This article was reviewed by Doug Noll, a member of the Finder Editorial Review Board and award-winning lawyer, mediator and author with over 40 years of experience in the legal field.
Traditional business loans can be hard for restaurants to qualify for because lenders consider the restaurant industry to be risky. That’s why restaurant business loans are most often available through Small Business Administration (SBA) lenders, nonprofits or alternative business loan providers.
These financing options are easier to qualify for than a bank loan, making it possible to obtain a loan to buy a restaurant, upgrade a kitchen or cover working capital expenses. But many charge higher interest rates and fees than you’d find at a bank. And some require weekly or even daily repayments, which can be inflexible.
Our team reviewed over 220 business lenders before selecting the best lenders for restaurants, focusing on providers with flexible requirements or relatively low rates and fees. And we revise our list regularly. In July 2021, we replaced Fora Financial with Credibly as our pick for bad credit, due to Credibly's faster turnaround and transparency about costs.
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National Funding is a direct lender and connection service that specializes in equipment financing. You can qualify for an equipment loan of up to $150,000 with a credit score as low as 575 and just six months in business — slightly different from its other business loan offerings. And it has a specialized program for financing restaurant equipment, both new and used.
| Loan amount | $5,000 – $500,000 |
|---|---|
| APR | 4% to 8% |
| Min. Credit Score | 500 |
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BlueVine offers easy-to-use lines of credit that can get you funding within hours of requesting a draw. It doesn’t require you to use your inventory as collateral — which generally isn’t an option when your inventory is perishable. And it accepts fair credit. But it’s not for startups. Your restaurant must be around for at least three years, generate $10,000 in monthly revenue and be registered as a corporation or LLC to qualify. It’s also not available in a few states, including Nevada — so Vegas-based restaurants will need to look elsewhere for financing.
| Loan amount | $5,000 – $250,000 |
|---|---|
| APR | Starting at 4.8% |
| Min. Credit Score | 600 |
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SmartBiz is an online platform that can connect you with a bank offering Small Business Administration (SBA) loans and help you fill out the application. The packaging services make it a lot easier for restauranteurs to navigate this paperwork-heavy loan program. This can be particularly useful for restaurants that want to take advantage of the reduced fees and higher guarantee that the SBA is offering during the coronavirus outbreak.
| Loan amount | $30,000 – $5,000,000 |
|---|---|
| APR | 4.75% to 7% |
| Min. Credit Score | 640 |
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Accion Opportunity Fund is a nonprofit community development financial institution (CDFI) lender. It specializes in funding new businesses, and provides coaching and mentoring to help your business survive those volatile first few years. In 2021, it launched the Main Street Strong Accelerator program in partnership with DoorDash to help revitalize restaurants affected by COVID-19 — which includes training and a $20,000 grant. Its $50,000 revenue requirement is lower than you might find with most lenders. And it has no stated credit score minimum.
| Loan amount | $5,000 – $100,000 |
|---|---|
| APR | 5.99% to 25.99% |
ARF Financial is an alternative lender that offers specialized financing programs for specific industries — including restaurant loans. It offers unsecured lines of credit, working capital loans, flex pay loans and bridge loans to the restaurant industry. And its 90-day COVID-19 Guarantee means you can request 90 days of interest-only payment if government mandates make it impossible for you to operate at full capacity. But while other industries might qualify for more, restaurant loans stop at $450,000.
| Loan amount | $5,000 – $450,000 |
|---|---|
| APR | Not stated |
| Min. Credit Score | 551 |
This peer-to-peer platform can connect your restaurant with investor-funded loans. It can be a great option if your credit score is less than perfect, with relatively low rates starting at 8.75% APR. It was also one of the first online lenders to offer PPP loans. But your restaurant must be at least two years old to qualify.
| Loan amount | $5,000 – $500,000 |
|---|---|
| APR | 4.99% to 38.43% |
| Min. Credit Score | 660 |
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Credibly is an online lender that offers short-term loans and merchant cash advances for all credit types. Its merchant cash advances and short-term loans come with relatively low fees, compared to other products available to bad credit borrowers, starting at 15 cents on the dollar. And in addition to accepting credit scores as low as 500, you only need six months in business. But its monthly revenue requirement of $15,000 is a little higher than other bad-credit lenders. And like other short-term loans and merchant cash advances, Credibly charges daily or weekly repayments.
| Loan amount | $5,000 – $400,000 |
|---|---|
| APR | Not applicable |
| Min. Credit Score | 500 |
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ApplePie Capital is one of the only lenders out there that specializes in franchise financing. Its term loans start at a high $100,0000 — but its rates are low, running from 6.5% to 9% APR. And it accepts startups. But you must have a personal net worth that is at least equal to the amount you're borrowing. And established businesses must be profitable for the past six months — under normal circumstances.
| Loan amount | $100,000 – $10,000,000 |
|---|---|
| APR | 6.5% to 9% |
| Min. Credit Score | 660 |
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With over 75 partner lenders, Lendio is one of the largest online business marketplaces out there. It can be a good choice when you need funding fast — or just don’t have time to spend shopping around. Its partners offer everything from working capital to SBA loans. And bad credit options are available. But customers give the site mixed reviews. Some say it was a great choice, while others complain it didn’t give enough information about offers or that Lendio customer service was slow to respond to emails.
| Loan amount | $500 – $5,000,000 |
|---|---|
| APR | Starting at 6% |
| Min. Credit Score | 560 |
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Several federal COVID-19 relief programs were available to restaurants, but many have run out of funds. But you should still consider these low-cost and free options before you apply for restaurant financing.
Here’s the status of the main SBA programs as of July 20, 2021.
The restaurant industry is also eligible for up to eight months of SBA loan debt reliefto all borrowers — including six months for new SBA loans disbursed between February 1, 2021 and September 30, 2021. The SBA will cover interest, fees and principal payments on the most popular SBA loan programs during the covered period.
These restaurant financing options might benefit businesses in the food service industry the most.
SBA loans offer restaurants government-backed funding as high as $5 million for almost any use. With rates and fees capped by the government, SBA loans might be the least expensive restaurant financing option for many businesses. While there are programs for startups and bad credit, it’s best for restaurants that have been around for at least three years and owners who have credit scores above 620 — which most SBA lenders require.
A business line of credit offers your restaurant access to cash as needed to buy inventory, hire new staff, handle seasonal expenses or use as general working capital. These can be good to have on hand for emergencies, since it typically takes less time for you to draw from a credit line than get approved for a loan.
Business term loans can help your restaurant cover a one-time expense — like renovating your dining room to meet social distancing policies. They’re the most common type of financing out there and are available for startups and established businesses, as well as good and bad credit.
Restaurant equipment financing is a term loan to buy equipment — including a new oven, mixer or salamander. Usually you can fund between 80% to 100% of the cost and use your equipment as collateral. The loan term is based on how long the lender expects your equipment to be functional. And this type of financing is one of the easiest to qualify for.
A restaurant acquisition loan is a term loan that you can use to buy an existing restaurant. The SBA 7(a) program can be a good option for restaurants that want to expand by buying out a competitor, since they come with low rates and offer high loan amounts up to $5 million.
Since food and alcohol are perishable goods, traditional inventory financing is off the table for most restaurants. But there are other inventory financing options. Consider an unsecured term loan or line of credit to buy inventory — or use other business assets to back the loan.
Working capital loans are usually short-term business loans, typically used to cover unexpected expenses. These can often fund your business within one day and are available to business owners with poor credit. But they can come with daily or weekly repayments and can cost more than your typical term loan or line of credit.
Merchant cash advances are an advance on your restaurant’s future credit and debit card sales. They can help cover cashflow gaps during the high season. They’re one of the most expensive types of restaurant financing out there and should be saved as a last resort. Especially during an off season or when sales are difficult to predict ahead of time.
A restaurant business loan can be useful when you need funds to invest in a new project or to cover working capital expenses. Use a restaurant loan to:
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While steps may vary depending on the loan type, amount or lender, restaurants can generally follow these steps.
Need help? Set up an appointment with an SBA resource partner in your area, like a small business development center. They can outline all of your financing options — including COVID-19 funding and grants — and decide on the right path forward for your business.
Generally, you need to have good to excellent credit to get a business loan — that’s a credit score of at least 670. Business lenders are usually more forgiving of personal credit scores than personal loan providers.
But when it comes to the restaurant industry, your credit score could matter more. Especially if you’re within the first five years. It can help offset the risk of lending to a relatively high-risk business.
If you have bad personal credit — or no credit at all — it’s still possible to get a restaurant loan. Microlenders and merchant cash advance companies are often your best bet.
But these often come with high rates or take a while to qualify. You might want to consider other options instead. Look into restaurant grants and consider setting up a crowdfunding campaign.
Business loans can dig your restaurant into an even worse financial situation if you’re struggling during the coronavirus outbreak. Instead, try to get help you don’t have to make repayments on. Some of these options are available to restaurant workers, while others are for small businesses.
Many local governments also offer grants to small businesses struggling during the COVID-19 outbreak. Talk to your local SBDC to learn about more options.
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