5 Options for Restaurant Loans in Today’s Market

09 Jun, 2016 / Comments: Comments Off on 5 Options for Restaurant Loans in Today’s Market / By

There are over one million restaurants in the US, making it one of the most popular types of businesses to own. Being the owner of a restaurant is both an exciting and potentially extremely profitable affair. However, it can also come with major risk. In fact, only 40 percent of new establishments make it through their first year. If you are the owner of restaurant and want it to both thrive and survive, you need to have a good business plan, great atmosphere and food, as well as plenty of funds. However, if you don’t have the necessary money to start or maintain a restaurant business, that doesn’t mean you have to throw in the towel, as there are plenty of funding options available to you. Here are five restaurant loan options you have in today’s financial market.


Small Business Administration Loan

In the past few years, the Small Business Administration (SBA) has given out more loans to restaurants than they have for any other type of business. That being said, getting an SBA loan is rather hard, as it requires that you have personal assets that you can put up as collateral in order to guarantee the loan. Sadly, this means that if your restaurant does not succeed, you are putting your personal finances at risk, which can be much more dangerous than just losing your business. Due to this, it is critical that you proceed with caution before choosing this option.


Equipment Loan

An equipment loan is a loan you can take out in order to buy needed equipment. This may come in handy when first getting your business off of its feet or when you are looking to expand your business and want a new piece of equipment to help it grow. One of the beneficial things about this type of financing is that you can put up the new equipment as collateral for the loan, which will help lower the lender’s risk and thus give you a better interest rate. If you are considered a credit risk, then this type of loan can be a major advantage for you.



Investors can be an excellent funding source. However, you must remember that they often will require that they be a limited or full partner in exchange for their money, which means you won’t have full decision making power over your business. Additionally, if you choose investors that are your family or friends then you must be even more cautious, as your relationship can become permanently damaged if your restaurant does not succeed. If you would rather maintain full control of your business and remain in good standing with a family member or friend, then an investor may not be the way to go.


Merchant Cash Advance

One option that is often overlooked is the merchant cash advance. However, it is a viable option to consider if you find yourself in a tight spot and need funds right away. This type of loan is much easier to secure than other traditional loans. With a Merchant Cash Advance, the lender will advance the amount you want, which is then paid back through a certain percentage of the credit card sales you make each day. If your business does not make a substantial amount of credit card sales, then this option likely isn’t the best one for you.


Franchise Restaurant Loan

Franchise restaurant loans are designed for entrepreneurs who are opening an established franchise, such as a McDonalds or Subway. The largest benefit of this kind of loan is that it is designed specifically for franchise owners and so its terms are designed specifically for that type of borrower. Additionally, the company that issues you the franchise may be able to help you find a lender, as franchise companies often have ties to banks and thus will improve your chances of gaining a loan with good terms and for the right amount.


William Mahnic
William Mahnic is a Finance Professor at Case Western University and has spent more than 20 years in the finance industry before becoming a professor. Mahnic has appeared as a commentator on both TV and radio talk shows including NPR, Crain's Cleveland Business, WKYC 3 and The Washington Post. He has been interviewed in BusinessWeek, Wall Street Journal and The Los Angeles Times.

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