Editor's choice: First Down Funding business loans
- Works with bad credit and most industries
- Only 100 days in business required
- No credit check
Getting a restaurant business loan can be difficult under normal circumstances — especially if you’re within those first five years. With such tight profit margins and a high rate of failure, lenders tend to see this industry as risky.
Unfortunately, COVID-19 has made it even more difficult for some restaurants to qualify for financing, especially in areas with government shutdowns. Government assistance like Paycheck Protection Program (PPP) loans were created with this industry in mind. But grants are often a better choice for struggling businesses in the food service industry.
Our team of business loan experts reviewed over 220 business lenders before selecting these providers. We focused on lenders that offer the types of financing restaurants can benefit from the most — like equipment financing and inventory lines of credit. And and we put an emphasis on lenders with flexible requirements.
Lender | PPP loans available? | Best for | Loan amounts | APR | |
---|---|---|---|---|---|
Fundbox | Yes | Inventory financing | $1,000 to $150,000 | Starting at 4.99% | |
National Funding | No | Equipment financing | $5,000 to $500,000 | 4% to 8% | |
SmartBiz | Yes | SBA loans | $30,000 to $5,000,000 | 4.75% to 7.00% | |
Funding Circle | Yes | Fair credit — 580 and up | Starting at $25,000 | Starting at 4.99% | |
Rapid Finance | No | Bad credit — 579 and below | Starting at $5,000 | Factor rate of 1.09 to 1.3 | |
Kabbage | Yes | PPP loans | Up to $10 million | 1% | |
Kiva | No | Opening a restaurant | $25 to $15,000 | 0% | |
ApplePie Capital | Yes | Franchise financing | Starting at $100,000 | 6.5% to 9% |
Kabbage has suspended its regular lending program to solely focus on getting PPP loans into the hands of small business owners through its platform, K Servicing. This online lender specializes in financing businesses with lower payroll expenses — the average PPP loan was just below $13,000 during the first round of funding. Restaurants that already received a PPP loan can apply for a Second Draw loan through Kabbage’s K Servicing as long as they saw a 25% drop in revenue or more since March 2020.
Min. Loan Amount | $500 |
---|---|
Max. Loan Amount | $250,000 |
APR | Varies |
Interest Rate Type | Variable |
Min. Credit Score | 600 |
Minimum Loan Term | 6 months |
Maximum Loan Term | 12 months |
Fundbox’s simple lines of credit make it easy to keep your walk-in stocked — and avoid 86-ing your best sellers on a busy night. It connects to your restaurant’s accounting software instead of asking for paperwork, and there are no fees to make a withdrawal. It also works with fair-credit owners and restaurants that have only been around for six months. But the weekly repayments can be unforgiving if you have a few slow days.
Min. Loan Amount | $1,000 |
---|---|
Max. Loan Amount | $150,000 |
APR | 4.99% |
Interest Rate Type | Fixed |
Min. Credit Score | 600 |
Turnaround Time | As soon as 1 business day |
National Funding is a direct lender and connection service that specializes in equipment financing. You can qualify for an equipment loan with a credit score as low as 620 and just six months in business. And it has a specialized program for financing restaurant equipment — both new and used.
Min. Loan Amount | $5,000 |
---|---|
Max. Loan Amount | $500,000 |
Fee | 1% to 3% |
Interest Rate Type | Fixed |
Maximum Loan Term | 12 months |
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 4.99% APR. It was also one of the first online lenders to offer PPP loans, and is currently accepting First and Second Draw applications. But your restaurant must be at least two years old to qualify.
Min. Loan Amount | $25,000 |
---|---|
Max. Loan Amount | $500,000 |
APR | Starting at 4.99% |
Fee | 3.49% to 6.99% |
Interest Rate Type | Fixed |
Min. Credit Score | 620 |
Minimum Loan Term | 6 months |
Maximum Loan Term | 60 months |
SmartBiz is an online platform that can connect you with a bank offering Small Business Administration (SBA) loans and you fill out the application. The packaging services make it a lot easier for business restauranteurs to navigate this paper-work 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.
Min. Loan Amount | $30,000 |
---|---|
Max. Loan Amount | $5,000,000 |
APR | 4.75% to 7.00% |
Interest Rate Type | Variable |
Min. Credit Score | 650 |
Minimum Loan Term | 120 months |
Maximum Loan Term | 300 months |
Rapid Finance is a merchant cash provider, which gives you an advance on your future sales based on credit and debit card receipts. It’s a high-cost type of financing that’s best saved for emergencies. But Rapid Finance offers some of the lowest rates available when compared to similar products. It can also fund your advance as soon as the same business day.
Min. Loan Amount | $5,000 |
---|---|
Max. Loan Amount | $1,000,000 |
APR | Fee based |
Fee | 9% to 30% |
Interest Rate Type | Fixed |
Min. Credit Score | 500 |
Minimum Loan Term | 3 months |
Maximum Loan Term | 60 months |
Turnaround Time | As soon as the same day |
ApplePie Capital is one of the only lenders out there that specializes in franchise financing. Its term loans 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.
Min. Loan Amount | $100,000 |
---|---|
Max. Loan Amount | $10,000,000 |
Fee | 3.5% to 5% |
Interest Rate Type | Fixed |
Min. Credit Score | 660 |
Minimum Loan Term | 60 months |
Maximum Loan Term | 120 months |
Here’s a breakdown of the main financing options you can choose from:
Follow these steps to find the right type of financing for your restaurant.
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.
Common questions about restaurant business loans.
It’s possible to get a loan to start a restaurant, but your options are limited. To avoid a high-cost loan, consider borrowing from a microlender like Kiva. Or, read about our roundup of the best startup financing loans. Finding a partner or an investor or running a crowdfunding campaign could potentially get you funding as well.
There are no business loans programs exclusively available to veterans — the SBA’s VA business loan program is no longer running. But some lenders offer services and advice tailored to veteran-owned businesses.
You can use a business acquisition loan to buy a restaurant. But whether you get approved depends on factors like the business’s finances, your personal assets and your experience in the industry. Since business acquisition loans can be hard to find online, talk to your bank about your options.
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