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Restaurant Business Loans: Top 5 Financing Options

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Whether you’re opening a restaurant or have been operating one for years, restaurant business loans can provide working capital for daily expenses or major purchases such as equipment. But getting a restaurant loan can be a challenge since traditional lenders often view restaurants as high risk because of industry volatility. Here are our top picks for restaurant business loans.

Top 5 restaurant business loans

We chose to highlight online lenders that cater to restaurants because they typically have more lenient eligibility requirements and faster funding, although interest rates can be high depending on your credit history. Online lenders typically work with a variety of businesses and can help restaurant owners pay for equipment, inventory, payroll and other expenses.

The lenders on our list also had to show:

  • Transparency: Information on loan amounts and time to funding is described on lender websites. While transparency is key for us, it’s not common for online lenders that offer restaurant business loans to list APRs online, so you’ll often need to reach out to the lender for specifics.
  • Reputation: Lender credibility was a factor in our determination.
  • Accessibility: We heavily weighted lenders that have relatively low revenue requirements and time-in-business requirements, with these lenders requiring one year or less.

Fora Financial

Fora Financial offers restaurant business loans between $5,000 and $500,000 that can be used to purchase equipment, hire staff, buy inventory, market the business or open a new location. The company, which also offers food truck financing, advertises 24-hour approval and funding in as little as 72 hours.

Repayment terms are up to 15 months. Fora Financial doesn’t require collateral and offers early payoff discounts. To be eligible, you need at least six months in business and $12,000 in gross monthly sales, and you must have no open bankruptcies.

Fora Financial uses factor rates — which are written as decimal figures rather than percentages — to express interest. You would multiply the factor rate by your loan amount to determine the total cost of your financing. However, the company doesn’t publicly disclose its factor rates.

Kabbage

Kabbage offers a revolving line of credit for qualified restaurateurs from $1,000 to $250,000. You can draw from your credit line at any point and repay the balance on a 6-, 12- or 18-month schedule.

Each month, you would need to pay back either one-sixth, one-twelfth or one-eighteenth of your debt, plus a fee between 1.25% and 10.00%. To qualify for the 12-month term, you must borrow at least $10,000. And the 18-month term requires a $20,000 minimum withdrawal.

Restaurant owners need at least one year in business and $50,000 in annual revenue or $4,200 in monthly revenue in the past three months. You could receive funds within three business days of being approved.

National Funding

National Funding offers small business loans to help restaurant owners grow their establishments. Eligible applicants could borrow between $5,000 and $500,000 to cover expenses such as inventory, kitchen equipment or dining room furniture. The company could issue funding in as little as 24 hours after approval.

Loan repayment terms span 4 to 24 months, but National Funding doesn’t disclose APRs. To qualify for a business loan, you need $100,000 in annual sales and at least one year in business.

National Funding also offers equipment financing, which requires just six months in business and has terms between 24 and 60 months. This could be a better option for someone with poor credit, as the minimum credit score requirement for equipment financing through National Funding is 575.

Balboa Capital

Balboa Capital provides restaurant business loans from $5,000 to $250,000. You could receive same-day funding with repayment terms from 3 to 18 months. The company doesn’t disclose its APRs.

Collateral isn’t required, and applicants with all types of credit can be considered. Balboa Capital requires your restaurant to have been open for at least one year with a minimum of $300,000 in annual sales.

Balboa Capital also offers equipment financing for restaurants. Equipment financing requires one year in business and $100,000 in annual revenue. You could receive same-day equipment loans up to $250,000 with lease terms starting at 24 months.

OnDeck

OnDeck offers short-term loans for restaurant owners between $5,000 and $500,000 with terms from 3 months to 36 months.

APRs start at 11.89% for well-qualified borrowers, though the weighted average is 49.06%. OnDeck requires one year in business and at least $100,000 in annual revenue. If approved, you could receive funds as soon as the same day.

OnDeck also offers lines of credit between $6,000 and $100,000 to restaurant owners.

6 types of restaurant financing

To cover the particular costs of running a restaurant, lenders offer several financing options. Here are some of the common types of restaurant funding from which you could choose.

Term loans

Long-term or short-term business loans can help restaurant owners cover large or small expenses. A long-term loan offers a fixed interest rate — typically between 6% and 8% — and monthly payments that often span three to 10 years.

Long-term loans typically range from $25,000 to $200,000, but they often require a lot of paperwork, such as a business plan and tax returns, that slows down the funding process. These loans are often backed by existing collateral.

Short-term loans have faster funding times and less required paperwork, such as no tax returns or financial statements. Repayment terms typically range from three to 18 months. Short-term loans typically come in amounts between $5,000 and $500,000 (though you can find them for lower amounts). They can be easier to obtain than long-term loans — especially if you have bad credit — but they also tend to have higher APRs.

Lines of credit

Restaurant owners can have continuous access to up to $100,000 in funding through revolving business lines of credit. You could draw from your credit line on an as-needed basis and only pay interest on what you borrow. Once you repay the borrowed funds, the full amount becomes available again.

Some lenders may charge a maintenance fee for keeping the line open, regardless of whether you use it. PNC Bank, for example, charges an annual fee of 0.25% based on your committed line amount. You may also need to secure the line with collateral. Lines of credit are possible for applicants with low credit, but you would likely face higher APRs.

Equipment financing

Equipment financing allows restaurateurs to take out a loan to purchase equipment or machinery for the business. The assets act as collateral on the loan, which can keep interest rates low, potentially between 4% and 12.75%.

There may be other costs, though, such as application or appraisal fees. You may need to make a down payment of 10% to 20% when applying for an equipment loan.

If you don’t want to own a piece of equipment, you may want to consider a lease instead of a loan. An equipment lease could provide lower monthly payments, and you could return the equipment or purchase it at a discount when the lease term ends.

Inventory financing

Restaurant owners can find short-term loans and lines of credit that are designated for purchasing inventory. That inventory would act as collateral, though the lender may only finance up to 80% of the inventory value.

Inventory financing could be beneficial if you want to buy items at a large discount but can’t make the full purchase upfront. You typically need good credit and a proven sales history to get a better APR. Rates may be as high as 35%. You may find higher loan minimums of at least $500,000.

SBA 7(a) loans

The U.S. Small Business Administration offers general business funding through its 7(a) loan program. Business owners can apply for loans up to $5 million from SBA-approved lenders. The SBA guarantees 85% of loans up to $150,000 and 75% of loans greater than $150,000.

Repayment terms could be up to 10 years for general working capital loans or up to 25 years for loans used for real estate expenses.

Variable rates would be based on your loan amount and repayment term:

  • Loans less than 7 years:
    • $25,000 or less: Prime rate plus 4.25%
    • $25,001 to $50,000: Prime rate plus 3.25%
    • Over $50,000: Prime rate plus 2.25%
  • Loans 7 years or longer:
    • $25,000 or less: Prime rate plus 4.75%
    • $25,001 to $50,000: Prime rate plus 3.75%
    • Over $50,000: Prime rate plus 2.75%

Fixed rates would be based on the Prime rate plus 5% to 8%. As of March 17, 2020, the Prime rate is 3.25%.

Business credit cards

Though not a business loan, business credit cards can offer restaurateurs fast access to funds. Business credit cards have average APRs between 13.12% and 19.87%. Business owners with strong credit would likely receive lower rates.

Business credit cards may charge annual fees, although you may be able to earn rewards as you use your card. Sign-up bonuses are possible, too. Keep in mind that you would need to pay off your balance in full each month to avoid costly interest.

How to qualify for a restaurant loan

When applying for restaurant loans to give your business a financial boost, you would need to meet each lender’s individual eligibility requirements. However, you could expect lenders to review some common documentation and information:

  • Personal financial statements: These would illustrate your history of borrowing and repaying money, indicating how much of a risk you’d be to a lender.
  • Profit and loss statements: A lender could review your business costs and expenses in a specified period.
  • Balance sheets: These would outline your business’s overall assets and liabilities.
  • Projected financial statements: A lender would need to make sure you expect to generate enough income to repay debt.
  • Business certificates and licenses: You typically need to be in compliance to be eligible for a business loan.
  • Business tax returns: Your tax returns would provide an additional window into your business’s financial history and current standing.
  • Resume: The more experience you have as a business owner, the more willing a lender may be to approve you for a loan.

A restaurant startup costs breakdown includes inventory, payroll and equipment, and those expenses will keep piling up as long as you stay in business. Labor is another common obstacle since restaurant owners typically have trouble finding dedicated workers while facing high turnover rates.

Be sure to shop around to get the best APR and repayment terms for your restaurant business loan. Once you find a lender with which you feel comfortable, you can be on your way to growing your restaurant.

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Small Business

Guide to Small Business Funding for Women

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Source: iStock

As the number of women-owned businesses grows across the U.S., women entrepreneurs are increasingly in need of funding for their businesses. While there aren’t specific small business loans for women, there are many lenders and organizations that offer small business help for women entrepreneurs, including SBA loans, term loans and business lines of credit, among other resources.

Small business loans for women: 3 options to consider

SBA loans

Best for: Businesses looking for long-term financing and businesses struggling to get loan approval.

The Small Business Administration (SBA) offers small business help for women that includes business training, counseling and assistance in accessing financing. The SBA can also help you if other lenders have deemed your business too risky. Since SBA loans are guaranteed by the Small Business Administration, lenders may be more likely to approve your application and even offer lower interest rates and longer repayment terms.

The SBA offers multiple loan types, with amounts ranging from $500 to $5.5 million. Requirements to qualify for each loan type are unique, and eligibility varies depending on the lender and the loan program. However, SBA loans are available for most business purposes.

Term loans

Best for: Businesses that can clearly project how much cash they’ll need or for startup capital when a business doesn’t want to forfeit any ownership to an investor.

A term loan is a typical loan arrangement that allows you to borrow a lump sum of money and pay it back in installments, with interest. Interest rates and other fees can vary greatly from one lender to the next, but you’ll likely need to present your business plan, expense sheet and financial projections in order to apply for a term loan at any bank or credit union.

Some lenders are committed to offering small business term loans to women. Learn more about these lenders and their loan product options below.

Business lines of credit

Best for: Businesses that need ongoing access to capital or that have an open-ended project.

A business line of credit is an account that allows you to draw money up to a set limit. Similar to a credit card, each time you pay down your balance you can draw up to the limit again, and fees and interest payments are based on your account balance. Unlike business credit cards, which generally have higher interest rates, business lines of credit tend to have lower interest rates and allow you to make cash withdrawals without any limitations and write checks from your account.

You can take out a business line of credit through a bank, credit union or online lender. Qualification is based on your personal credit.

5 best small business loans for women

To select the top five small business loans for women, we looked at a number of lenders and chose a mix of online and traditional bank lenders. While traditional lenders may be more difficult to qualify for, the two we have listed are among the most active SBA lenders, making them a potentially compelling option for women business owners.

Additionally, the lenders we selected had to meet the following criteria:

  • Transparent websites. These lenders clearly list necessary information on their websites so small business owners can easily find what they need.
  • Wide range of amounts and term lengths. Many of these lenders offer a range of loan products as well as amounts and term lengths, which means they can cater to a range of small business owners’ needs.
  • Lender credibility. These lenders have all been in business for at least a decade and have established themselves in the space through things like positive customer reviews and high approval counts.

1. Kabbage

Type of financing

Rate

Amount

Min. credit score

Best for...

Business line of credit

Monthly fee is 1.25% to 10.00% of principal

Up to $250,000

None

Ongoing access to capital

Although Kabbage often refers to its financing product as a loan, it is technically a line of credit, one the company says is commonly used by women business owners for inventory purchases, office expansion, marketing campaigns, equipment purchase and hiring employees. Kabbage’s monthly fees for business lines of credit start at 1.25% and are only charged based on the amount you draw.

Kabbage offers a simple online application process, and you can manage your line of credit account from a mobile device.

2. Smartbiz

Type of financing

Rate

Amount

Min. credit score

Best for...

SBA loans

5.04% to 10.29% APR

$30,000 to $5,000,000

650 for a $30,00 to $350,000 loan

675 for a $500,000 to $5 million loan

Faster processing on SBA loans

According to Smartbiz, 30% of its 7(a) SBA loans are granted to women-owned businesses. The national average is only 14% for SBA lenders.

Smartbiz helps expedite the application process by submitting your application to an online marketplace of multiple SBA lenders at once. Prequalification is available within five minutes, and funding is available in as few as seven days upon approval.

3. Wells Fargo Bank

Type of financing

Rate

Amount

Min. credit score

Best for...

Equipment Express Loan

5.50% to 9.50% APR for vehicle loans

6.00% to 12.25% for equipment loans

$10,000 to $100,000

Not disclosed

Purchasing vehicles or equipment

In 2013, Wells Fargo Bank committed to lending $55 billion to women-owned businesses by the year 2020. The bank offers several small business loan products, including its Equipment Express Loan. The interest rate on the bank’s secured vehicle loans starts as low as 5.50%.

However, you’ll need to be an existing customer of the bank to apply. Wells Fargo small business loans are only available to customers who have had a checking or savings account with the bank for a minimum of one year.

4. Celtic Bank

Type of financing

Rate

Amount

Min. credit score

Best for...

Express Loan

Variable

$20,000-$150,000

Not disclosed

Wide variety of loans

Celtic Bank is perhaps best known as an SBA lender, but the Utah-based lender offers a variety of loans well-suited to all types of businesses, small to large. The Celtic Express loan offers loans between $20,000 and $150,000 for up to 120 months.

To be eligible, the business must be a for-profit, owner-operated enterprise. Loan proceeds may not be used for construction or tenant improvements. Newer businesses are considered, but you must have a location identified and be able to start operations at funding.

5. OnDeck

Type of loan

Rate

Amount

Min. credit score

Best for...

Short-term loan

11.89% APR and up

$5,000 to $500,000

600

Business owners with lower personal credit scores

OnDeck is an online lender that has funded over $6 billion in small business loans for women. The lender offers business loans for women with bad credit, with a minimum credit score requirement of just 600. However, its APRs start relatively high, at 11.89% and up.

In order to qualify for a loan with OnDeck, your business must be at least a year old and earn at least $100,000 a year in revenue. Those who qualify may receive funding within as little time as 24 hours.

Alternative financing options for women-owned businesses

Grants for female business owners

Small business grants can provide you with funds to start or expand your business — and, unlike loans, they don’t have to be repaid. Grantors who fund women-owned businesses include the federal government, local governments and private funds. The amount of money available and the requirements to qualify will vary depending on the source of the funds.

Here are a variety of women-owned business grants to consider:

  • Amber Foundation Grant. Grants of $4,000 are awarded on a monthly basis to women-owned businesses of all kinds. Monthly grant winners are eligible for an additional $25,000 grant at the end of the year.
  • Cartier Women’s Initiative. This grant is for women-owned, women-run businesses focused on sustainable social and/or environmental impact. Applicants in a select group receive one-on-one business training and cash awards of $30,000 or $100,000.
  • Girlboss Foundation Grant. Grants are available up to $15,000 for women entrepreneurs working in the areas of design, fashion, music or the arts.
  • NASE Growth Grants. The National Association for the Self-Employed (NASE) offers $4,000 grants for female business owners. You must become a NASE member to apply.
  • SBA. Though there technically are not Small Business Administration grants for women (or anyone else), the SBA does facilitate federal grants for all types of business owners through the Small Business Innovation Research and the Small Business Technology Transfer programs.

Equity financing opportunities

Venture capital firms and individual investors, sometimes known as “angel investors,” differ from lenders. Instead of offering debt, these venture capitalists offer to make a long-term investment in your company in exchange for equity. They may also require some form of ownership and/or a seat on your company’s board of directors.

Here are some investing groups and firms that cater to women-owned businesses:

Additional resources for women-owned businesses

  • SBA Women’s Business Centers: The SBA offers over 100 office locations throughout the U.S. where women can receive free training, workshops, mentorship and more. Use the SBA directory to find your nearest location.
  • Women-Owned Small Businesses (WOSB) Federal Contracting Program: This federal program sets aside contracting opportunities for women applicants in industries where women’s businesses are underrepresented or disadvantaged. Those industries include construction, manufacturing, publishing and more.
  • National Women’s Business Council (NWBC): This federal advisory committee advises the president, the U.S. Congress and the SBA on matters affecting women entrepreneurs and women-owned businesses. The NWBC hosts round-table events around the country to gather input and promote women’s STEM-focused and rural-owned businesses.
  • DreamBuilder: This free online program offers interactive courses for women on how to start, build and finance your business. Courses are available in Spanish and English.
  • National Association of Women Business Owners (NAWBO): NAWBO is an advocacy organization that promotes networking events for women entrepreneurs, provides online resources and has local chapters throughout the U.S.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.