Business Expansion

Fast Business Loans for Restaurants in 2021

Last updated on January 11, 2021

Jacques Famy Jr

Restaurant small business loans are sometimes needed fast due to equipment failure, seasonal sales dropping, working capital needs, or other restaurant industry emergencies. When in need of money, restaurant owners turn to restaurant financing 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 and a business line of credit, as well as 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.

As always, whether restaurant small business owners need access to restaurant business loans fast or not, it’s important first to identify what the money’s use will be. Step number one is identifying needs, then evaluate the loan options from there.

Let’s get started! Below is a list of the most common fast restaurant business loans which we have broken them down by their terms, best uses, time frame to fund from application to funds in your restaurant business bank account, and pro and cons.

What Are the Fastest Restaurant Loan Options for Small Business?

  1. Small Business Loans (Term Loans)

  2. Merchant Cash Advance

  3. Line of Credit

  4. Equipment Loans

 

Short-Term Small Business Restaurant Loans

Short-term small business loans are an excellent choice when you need access to capital fast for your restaurant. The requirements are a lot lower than that of traditional bank business loans and business lines of credit. Usually, the only requirements to get a quote are a one-page application and three most recent bank statements, which is a lot 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 ranges from 3 to 6 business hours.

Usually, once an offer is accepted, you will have to 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 very quick and fast business funding compared to traditional restaurant business loan options from a bank.

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 cost versus benefit of acquiring a short term business loan product more closely. The costs are based on factor rates or fixed costs, which are different from principal and interest and usually weekly and sometimes daily payments, with terms from 6 to 18 months. This funding is defined as a term loan.

How Fast Can I Get a Short Term Business Loan?

  • Same day to 24 hours

Qualifications 

  • Annual Revenue in excess of $180,000 
  • Minimum Credit Score of 500 and above
  • Over 6 months in Business 
  • No Tax Returns or Financial statements 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

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, fixed term of that of a loan. The requirements are a lot lower than those of traditional loans and lines of credit. 

To get a quote, all that is required is a one-page application, the three most recent months’ bank statements, and three months of most recent merchant processing statements. This is a lot less work than traditional loans, which would need a lot more paperwork and explanation as well as 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 offer 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 are different 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, also known as 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 amount and the payback amount is the flat cost or factor rate that the restaurant owner is charged over the life of the advance. The future sales withheld are the monthly percentage of card sales monthly or deposits monthly. Therefore, your 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 who 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 
  • Minimum credit score of 500 and above
  • More than six months of sales revenue
  • No tax returns or financial statements typically required
  • Average business credit

Use of Money

  • Equipment repair
  • Working capital
  • Emergency cash flow needs
  • Operating expenses and inventory
  • General facility repairs

Terms

  • Not set length of terms, but estimated times to pay are between 6 to 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
  • Shorter time to repay than traditional loans
  • Frequent payments

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 on a semi-annual or annual basis. 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 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 of 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

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 get this equipment replaced. 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 purchase 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 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 will have to be backed by the SBA. The most common SBA program for start-ups for restaurants is called 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 financing options such as short-term loans or cash advance 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 need to be aware that long term loans require more paperwork and more underwriting scrutiny, requiring 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 business.

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 quick 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 products you are eligible for, break down the difference between terms and costs. The last evaluation should be how much time it will take to complete the process and fund. That should be your order of priorities. If one more day in processing to funding is necessary from one product to another to get better terms, you must ask yourself is it 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.

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* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.