Business Expansion

The 4 Fastest Business Loan Options for Restaurants in 2020

Last updated on March 10, 2020

Jacques Famy Jr

Operating a successful restaurant has many moving parts. Sometimes situations occur where the need to access capital quickly for your restaurant is a must. Whether its equipment in the kitchen that needs repair or replacement, seasonal declines in revenue, unexpected tax obligations, or general cash flow problems, having a fast and quick financing option for a restaurant can be a business lifesaver. 

When in need of money for your business, typically, the recommendation is to evaluate the various options that are available for a business and apply for the most attractive terms that are available. Some options, like traditional bank loans and business lines of credit, as well as SBA loans (Small Business Administration), are great products with great terms but require weeks to process and approval. When time is of the essence, and a restaurant business loan is needed quickly, those options just aren’t on the table, so it’s important to know what quick business loan options are available.     

As always, whether you need access to business loans fast or not, it’s important to identify first what the use of the money is for. Step number one is identifying needs, then evaluate the fast business loan options from there. 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 business bank account, and pro and cons. 

What Are the Fastest Business Loan Options for Restaurants?

 

  1. Short-Term Business Loans

  2. Merchant Cash Advance

  3. Equipment Loans

  4. Business Credit Cards

 

Restaurant Short-Term Business Loans

Short-term business loans are an excellent choice when you need access to capital fast. The requirements are a lot lower than that of traditional bank loans and 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 loans, which would need a lot more paperwork and explanation as well as financial statements. 

Short term business lenders’ main focus is a business owner’s credit and the business bank statement health, so 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 a fast business loan quote 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 business loan options.

But the fast turnaround can come at a cost as short term business loans have shorter terms and higher costs, so a restaurant owner must take into consideration more closely the cost versus benefit of acquiring a short term business loan product. The costs are based on Factor rates or fixed costs, which are different than that of principal and interest rates and usually weekly and sometimes daily payments, with terms from 6 to 18 months.

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

Restaurant Merchant Cash Advance

Merchant Cash Advances, also known as Future Sales Purchase Receivables Agreement, less known than short term business loans, are another option when you need access to business capital fast. The restaurant owner is given a lump sum of money upfront, like short- term business loans, but the payback is based on a percentage of future sales instead of a fixed payment, fixed term of that of a short-term business loan. The requirements are a lot lower than that of traditional bank loans and lines of credit. 

To get a quote for a Merchant Cash Advance, all that is required is a one-page application, three most recent months bank statements, and three months of most recent merchant processing statements. This is a lot less than traditional loans, which would need a lot more paperwork and explanation as well as financial statements. 

Like Short term business lenders, Merchant Cash Advance funder’s main focus is Business owner’s credit, business bank statement health, and the activity of merchant processing transactions on a monthly basis. The business funder’s ability to turn around a Merchant Cash Advance offer is only hours, not days or weeks. Typical turnaround times for a fast Merchant Cash Advance quotes range from 3 to 6 business hours.

Once a Merchant Cash Advance offer is excepted, 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, but that’s very quick and fast business funding compared to traditional business loan options.

But the fast turnaround can come at a cost as Merchant Cash Advance have higher costs, but do 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 of acquiring a Merchant Cash Advance product. The costs are based on Factor rates or fixed costs, which are different than that of principal and interest rates and usually weekly and sometimes daily payments, with terms from 6 to 18 months.

Example of a Merchant Cash Advance 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 credit card sales monthly or deposits monthly. Therefore, your monthly amount you pay is flexible to that of 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. Estimated times set to pay back for a Merchant Cash Advance are between 6 to 18 months. 

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 pay too much in their slow season and protect their margins of profit.  

How fast can I get a Merchant Cash Advance?

  • Same day to 24-48 hours

Qualifications 

  • Annual Revenue in excess of $180,000
  • Credit Card sales of $10,000 plus per month 
  • 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

  • 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 business loans
  • Frequent payments

Restaurant Equipment Financing

Restaurant equipment financing is another quick solution when a restaurant owner needs to equipment within the business. 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 that of short term business 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 solution if that piece of equipment breaks down in your kitchen that is vital to the process and operation of the kitchen and producing certain food items. For example, a pizza shop that relies heavily on a brick oven, or a fast-food establishment that has deep fryers, there is no time to spare to get this equipment replaced. 

How fast can I get Restaurant Equipment Financing?

  • Same day to 24-48 hours

Qualifications 

  • Minimum Credit Score of 680 and above for business owner credit
  • Business Revenue above $180,000 annually

Use of Money

  • New Equipment only purchase from a manufacturer, distributor, or retailer

Terms

  • Loans 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
  • Time in business requirements
  • Approval rates lower than that of alternative business loans like short-term business loans, Merchant Cash Advance, and business credit cards

Restaurant Business Credit Cards

A restaurant business credit card is a payment card the is issued to the business owner and additional approved users to pay for goods and services. The card operates as revolving credit and is based on both principal and interest.

Business credit cards allow the customer to grow a balance and draw on demand money up to a credit limit. This allows the business owner to defer payments as only a minimum monthly payment is required that is far less than the card’s current balance.

Business Credit Cards are simple to apply for and can be done online or by email with bank credit card lenders. Sometimes additional information like bank statements and or tax returns may be required as well for larger credit limits.

How Do I Select the Best Business Credit Card?

The best way to shop for business credit cards is through an internet search. Not all credit cards have the same qualification criteria, interest rates, and or credit limits, so it’s important to shop around and get at least three different offers. Remember, an offer is only an offer after you have completed an application, credit check, and affordability test by the bank offering the credit card. Pre-Qualification for a credit card is not the same as approval.  

How Fast Can I Get a Business Credit Card?

  • Same day to 1 to 3 days

 Qualifications 

  • Minimum Credit Score of 680 and above
  • Revenue requirements either personal or business income 

Use of Money

  • Equipment
  • Debt Consolidation
  • Business Expansion
  • Operating Expenses and Inventory
  • Renovations or refurbishing 
  • Purchasing

Terms

  • Revolving credit line without annual renewal
  • No term limit – can be closed at any time
  • Rates from 0% to 29.99%
  • Monthly Payments
  • Low to no origination/annual fees

Pros 

  • Great rates, low fees, and overall terms 
  • Speed of process (usually takes a day or two)

Cons

  • High Credit Standards
  • Financial Statements required with strict financial statement standards
  • Time in Industry
  • Approval rates lower than that of alternative business loans like short-term business loans and business credit cards

How Do I Select the Best and Fastest Restaurant Business Loan Option for My Business?

The first step when looking for money for your business, whether you need it quick or not, 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 that you qualify 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. 

 

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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.