5 Best Business Loans for Restaurants & Bars
When you work with Clarify, your dedicated lending advisor guides you to pick the best type of financing that fits your business goals. Having funded over 10,000 food services companies, we've seen these five loan options to work best for restaurant owners:
1. Business Line of Credit for Restaurants
A business line of credit provides working capital always on-hand when needed. It's a flexible way to get approved for a credit line with low interest rates and is structured similarly to a credit card. You only pay interest on funds you utilize.
Benefits of having a business line of credit:
- On-demand funds available to use when needs arise
- Only pay interest on money withdrawn from the credit line
- Helps improve your credit rating
- There are no pre-payment penalties
2. Short-Term Loan for Restaurants
The most common type of loan taken by business owners. A short-term loan is a traditional financing option. You borrow a fixed amount of capital from a lender with a fixed interest rate that is paid over a certain length of time. You get the entire loan amount as a lump sum and can be used for any type of business expenditure.
Benefits of getting a short-term loan:
- No collateral is needed to secure the loan
- Quick and easy approval
- Loan closing within 1-2 days
- Low credit score requirements (we recommend a credit score of at least 550+)
3. Equipment Loans for Restaurants
Finance up to 100% of the kitchen equipment, furniture, and decor needed to create a successful restaurant. Equipment financing offers competitive interest rates and has minimal paperwork needed to get approved.
Benefits of equipment loans:
- The only collateral needed is the equipment you are purchasing itself.
- APRs as low as 6%
- Minimal paperwork
- Both good and bad personal credit score is okay to get approval
4. SBA Loans for Restaurants
The federal agency offers two popular lending options for restaurant owners: 7(a) and Microloans. The SBA backs the loan up to 80% of the total funding amount. Do be aware that while SBA loans offer some of the best interest rates, approved lenders have strict credit score and paperwork requirements. Due to the time needed to get approved for an SBA loan, we advise it as an option only for owners who are not in immediate need of capital.
Benefits of SBA loans:
- Partially backed by the Small Business Administration
- Low interest rates starting at 5.75%
- 5 to 25-year term length