Running a successful restaurant requires the right equipment – from commercial ovens and refrigeration units to point-of-sale systems and dishwashers. Whether you’re opening your first location, expanding your kitchen, or replacing aging equipment, the costs can quickly add up to tens or even hundreds of thousands of dollars.

Restaurant equipment financing helps you acquire the equipment you need without draining your cash reserves. We’ve worked with countless restaurant owners, from quick-service cafes to fine dining establishments, to secure financing that fits their budget and operational needs. In this guide, we’ll walk you through everything you need to know about financing restaurant equipment.

What Is Restaurant Equipment Financing?

Restaurant equipment financing is a type of business funding designed specifically to help restaurants, cafes, bars, food trucks, and other food service businesses purchase equipment. Instead of paying the full cost upfront, you make monthly payments over a set term, typically ranging from one to seven years.

The equipment itself usually serves as collateral for the financing, which often makes approval easier than unsecured loans. Lenders view restaurant equipment as relatively secure collateral because it’s essential to your operations and retains value even if used.

Financing is available for both new and used equipment, though terms and rates may differ based on the equipment’s condition and age.

Ready to get started? Contact Llama Loan today to get the best rates and terms available!

Common Restaurant Equipment Financed

Restaurant owners often finance a wide variety of equipment, including:

Kitchen Equipment:

• Commercial ovens, ranges, and grills
• Walk-in coolers and freezers
• Refrigerators and prep tables
• Food processors and mixers
• Fryers and ventilation hoods
• Dishwashers and sinks

Front-of-House Equipment:

• Point-of-sale (POS) systems
• Tables, chairs, and booths
• Bar equipment and draft systems
• Digital menu boards
• Sound and entertainment systems

Specialty Equipment:

• Pizza ovens and dough mixers
• Espresso machines and coffee equipment
• Ice machines
• Food trucks and mobile units
• Bakery equipment

Pros of Restaurant Equipment Financing

1. Preserve Working Capital

The restaurant industry operates on thin margins, and cash flow is critical. Financing allows you to acquire necessary equipment without depleting your reserves, keeping cash available for inventory, payroll, marketing, and unexpected expenses.

We’ve worked with restaurant owners who financed their kitchen buildouts rather than paying cash, allowing them to maintain sufficient inventory during their critical opening months when establishing their customer base.

2. Start Earning Revenue Immediately

Financing lets you acquire equipment now and start generating revenue immediately rather than waiting months to save up the full purchase price. For newer restaurants or those adding revenue-generating equipment like delivery systems or expanded seating, this speed directly impacts your bottom line.

3. Potential Tax Benefits

Restaurant equipment financing offers significant tax advantages. Under Section 179, you may be able to deduct the full purchase price of qualifying equipment in the year it’s placed in service, rather than depreciating it over multiple years.

Consult with your accountant to determine how to maximize the tax benefits of your equipment purchase and financing structure.

4. Lower Interest Rate

Equipment financing can often have lower interest rates than other forms of alternative financing. In many cases, you can secure financing for around 12% whereas other financing options can exceed 20%.

5. Predictable Monthly Payments

Fixed monthly payments make budgeting straightforward. You know exactly what you’ll owe each month, making it easier to manage cash flow and plan for other expenses – critical in an industry with variable revenue.

6. Easier Approval Than Other Loans

Because the equipment serves as collateral, restaurant equipment financing is often easier to obtain than unsecured business loans. Even restaurants with limited operating history or less-than-perfect credit can qualify if they demonstrate strong sales.

Cons of Restaurant Equipment Financing

1. Higher Total Cost

While the interest rates on most types of equipment financing (including medical equipment financing and food truck financing) can be lower, it still adds up.

The biggest drawback is paying more than the equipment’s purchase price due to interest and fees. A $50,000 equipment package financed over five years at 10% interest will cost you approximately $63,700 in total payments – $13,700 more than paying cash.

For restaurants with strong cash reserves, paying upfront eliminates interest costs entirely.

2. Long-Term Obligation

Financing commits you to payments for the entire term regardless of how your business performs. If sales decline, you face tough decisions about meeting equipment payments while covering other essential expenses.

The restaurant industry has a high failure rate, and equipment payments continue even if your concept doesn’t work out as planned.

3. Depreciation Risk

Restaurant equipment depreciates quickly, especially in high-use environments. You might owe more than the equipment is worth midway through your financing term, creating challenges if you need to sell or refinance.

Used commercial kitchen equipment often sells for 30-50% of its original price, but you’ll still owe the full loan balance regardless of the equipment’s current market value.

4. Personal Guarantee Requirements

Most lenders require personal guarantees for restaurant equipment financing, particularly for newer establishments. This puts your personal assets – your home, savings, vehicles – at risk if your restaurant can’t make the payments.

Understand exactly what you’re personally liable for before signing any financing agreement.

5. Hidden Fees and Costs

Some financing agreements include fees that inflate your total cost beyond the stated interest rate. These might include origination fees, documentation fees, late payment penalties, or processing fees.

Always request a complete breakdown of all costs and fees before committing to any financing arrangement.

How to Qualify for Restaurant Equipment Financing

Credit Requirements

Lenders typically look at both personal and business credit scores. Most require a minimum personal credit score of 600-650, though some lenders work with scores as low as 500 if other factors are strong.

New restaurants without established business credit rely heavily on the owner’s personal credit history. Established restaurants with strong business credit may qualify for better rates and terms.

Want to see if you qualify? Contact us today to get started!

Time in Business

Many traditional lenders prefer restaurants that have been operating for at least two years. However, startup financing is available, particularly for experienced restaurateurs or those with strong concepts and detailed business plans.

Some lenders specialize in restaurant startups and focus more on your industry experience, financial projections, and location than just time in business.

Financial Documentation

Be prepared to provide:

• Personal and business tax returns (typically two years)
• Bank statements (three to six months)
• Profit and loss statements
• Balance sheet
• Equipment quotes or invoices
• Business plan (for startups)
• Lease agreement or proof of location

Larger financing requests typically require more extensive documentation and financial review.

Revenue Requirements

Many lenders require minimum monthly revenue, often ranging from $10,000 to $25,000 depending on the financing amount. This demonstrates your ability to support the equipment payments alongside your other operating expenses.

Down Payment

Most equipment loans require a down payment of 10-20% of the equipment cost. Some lenders offer zero-down financing for well-qualified borrowers, while others may require 25-30% down for startups or those with credit challenges.

Is Restaurant Equipment Financing Right for You?

Restaurant equipment financing makes sense when you need equipment now but lack sufficient cash reserves, want to preserve working capital for other uses, or need to replace failed equipment immediately to keep operating.

The right financing partner understands the unique challenges of the restaurant industry – thin margins, variable revenue, and the critical nature of equipment to your operations.

Ready to finance your restaurant equipment? Llama Loan specializes in connecting restaurant owners with competitive equipment financing options. Get started today and discover what’s possible for your restaurant.