Restaurant Business Loan

Ease the financial strain and find the right loan for your restaurant by comparing offers with Savvy.

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, updated on July 26th, 2023       

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Why should I take out a business loan to help my restaurant?

There are many reasons why a restaurant loan might be one of the best options for your business when it comes to seeking out additional funds. Because they’re designed to be versatile and essentially able to be used across any business area you may need (and are no different from how a standard business loan works), restauranteurs can make use of them for a range of purposes, including:

  • Boosting your restaurant’s cashflow
  • Funding the expansion, renovation and fitting out of your restaurant
  • Purchasing necessary equipment or machinery
  • Buying a new POS system or paying to fix or upgrade your current one
  • Helping cover the cost of maintaining your lease, including rent, utilities and other regular costs
  • Financing bulk inventory and stock to sell
  • Covering staff salaries and helping to pay for further training
  • Subsidising or entirely covering the cost of conducting marketing campaigns, either online, on television or anywhere else
  • Allowing you to stagger the repayments of your purchases

What types of business finance can I choose from?

Fortunately, you aren’t short on options when it comes to the type of finance you can choose for investing in your business. These include:

Unsecured business loan

One of the most common types of business finance, unsecured business loans are perhaps the most accessible for small and large businesses alike. These allow you to access funds without the need for a valuable asset to serve as security which many small businesses seeking finance simply don’t have. Unsecured loans range from as little as $5,000 up to $500,000 and come with fast and simple application processes.

Secured business loan

If you own an asset such as property or valuable equipment, you can instead use this to secure your restaurant loan. If you’re looking to buy a specific business asset, such as an oven or freezer, this is known as equipment finance. By providing the asset as collateral, your potential borrowing range could be greatly expanded to upwards of $1 million in some cases, in addition to reducing your interest rate. The asset acting as collateral plays no role during your repayments and is only required as a last resort if you fall behind.

Business line of credit

Perhaps the most flexible type of business loan, a line of credit allows you to be approved up to a certain limit and withdraw funds whenever you wish. Many businesses prefer these for their flexibility and the fact that you aren’t simply receiving a lump sum with repayments beginning soon afterwards. You’ll only pay interest on the outstanding balance, albeit at a higher rate than standard loans in some cases.

Business overdraft

An overdraft facility functions similarly to a line of credit, allowing you to withdraw funds from your account beyond $0. However, what sets them apart is the fact that they come without set repayments, only requiring you to repay interest on the outstanding balance (which is usually higher, like that of a line of credit). Because they can be open indefinitely, you can have one running in the background as a safety net for your restaurant.

Types of business loan

Why compare business loans through Savvy?

How to apply for your restaurant business loan

Frequently asked restaurant business financing questions

Over what term length can I repay my loan?

This depends on the type of loan you’re after. Unsecured loans generally offer available terms between three months and five years, while larger secured financing can be repaid over up to ten years in some cases. If you decide to go with a line of credit or overdraft, however, there likely won’t be a set end date, as you can keep it open and running as long as it’s viable.

Can I take out a loan to buy an existing restaurant?

Yes – one of the many purposes for restaurant business financing is to enable owners to purchase an existing restaurant. There are many benefits for doing so, such as having internal processes and structures in place and potentially existing brand recognition. It’s easiest to do so if you’re already running a business, but if not, lenders will look to areas such as your credit score and whether you have any transferrable skills (such as working as a restaurant manager). They’ll also require at least two years of financials for you, your restaurant and the one you’re looking to buy before approving your loan.

Is financing available for startup restaurants?

Yes – there are specialist lenders in the market who offer startup business loans for restaurants with less than six months of trading under their belts (which is the usual cut-off). However, these loans will be more closely scrutinised, as they’re seen as being riskier than those for businesses which have been running for some time. As a result, your borrowing range will be limited and your interest rate will be higher. Your lender may also require you to have run a business in the past.

What extra costs will I need to budget for?

The main cost to consider when determining what you can afford is interest. Depending on the size of your loan and your term, this could cost you anywhere from hundreds of dollars to tens of thousands overall. On top of this, your lender may charge an application fee, which could cost up to 3% of your total loan amount. You may be charged a fee for drawing down on your line of credit also, while paying out your loan early can sometimes incur charges.

How long will it take to be approved for my loan?

Fortunately, unsecured small business loans are incredibly fast to process, with turnaround times between application submission and approval being as fast as the same day in some cases. This is because these loans are online and utilise efficient processes to maximise the speed of approval.

Are business overdrafts secured or unsecured?

Overdrafts can either be secured or unsecured. Like loans, providing security gives you access to a greater amount of money, which you may need depending on your situation.

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Still looking for the right finance for your business?

Explore a range of business loan options suitable to your financing needs and apply online through Savvy today.