Restaurant Financing Options Beyond SBA Loans

Why many restaurants look past SBA loans

Timing, paperwork and collateral rules make SBA loans hard to use for urgent needs, and restaurants often face urgent needs.

An SBA loan can be the best deal on paper, with long terms and lower costs. But restaurants run on tight margins and fast cycles. A walk-in cooler dies on Thursday, a supplier wants payment before Saturday's big event, or a slow month threatens payroll. Waiting weeks is rarely an option.

SBA approval also asks for detailed financials, projections and often collateral. Newer restaurants or those with thin records may not fit. See our guide to SBA loans for restaurants if you want the lowest-cost route and can plan ahead. Otherwise, consider the options below.

Match the tool to the need

Pick financing by what you are paying for: equipment, a build-out, inventory and payroll gaps, or seasonal swings.

Details on each appear on our pages for equipment financing, term loans and business lines of credit.

Revenue-based financing for uneven sales

With revenue-based financing, repayment rises and falls with sales, which suits restaurants that have strong weekends and slow Tuesdays.

Fixed payments hurt in a slow week. In revenue-based financing, the amount you repay moves with your sales, so a quiet month means a smaller payment. Total cost is usually higher than a bank loan, so run the math before signing.

Example (illustrative): a restaurant with $60,000 in monthly sales takes $30,000 and agrees to repay $34,500 as a share of sales over about six months. Cost is $4,500. If the cash funds a patio expansion that adds $5,000 of monthly profit during the season, the payback is clear. If the season is short, the same structure may be less attractive. See revenue-based financing and 4 ways to fund a seasonal business.

Do the payback math before you borrow

Estimate extra profit the money will create, divide cost by that profit and compare against the payment you must make each month.

Restaurant margins are thin, so every dollar of financing cost must be earned back. Use this method:

1. Name the purchase and its expected result: more covers, higher check average, lower waste or avoided downtime.
2. Estimate added monthly profit, not added sales.
3. Get the total repayment and convert it to a monthly-equivalent payment. Our daily payment to monthly equivalent guide helps.
4. Check that added profit exceeds the monthly payment with room to spare.
5. Stress-test a bad month. See stress test payments.

Replace a failing refrigeration unit and you avoid spoiled inventory and a forced closure, which is a savings you can count. A new espresso machine that adds 40 drinks a day at a $2 profit each adds roughly $2,400 a month. Choose with numbers.

What funders look at for restaurants

Funders review monthly deposits, consistency, existing obligations and time in business. Clean bank statements and steady card sales help most.

At ROI Funder, 500+ FICO, 6+ months in business and $20,000+ monthly revenue are considered. A complete file is the application plus 3 months of business bank statements. Restaurants have an advantage: daily card deposits create a clear record of sales.

Things that can slow a file: mixed personal and business spending, frequent overdrafts, many existing daily or weekly debits, or large swings with no explanation. Keep a short note ready about seasonal patterns. For more on the industry, see restaurant funding, restaurant equipment and our seven things that kill a restaurant business.

Avoid common financing mistakes

The biggest mistakes are stacking several daily-payment products, financing operating losses and ignoring total cost. Borrow for growth or fixes, not to cover chronic losses.

• Stacking. Several daily debits at once can empty the account. Read the loan stacking guide.
• Financing losses. If the restaurant loses money every month, borrowing postpones the problem. Fix prices, labor or food cost first.
• Ignoring total cost. Compare dollars repaid, not just the headline number.
• Choosing the wrong term. A 6-month product for a 5-year asset strains cash flow.
• Skipping the lease review. Landlord terms can change the numbers.

ROI Funder works with a network of funders and matches each file to funders that fit it. We show true cost, payback period and monthly-equivalent payments before you sign, and applying uses a soft credit pull with no obligation to accept an offer.