant owner is given a lump sum of money upfront, but unlike a loan, the payback is based on a percentage of future sales instead of a fixed payment, a fixed term of a loan. The requirements are much lower than traditional loans and lines of credit and offer more benefits to restaurants.
A one-page application is required to get a quote, including the three most recent months’ bank statements and three months' most recent merchant processing statements. This is much less work than traditional loans, which would need more paperwork, explanation, and financial statements.
Like short-term lenders, the funder’s primary focus is the owner’s credit, bank statement health, and the activity of merchant processing transactions monthly. The funder’s ability to turn around offers is only hours, not days or weeks. Typical turnaround times range from 3 to 6 hours for quotes.
But the fast turnaround can come at a cost as an advance has higher costs but does have flexible repayment terms as it’s based on a percentage of future sales. The restaurant owner must take into consideration more closely the cost versus benefit. The costs are based on Factor rates or fixed costs, which differ from principal and interest and usually weekly and sometimes daily payments, with terms from 6 to 18 months.
Example Quote:
- Advance Amount (Purchase Price): $25,000
- Payback Amount (Specified Amount): $29,000
- Future Sales Withheld (Specified Percentage): 9%
The Advance amount, or the purchase price, is the lump sum provided to the restaurant owner at funding. The payback amount, also known as the specified amount, is the amount the restaurant owner has to pay back. The difference between the advance and payback amounts is the flat cost or factor rate that the restaurant owner charges over the advance's life.
The future sales withheld are the monthly percentage of card sales or deposits. Therefore, the monthly amount you pay is flexible according to your monthly sales as the percentage of holdback is fixed but not your future sales, so there is no set term or time to repay.
Merchant Cash Advances are completed whenever the payback amount (specified Amount) is paid back in full. This is an excellent product for seasonal restaurants that don’t want to spend too much in their slow season and protect their profit margins.
How Fast Can I Get Funded?
- Same day to 24-48 hours
Qualifications
- Annual revenue above $180,000
- CC sales of $10,000 plus per month
- A minimum credit score of 500 and above
- More than six months of sales revenue
- No tax returns or financial statements are typically required
- Average business credit
Use of Money
- Equipment repair
- Working capital
- Emergency cash flow needs
- Operating expenses and inventory
- General facility repairs
Terms
- No set length of terms, but estimated times to pay are between 6 and 18 months
- Factor rates from 1.18 to 1.45
- Daily (M-F) payments through holdback percentage of sales
- Origination fees
Pros
- High approval rates
- Low credit standards
- Low documentation requirements
- Flexible repayments
- Speed of process (takes a day or two)
Cons
- Higher cost
- It takes a shorter time to repay than traditional loans
- Frequent payments
3. Line of Credit for Restaurants
A Small Business Line of Credit is an open revolving line of credit that allows business owners to draw funds when needed on-demand or make purchases up to a specific credit limit.
Lines of credit require renewal to extend either semi-annually or annually. The most significant benefit of a small business line of credit over term loans is flexibility; the product allows for a draw of funds on demand up to the credit limit. A line of credit is not considered a fixed-term small business loan.
How Fast Can I Get a Line of Credit? What's the Application Process?
- Same day to 24-48 hours
Qualifications
- Annual revenue over $180,000
- Deposits of $15,000 plus per month
- A minimum credit score of 600 and above
- Over six months in business
- No tax returns or financial statements are typically required
Use of Money
- Equipment repair
- Working capital
- Emergency cash flow needs
- Operating expenses and inventory
Terms
- Not set length of terms, but must renew semi and/or annually
- Rates in the range of 1% per month simple interest
- Daily (M-F) payments through holdback percentage of sales
- Origination fees
Pros of Business Line of Credit
- Draw money at will up to a credit limit
- Flexible repayments
- Speed of process (takes a day or two)
Cons of Business Line of Credit
- Smaller loan limits
- Renewed semi-annually to annually
4. Restaurant Equipment Financing
Restaurant equipment financing is another quick solution when a restaurant owner needs equipment. Obviously, this is a specific purpose loan or lease the equipment purchased is used as collateral for this type of financing; therefore, terms are more attractive than other restaurant loans. Terms are based on interest rates or lease factor rates depending on the product and range from 2 to 10 years, typically in duration.
This is a great funding solution if a piece of equipment breaks down in your kitchen that is vital to your operating process when producing certain food items. For example, in a pizza shop that relies heavily on a brick oven, or a fast-food establishment with deep fryers, there is no time to spare to replace this equipment. This funding is defined as a term loan or lease.
How Fast Can I Get Restaurant Equipment Financing? What's the Application Process?
- Same day to 24-48 hours
Qualifications
- A minimum credit score of 680
- Revenue above $180,000 annually
Use of Money
- New equipment only purchased from a manufacturer, distributor, or retailer
Terms
- Loan amount up to 2 million
- Loan terms from 2 to 10 years
- Rates vary either principal and interest or lease factor rates
- Monthly payments
- Low origination fees
Pros
- Good rates, low fees, and overall length of repayment terms
- Monthly payments
- Speed of process (takes days, not weeks)
Cons
- High credit standards
- Approval rates
Top Reasons Restaurants Need Business Financing Fast
- Cash Flow/Working Capital Loans
- Funding Food Costs
- Kitchen Equipment Loans
- Fulfill a Business Plan (Expansion)
- Emergency Funding
- Payroll Funding
- Staff/Employment Needs
Frequently Asked Questions from Restaurant Owners
How do I get a restaurant loan?
Restaurant loans can be acquired through banks, credit unions, online business lenders, and finance business brokers. The products offered and the business owner’s qualifications will dictate the "how" when it comes to the types of restaurant loans chosen. Restaurants can be tricky to get funding.
How can I get a small business loan to open a restaurant? Can I get a loan to buy a restaurant?
Some financial institutions can view the restaurant industry as risky. Typically, start-up type of restaurant financing must be backed by the SBA. The most common SBA program for restaurant start-ups is the SBA 504 C. Real Estate may be required as collateral. Restaurant loans face higher hurdles than other businesses due to the risky nature of restaurant loans.
What is the easiest and best restaurant business loan to get?
Restaurant businesses turn to finance options such as short-term loans or cash advances when they want fast and easy funding. Small business loans can take longer to receive funding for restaurants.
What is the Paycheck Protection Program?
The Paycheck Protection Program (PPP) Loan- The Small Business Administration has established the SBA Paycheck Protection Program loan. This SBA loan provides loans to small businesses affected by the COVID-19 crisis and needs financial help. Under the right conditions, this loan program offers forgiveness. The federal government backs SBA loans.
Can I fund my restaurant with credit cards?
Credit cards are another alternative to restaurant loans in that they work similarly to a line of credit where you can access money on demand. A credit card can be acquired using both personal credit and business credit. Be careful not to run up your credit cards to your restaurant’s max limit because it can negatively impact your personal credit and impact future restaurant business loans.
Are long-term business loans something business owners can get fast?
Small businesses must be aware that long-term loans require more paperwork and underwriting scrutiny, require more time to process, and are not considered a fast, small-business loan option. A restaurant loan may also face additional hurdles because restaurant funding is risky.
How Do I Select the Best and Fastest Restaurant Business Funding Option for My Business?
When looking for money for your business, whether you need it quickly or not, the first step is to start with the question: What is the use of the money? And what is the return on the investment or use? Don’t let the urgency or immediate need cloud your judgment, so always keep that in mind.
Then you must investigate which product or products you qualify for based on your specific stats and qualifications. Once you develop a list of eligible products, break down the difference between terms and costs. The last evaluation should be how long it will take to complete the process and fund. That should be your order of priorities. If one more day in processing funding is necessary from one product to another to get better terms, you must ask yourself if it is worth the wait.
If you have the time, even if it’s only a couple more hours, take that time and be deliberate and methodical with your search for the best restaurant financing product for your needs within the time frame that you need it. Clearly, a bank loan will take time for funding, so instead, make a choice to get started by contacting AdvancePoint Capital.
