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Restaurant loans

Best Restaurant Business Loans for 2021

The restaurant business industry is demanding, with 20% of restaurants failing within one year of opening. Expenses can readily amass. Restaurant business loans are a solution for any restaurant that needs to get started or refresh their cash flow.

Written by Brian Huber, updated on 11/03/2021
Financially Reviewed by
 Gordon ScottCMT on 6.1.2021

Getting a business loan to open a restaurant can be tricky since 8 in 10 restaurant owners begin their careers at entry-level. Whether conventional or alternative financing is right for you, small business lenders can provide access to the capital for your short and long-term goals. Our experts will help you find the right financing solution for your restaurant and walk you through the top lending options.

A Quick Overview of the Best Restaurant Business Loans for 2021

According to the Bureau of Labor Statistics, the average American household spends around $3,000 eating out annually. In 2020, the restaurant industry had $659 billion in sales and over 12.5 million employees, with sales set to grow 10.2% in 2021. According to the National Restaurant Association's State of the Industry Report, there’s room in the market for new restaurants. Here is a table summary of the different types of restaurant business loans currently on the market. 

Financing Needs

Loan Type

Loan Features 

Recommended Lender

Renovation costs, upgrade equipment, purchase inventory, working capital

Short-term loans

  • Amount: Between $5,000 and 500,000
  • Term: Up to 15 months
  • Interest: No interest rate, instead offers one-time factor rate 
  • Time to get the loan: Up to 24 hours

Fora Financial

Working capital, equipment purchases

Business Line of Credit, Short term loans

  • Revolving credit line or term loan up to $150,000
  • Credit line repayable over 12 or 24 weeks
  • Term loan repayable over 24 or 52 weeks
  • Immediate assessment of qualifications, funding within 2 days

Fundbox

Working capital, equipment purchases, inventory expansion

Short term loans, long-term loans, credit lines, SBA loans, alternative financing

  • Working capital loans up to $400,000 repayable over 6 to 18 months
  • Expansion loans up to $250,000 repayable over 18 or 24 months
  • Funding as quickly as 48 hours

Credibly

Fast cash with no collateral

Merchant cash advance

  • Loan amounts from $2,00 up to $500,000
  • Interest rates are 10%-350% APR
  • Repaid in 3 to 36 months
  • Turn around time is 1 to 7 days

Rapid Finance

Freeing up cash flow

Invoice factoring or invoice financing

  • Loan amounts up to 100% of the invoice value
  • 3% processing fee and 1% factor fee weekly until full invoice payment
  • Repayment complete when the customer pays the invoice
  • Turn around times as quick as one day

BlueVine

Working capital, equipment, inventory, bad credit loans

Short-term and long-term loans

  • Small business loans up to $500,000 for various terms
  • Up to $150,000 for equipment financing & leasing
  • Funding in as little as 24 hours

National Funding

Best Restaurant Business Loans - Full Overview

Of the 6 restaurant business loan types outlined above, you’ll need to decide which loan is right for you. Here we’ll explain the features of each of these loans in detail to make your choice easier.  

1. Fora Financial - Best for Short-Term Loans

Fora Financial offers flexible short-term loans between $5,000 and $500,000 with low rates that are easy to apply for. Until now, Fora Financial has supplied more than $2 billion in working capital solutions to their customers. Over 25,000 unique customers have leaned on Fora to achieve their goals and build their businesses.

As one of the most reliable small business lenders, Fora Financial comes highly recommended by us. They specialize in helping small businesses and loan applications are handled swiftly.

The company aims to continue being a competitive lender with extensive and flexible offerings. They are dedicated to developing fresh ways to serve small businesses for as long as possible in a financial market that’s always changing. 

Learn more about Fora Financial in our comprehensive review

2 . Fundbox - Best for Working Capital Loans

Fundbox is an AI-powered financial platform, making quick credit decisions by assessment of business banking history. Fundbox has funded nearly 300,000 businesses since its founding in 2013.

Credit lines are provided to businesses with at least $100,000 in annual revenue that has ideally been in operation for at least six months. Loan advances are payable over either 12 or 24 weeks. Available credit increases as amounts are repaid.

Term loans of up to $150,000 are repayable over 24 or 52 weeks. No origination fee is charged and no prepayment penalty is assessed. Lump sums provided by term loans are available for purchases of equipment, machinery, and real estate as well as inventory purchases.

Read the full Fundbox review for more details.  

3. Credibly - Best for Equipment Loans

Credibly review

Credibly makes lending decisions using a data scoring model with a human touch. Businesses applying for loans provide basic information for prequalification. Credibly assesses an applicant’s credit history, business cash flow, and bank statements, among other factors addressed in a simple 10-minute online application. 

A team member with Credibly then helps determine the best funding option for meeting short-term needs as well as long-term goals. Longer-term loans of up to $250,000 are available for business expansion, including equipment purchases and adding locations.

Working capital loans of up to $400,000 help businesses meet operational costs, such as payroll and inventory increases. These loans are ideal for seasoned companies that simply need to stabilize cash flow. Credibly also has merchant cash advance financing, which provides a lump sum for a short duration in exchange for a percentage of future credit card revenue. 

Read the full Credibly review for more details.

4. Rapid Finance - Best for Merchant Cash Advance

Merchant cash advances are lump sum payments available to borrowers using future credit/debit card sales as repayment. Fast cash with no collateral upfront doesn’t require good credit; however, high-interest rates and daily minimum payments can disrupt cash flow. Requiring only three months in business and a minimum personal credit score of 550, Rapid Finance is our choice for merchant cash advances with funds of up to $500,000 available in 24 hours. 

Read the full Rapid Finance review for more details.

5. BlueVine - Best for Invoice Factoring

Referred to as accounts receivable financing, restaurant owners get a capital advance in exchange for unpaid invoices. Invoice factoring involves selling your outstanding invoices to an invoice factoring company at a discount, while invoice financing requires paying off the advanced capital on unpaid invoices with interest. Lenders finance 85% of the total invoice and the final 15% upon full payment. These loans are easier to get, and freeing up your cash flow is always a win-win situation. 

We recommend BlueVine, which will fund up to $1 million to borrowers with a 530 credit score, who have been in business for at least three months, and show an annual revenue of $120,000.

Read more in the full BlueVine review.

6. National Funding - Best for Business Loans with Bad Credit

National Funding provides a variety of funding solutions for small businesses, including first time borrowers and bad credit situations. Lending specialists communicate with business applicants to tailor financing to specific circumstances. National Funding has provided over $3 billion to more than 50,000 businesses since 1999. 

Loans are available to businesses in multiple industries. Equipment financing is provided to entrepreneurs in business for at least six months and credit scores of more than 575. 

Funds are also provided for inventory, receivables, updating equipment, expanding facilities, paying vendors, and adding staff. National Funding offers direct loans as well as alternative lending programs, such as merchant cash advance financing. Repayment terms are structured to meet the operational needs of a specific borrower.

Read more in the full National Funding review.

What Can Restaurants Use Business Loans For? 

Restaurant startup costs can run between $95,000 and $2 million, depending on your detailed business plan. Half of all restaurant owners start businesses using personal savings, so having a  clear vision of your dream helps you plan and know how much funding you’ll need. Listed below are current estimates for the essentials:

  • Food costs: The average amount of food costs run 28%-35% of sales, with steakhouses exceeding this at 40%.
  • Operations: $10,000-$100,000 will cover equipment depending on the restaurant size.
  • Labor costs: The number of employees, their salaries, and benefits should range from 28%-35%
  • Rent and building fees: Owning your space averages $178 per square foot, while leasing averages $159 per square foot. 
  • Hidden costs: Approximately $180 a month will buy restaurant insurance that can offer some protection when unexpected events occur.
  • Technology costs: Monthly costs of $100-$400 for technology, such as, but not limited to, point-of-sale terminals, handheld and at-table sale systems, self order kiosks, digital displays, cash drawers, and printers, could provide a significant return on your investment. 
  • Marketing costs: Low-budget marketing costs average about $1,000 a month. This may include branding, the website, and social media, to name a few.

How to Choose the Best Restaurant Loan Option

You’ve created a detailed business plan and read through the popular restaurant business loans presented by our experts on this page; now is the time to consider which loan is right for your restaurant business. Prospective business owners should examine the loan cost, terms of repayment, processing speed, and available lenders. You may also want to consider these additional details:

  • Lender reputation
  • Fixed vs. variable rates
  • Need for collateral
  • Payment schedules
  • Cash availability time after approval

While the financial details are most important, good lending relationships are also crucial. Your lender should be supportive and be there throughout the term of the loan. Owning a restaurant could be the most significant and rewarding investment of your life.

Can I Get a Restaurant Business Loan With Bad Credit?

Although traditional bank loans are difficult for any restaurateur to obtain, financing avenues are available even for these individuals with bad credit. 

Financial institutions other than banks tend to give substantial weight to different qualifications than credit history. These alternative lenders determine loan eligibility based on multiple criteria, depending on the type of financing. Among the factors considered are the length of time in business, total revenue, credit card sales, collateral, and the ratio of debt to income.

Do Banks Lend to Restaurants?

Banks are generally reluctant to approve loans for restaurants except those that meet specific standards. A particularly common requirement of banks for restaurant loans is that the businesses have some operating history and provide detailed financial documentation of past results. 

Banks are more likely to consider lending to a restaurant if the loan is guaranteed by the US Small Business Administration. These SBA loans are greatly contingent on good credit standing of the borrower. 

How do You Finance a New Restaurant?

Whereas banks are most attuned to analysis of past performance, alternative lenders are eager to assess a restaurant’s upcoming expectations. Among alternative financing options for new restaurants are equipment lending and cash advances against merchant credit card sales.

Alternative financing lenders tend to have more lenient borrowing qualifications than traditional banks and provide greater repayment flexibility. However, SBA guaranteed loans from banks to new restaurants are possible. For example, an experienced restaurant manager with a sound business plan for a new restaurant is an SBA loan candidate.

See Our Additional Guides on Industry-Specific Loans

The Bottom Line

After analyzing seven types of restaurant business loans, we’ve armed you with the tools and knowledge to make an excellent investment choice. The SBA offers guidance, coaching, help in completing business plans and loan applications, and special financing programs for women, veterans, minorities, and the disabled. There are even restaurant loans available for those with bad credit. So whether you seek conventional or alternative funding, there is a lender ready to service your needs. So what are you waiting for? Let’s get going!