Whether large or small, restaurants have a tendency to become staples in their local communities. Some towns have restaurants that have operated in the same spot, with the same ownership, for decades, while others have new spots that pop up and start a craze among residents and tourists alike. With such fierce competition, having a consistent capital source and the right financing options can be the difference between success and failure.
There are a variety of sources that restaurants turn to for funding, such as bank loans, investments from partners/angels, credit cards, lines of credit, and alternative lending. Each option comes with its own set of pros and cons, so it’s important to research what works best for your restaurant before making any financial decisions.
Understanding all of your options is the only way to ensure you’re making the right decision for your business. Let’s explore the many ways to finance your restaurant and, more importantly, how to choose the right one for your specific circumstances.
What Kind of Restaurant Equipment Can You Finance?
Restaurants have a wide variety of equipment needs, from stoves and refrigerators to dishwashers and ovens, and all of it can be expensive. Fortunately, there are financing options available for any piece of restaurant equipment, including
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It is important for restaurant owners to do their research and compare different lenders before choosing one — examining fees, payment schedules, interest rates, terms & conditions, and customer service can help you find the best option for your business.
Financing Vs. Leasing
Leasing equipment is nearly identical to leasing a car, where you make structured payments over a set period of time in exchange for the use of the asset. Each payment is given to the vendor as a fee for using the asset, not for ownership of any kind. At the end of the lease, you return the asset to the lender and can no longer use it unless you begin a new contract.
Financing equipment is a contractual agreement with a lending organization to front the purchase of an asset, where the borrower repays the funds through structured payments to the lender. It works similarly to leasing equipment, but you get to keep the asset at the end of the repayment period. Each payment you make to the lender works toward the total cost of the asset, and you can write off interest payments on your tax return.
Leasing equipment is most beneficial if you won’t need the asset long term, like short, one-off projects or contracts. However, if you plan to continue leveraging the asset in your business, it might be more advantageous to finance the equipment and pay over time.
Financing Options for Restaurant Equipment
Restaurant owners have to navigate a variety of options when investing in new equipment. Purchasing necessary items up-front can be cost-prohibitive for many, so alternative financing solutions may need to be considered. Here are a few of the more common options.
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