Getting a loan for financing for restaurant equipment is a kind of small business funding allowing the restaurant owners to access the capital for purchasing the equipment while acting as collateral for restaurant equipment loans.
Consequently, if you require a new stove, a new truck, or any equipment for your restaurant, getting a loan for equipment financing allows you better access to secured financing without needing external collateral. As a result of its self-secured nature, restaurant equipment financing is the ideal option for restaurant owners and start-ups with challenged personal credit that looks for such things in a business loan.
Above all, setting up a restaurant is not a cheap option globally, and most people cannot shell out the capital involved. Luckily, for the ones who need help in this area, the restaurant owners have several financing options, mainly for their equipment. A couple of them are better than the rest, but it is the topic of our post today.
You can see that using the right equipment finance options is very important. It is the massive factor deciding the success of your restaurant even if your restaurant has already been operating for a while. The restaurants have to change the equipment often to ensure that food preparation is done in a proper way for one thing. They are even regularly finding themselves needing equipment to stay over the competitive edge.
Sadly, outfitting your restaurant with new kitchen equipment and furniture is expensive. While trying to acquire new equipment with the help of your working capital alone can lead to financial issues, and it is why you must know the right use of the equipment finance options at the lowest interest rates possible.
Overview of Restaurant Equipment Financing
Equipment financing is a business loan or funding to help small businesses obtain the required equipment. It is anything that starts, from the massive freezers to the smart ovens or refrigerators for the restaurant businesses. Apart from the equipment purchases, the loan proceeds are even used for equipment repair options.
Once the financing is approved, you can avail about 100% of the total value of the equipment, as it depends on the business’s credentials. You can then repay that amount along with interest over the specific period you and your lender agree on. Mainly, the repayment period for restaurant equipment loans is based on the equipment’s expected lifespan.
Equipment financing can ease your burden for larger purchases by allowing restaurateurs to make smaller payments towards their equipment over the entire financial term. It is more practical than shelling out a larger sum of money out of your pocket that can disrupt the company’s cash flow.
Reasons to Consider Restaurant Equipment Financing
Instead of picking other forms of business financing or using your funds, why should you use equipment financing for your restaurant? Check out the reasons below.
- You don’t have the cash on hand for an upgrade
The commonest reason for buying a new piece of equipment is that your old one breaks down. However, if you were not expecting to shell out thousands of dollars this week for a new and important piece of equipment like the grill or fridge, you might not have the cash required to make this purchase.
Equipment financing is the ideal solution if you are in need of a new piece of equipment and are not liquid enough to buy it for yourself.
- You’re trying to have a consistent cash flowÂ
The mismanagement of the cash flow is one of the main reasons small businesses fail. Even the most successful businesses can get entrapped in this if they invest too much money before recouping their investments.
To avoid any failure due to cash flow issues, make sure that your regular expenses are as predictable and consistent as possible. One of the ideal ways to get it done is by taking out equipment financing for purchasing your next equipment and paying it off over several months in regular installments instead of paying all at once. Since if you pick the latter option and other unexpected expenses hit, you can land into a lot of trouble.
- You don’t have any additional collateral
The restaurant equipment financing is a loan that is “self-secured.” It means that the equipment you are financing will act as collateral. However, if you default on your loan payments, the lender will seize the equipment and sell them for cash to repay the loan.
Therefore, if you are in search of financing but are unwilling to place any additional collateral and risk losing other assets, then equipment financing is the best move.
- You want to own your equipment outright
In numerous ways, restaurant equipment financing and leasing are identical. You will easily avoid the larger one-time investment with either of the options and, instead, start spreading your spending over several months. In reality, leasing equipment is the ideal option if you are searching for a temporary solution. However, if you wish to become the owner of this equipment, you need to take ownership with the help of restaurant equipment loans.
- You don’t need an outstanding credit score to qualify
You will need great personal and business credit scores for several business financing options to qualify for the most affordable products. For instance, qualified SBA loan applicants generally have a personal credit score of a minimum of 680 and you have to show you have income over 100,000 a year. SBA is very slow too.Â
The restaurant equipment financing loans include an easy qualification process of just a simple one page credit application and are self-secured. Surely, the better your financials are, the better deals you will attain regarding your repayment terms and interest rates; however, you need not worry if your credit history is not stellar.
- You won’t pay extra for what you don’t need
As already mentioned, an equipment financing loan is known for the exact amount you must purchase for your equipment. On the other hand, a business loan costs more money than you need, and short-term loans often have higher interest rates than most financing products.
- You want to focus on other investments
Operating a restaurant needs a proper balance of several things at once. You have to ensure that the equipment operates optimally, however also that the front of the house is operating smoothly, while you turn the tables over, thereby bringing in new customers and encouraging the old ones for stick around among hundreds of other responsibilities. These are the tasks that need your expenditures on operations, hiring, and marketing while you wish to focus your liquid capital on these areas.
As a result, if a sudden need for equipment arises, you can get their finance instead of adding the list of things you wish to tie up your liquidity.
Tips for Restaurant Equipment Financing
If you consider your options for purchasing restaurant equipment loans, remember the following tips, as they will help you make important decisions regarding your business’s future.
- Always Think Ahead
There is an old adage known as “a stitch in time saves nine” that has stuck around this long for some reason. It is always easier to resolve issues if you are thinking ahead and preparing for them before they appear.
Start planning to replace the important pieces of restaurant equipment in advance of when they become unreliable and old. You are much less likely to get stuck in a situation where you are forced to pay more than what is fair to keep your doors open if you have a replacement plan prepared on the move a year or more before the equipment reaches the end of its expected lifespan.
Always check out the signs of malfunctions in your restaurant kitchen equipment daily and perform preventative maintenance that helps extend the equipment’s life. Maintenance and repair costs will eventually rise with time, and you need to prepare for the moment when you can save money on future maintenance and energy bills by replacing the entire equipment.
Keep in mind that if you have a plan, a sudden catastrophic failure of the refrigerator or oven is of no sweat. You are most likely being prepared to make smart purchases with the right financing at a fair price.
- Have well-organized Financial Information
if you’re looking for an equipment loan over $250,000. The initial step to prepare for purchasing restaurant equipment is putting your financial documents in place. Start by assembling the balance sheets and the income statements while ensuring that all documents are up-to-date and accurate.
If you don’t have healthy finances. A business tactic could be to break the deal up into two equipment loans and get approved application only under two equipment loans
You should also have your credit score handy since lenders take your personal and business credit score into account when assessing the risk of extending the company’s credit. Making those timely payments on what you owe can enhance your credit score before applying for restaurant equipment financing.
If your finances are well-organized, you can determine the debt service coverage ratios while developing an airtight case for why you require the money you wish to borrow and why you can get relied on it while paying back.
- Check out for Buying Used Equipment
Restaurant equipment is a massive capital expense, and it is worth investigating the strategies for saving money without sacrificing its qualities. Finding used restaurant equipment for sale is one of the ideal ways to make the most reasonable and smart-priced restaurant equipment purchases.
There are a couple of things to bear in mind while shopping for used restaurant equipment:
- Inspect every element of used equipment you might buy carefully. The cosmetic damages can get easily ignored or fixed; however, you must check to ensure that the equipment is in great working order.
- Make sure to ask to check on the maintenance records of the appliance. You can review the maintenance and repair records by finding out the important information regarding the equipment and how it is being treated over the lifespan.
- Get the warranty information in writing which are available. Used equipment often lacks lengthier warranties; however, you may still get a warranty of sixty to ninety days.
- Finding the right Business Finance Partner
You can avail of several equipment finance options available to help your restaurant. But, you need to think more about it instead of choosing the one to use. It is since the success of your restaurant equipment loans depends on the choice of the right equipment financing partner.
It might be unpleasant to hear that a few lenders are taking the right advantage of their clients. They are the ones who can gain benefits from the equipment finance options they are offering.
You require a partner who is a trusted online lender caring about the success of their clients like their own. There are several equipment financing companies these days you can choose from. But only a handful of them are reliable, like Trust Capital.
Trust Capital is one of the highly reliable equipment financing companies. They are well-known for helping their clients grow and succeed by offering the ideal equipment financing options. Lease companies cover several industries and serve clients in the restaurant industry. They help your restaurant business through the companies offering financing with only a few of the following requirements:
- Business licenses or even active business entities with the secretary of the state
- Personal guarantee offers across several owners
- A minimum of 600 credit score
- No bankruptcies of any kind in the past seven years
- No tax liens are unresolved.
You can easily gain easier access to numerous benefits since you are qualifying, such as:
- 100% purchase for your financing program
- Loan amount up to $250,000 with a simple one-page application
- Loan up to $5,000,000 with a financial disclosure
- Deferred options for payment and terms for seven years
- Next-day funding with pre-funding available for the approved equipment vendors
- No need for any down payments
- Eligibility for every new and used restaurant equipment purchase
- Same-day approvals in just two hours
- Eligibility for every new and used restaurant equipment purchase
- No age limitations
Final ThoughtsÂ
In our blog post today, we have spoken regarding restaurant equipment loans and other financing options for restaurateurs. The restaurant owners mainly have issues regarding their business capital. It is because they have to replace their equipment almost daily, and they require a lot of money to replace the equipment, not because the restaurant equipment is expensive. But, they can resolve this issue easily since there are several equipment financing options you can pick from.
The usual equipment finance options will include SBA loans, business cash advances, restaurant equipment loans, short-term restaurant loans, and business lines of credit. These are the equipment leased options that help restaurant owners. But, succeeding in it will still depend on the selected financial partner.
It is why it is always best to partner with reliable equipment finance companies like Trust Capital. They are reckoned as one of the highly respected equipment financing solutions with the help of these companies.