Restaurant equipment financing is a collection of solutions for managing the budget for startups, reducing costs, and keeping the cash flow for growing food businesses. The food business requires a wide array of equipment to function properly. Whether you are a startup or a business owner looking to improve an existing kitchen, budget management is a big concern.
Restaurant equipment financing is one of the best ways to purchase commercial kitchen equipment for the overarching goals and long-term benefits. By carefully planning in the initial stages and finding out the various suitable routes for your business, this option would help you to easily put together a fully functioning commercial kitchen.
What is Restaurant Equipment Financing?
Restaurant equipment financing is an easy solution to the biggest problem entrepreneurs face when starting a business: Capital. Opening a restaurant requires many different and pricey purchases. While many solutions exist, like bank loans and leasing equipment, most aspiring business owners search for faster paths, and restaurant equipment financing is the one.
First, financing is done by either the manufacturer or a finance company. The lender sets certain conditions for the applicants to fit, but mostly the process is a lot quicker. The processing and approval of applications happen in a short amount of time. When you get equipment through restaurant equipment financing, you aren’t expected to pay an upfront fee, and you can get the equipment before your payments begin. Once the finance is repaid, you will own your equipment.
Benefits of Restaurant Equipment Financing and New Equipment
Restaurant equipment financing has its own special perks, with many options. You should keep in mind the following points when making your decision.
- Restaurant equipment financing is a faster path than bank loan systems. The dealer or the finance company will understand your needs better and recognize that acting in a quick fashion is the best solution for everyone.
- You won’t need to pay large sums in the initial stages of starting a new business. Thanks to this system, your priority won’t have to be the capital, and you’ll have a chance to bring your plans to fruition with ease.
- The equipment will start working for you before you start paying for it. One of the most appealing aspects of this financing method is that you have time to generate revenue before spending your money.
- Once the financing is repaid, you will own the equipment, which is a major benefit in comparison to renting or leasing equipment. Restaurant equipment financing is a better option in this sense than leasing equipment.
- Low-interest rates are an insane benefit of restaurant equipment financing. Most finance companies and manufacturers offer low-interest rates compared to bank loans; by choosing this method, you can save more and spend less.
- There are also tax benefits that come with this path. The IRS tax code allows business owners to deduct the price of the equipment as an expanse in the first year of service. You can benefit from this deduction with financed equipment. (It’s highly recommended that you consult your accountant for your specific situation.)
- The monthly amount you need to pay can be very little. Most companies will have a 12–60-month period to complete the repayment process, and you could customize your own payment plan in collaboration with the company.
- Improved machinery will improve the quality of your work. It can help you be more efficient by cutting down the time and energy spent in a day.
- The food is bound to taste better if you have better equipment. Thanks to restaurant equipment financing, you can acquire such pieces quickly and improve your output in a short amount of time.
How Can You Apply for Restaurant Equipment Financing
There are many different lenders you can look up for financing. Usually, the application process is pretty short; you will be asked to fill out a 2 or 3-page form at the initial stage. It is not a tiring or challenging process which is one of the benefits that make equipment financing such a charming option. Each company has its own expectations. While they are fairly similar, you should check out their specific websites to find out about their special offers and requirements.
Qualifications for Restaurant Equipment Financing
As with all business agreements, you also need certain qualifications for restaurant equipment financing. However, this one isn’t as scary as some other ones might be. Dissimilar to banks, restaurant equipment financing lenders have fairly flexible and easy expectations.
- While you are expected to present a business plan, your credit score does not influence your chances. A low or bad credit score is still acceptable for many lender companies.
- Application processes are short, and you will be expected to provide proof of income and tax return information. There are usually no minimum amounts you need to meet in this regard.
- Proof of identity is a no-brainer. As with many other application forms, you must give your ID information.
- Proof of address is also needed in many application forms.
- Collateral is another important point to consider. While it is not usually needed in the initial stages of application, you might need to show collateral in the future. While it is a standard method of securing personal loans, it is important that you think of it before you take action.
- Business history is another point you might need to document. Some companies do not care for your experience, but some might wish to know your previous ventures to get an idea of you as a business owner.
Is Restaurant Equipment Financing Better Than Leasing Equipment?
When making a decision, you should be aware of several key differences between financing and leasing.
- Restaurant equipment financing is a great option because you own the equipment you took at the end of the repayment period. Since most pieces needed in a commercial kitchen are indispensable items, you’d be better off with this method. Thanks to financing, you won’t need to pay rent forever.
- Usually, both restaurant equipment financing and leasing are tax deductible, but this is a point you should make sure of by consulting your financial advisor since the terms of the agreements might cause otherwise in some cases. Especially in leasing agreements, if your goal is a tax deduction, make sure you understand the terms.
- Leasing can prove more costly than expected. In some cases, the overall amount you pay can end up being more than the price of the equipment.
- However, if the equipment you are looking to acquire is a piece you’ll only need for a short time, then you might want to opt for a lease. This way, you won’t need to pay a big amount for something you will only use for a short period.
- The same logic goes for fast-changing pieces too. If the equipment you have in mind changes a lot with new technological developments, leasing will allow you to keep up with the latest products in the commercial kitchen equipment market.
- Between leasing and restaurant equipment financing options, restaurant equipment financing is a more reliable choice if you intend to stay in the food business for a long time.
Opening a new restaurant, furnishing a commercial kitchen, and growing a business are pricey endeavors. You might be intimidated by the sheer amount of money you need to put in and all the effort that goes into sustaining it. However, with solutions like restaurant equipment financing, you can lighten the load off your shoulders a bit and acquire financial partners to smoothen the process. This way, your road to success will be faster and paved with a beneficial restaurant equipment financing agreement.