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Restaurant Working Capital: Short Term Funding For Restaurants

Restaurant Working Capital

Owning and running a restaurant is the dream of many entrepreneurs and chefs in the United States. Being able to own and run your own establishment is a great way for lovers of food, lovers of cooking food, and entrepreneurs to make money will partaking in an industry they truly love. While owning and running a restaurant may be some business owner’s dreams, without enough capital to cover the business’s expenses, a dream can turn into a nightmare. Restaurants see plenty of cash-flow because of a high volume of sales, but if the cash on hand isn’t enough to cover the restaurants general operating expenses, you are a high risk of shutting the doors and closing down the restaurant for good. Therefore, making sure the company has not only sufficient cash-flow, but enough to cover all of its business expenses is absolutely vital for a restaurant (or any small business). In this article we will explore all of the working capital financing options available for restaurants and dining establishments.

What Are Restaurant Working Capital Uses?

  • Expansion: When a restaurant finds itself with more demand than it can handle, or if the restaurant realizes it can capture more revenue and profits by expanding its square footage and seating, and restaurant expansion working capital loan may be a really good option to help you reach that goal.
  • Payroll: Running a restaurant isn’t going to happen with only one employee. You’ll need cooks, waiters, waitresses, busboys, food preps, managers, etc.. Paying these employees on a daily or weekly basis is of critical importance, as your business can’t run without them. If you are in danger of not being able to pay your employees, a restaurant payroll working capital loan may be in order.
  • Upgrades: Like all businesses, over time there may come the need to modernize the facilities to make it more inviting to customers. Having old tables, old flooring, and outdated styling may limit the number of customers your restaurant is bringing in. Updating and upgrading your dining establishment with a business loan may pay for itself and then some if done properly.
  • Emergency uses: There isn’t a day when some sort of expense doesn’t arise for a small business. Few businesses have contingency plans to deal with emergency working capital financial needs, because few have enough savings to put aside in event of an emergency. Thankfully, when there are emergencies, restaurants can turn to emergency business financing to help cover their expenses.
  • Equipment: Every restaurant and dining establishment relies on some sort of cooking equipment to make their dishes. Equipment includes ovens, stoves, ranges, hoods, heating bars, salad bars, mixers, dish washers, on and on. When your equipment goes down a restaurant can’t wait weeks and months to replace – as they need the equipment for today’s or the next day’s services. When you need to replace equipment, there are both loan options and equipment leasing options available to restaurants.
  • Purchase Real Estate: While many restaurants lease the commercial space they use to run their small business, others are fortunate enough to own the building they operate their restaurants out of. For restaurant owners looking to purchase the commercial real estate their restaurant is located, there are plenty of commercial real estate loan options available.
  • Debt Consolidation: Running a business can be expensive and at some point, nearly every company will seek out some form of debt financing loan. Unfortunately, at times a company may take on so much debt that repaying the debt puts enormous strain on the restaurant’s cash-flow. By consolidating multiple restaurant loans or restaurant cash advances into a single payment (at a longer term) may considerably reduce the strain on the restaurants cash-flow.
  • Refinance: As we mentioned with emergency financing needs, few restaurants have the cash-on-hand to cover an emergency expense, and find themselves taking-out a loan or advance that may be much more expensive than they want. But since time is of the essence, obtaining a high-interest rate loan or cash advance may be the only option at the time, but the repayments may be extremely expensive or short in term putting stress on cash-flow. When you have a high-interest loan a good idea is to refinance into financing that’s more affordable.

Bank Working Capital For Restaurants

Of all of the types of financing available for restaurants and dining establishments, the most common provider of restaurant working capital comes from a bank. Bank lenders offer the most affordable working capital rates, as well as the longest working capital repayment terms of all business lenders.

  • Rates: 5-10%
  • Terms: 3-25 years

SBA Restaurant Working Capital

SBA lending is a popular form of financing for restaurants – especially with the risk that restaurants pose to longer-term lenders. While many restaurants may be popular for a period of time, many may find themselves fading with time. Because of that many conventional lenders fear that restaurants pose too much of a risk to lend to. Thankfully, because of the SBA enhancement that reduces the risk posed to lenders, SBA lenders are willing to offer restaurant working capital loans up to 7 years.

  • Rates: 6-8%
  • Terms: 3-7 years.

Alternative Restaurant Working Capital Loans

Not every restaurant owner will be able to qualify for conventional working capital loans from a bank because they lack the credit required by the bank, or because their business isn’t profitable enough for their lending models. Just because the bank turned your restaurant down for an operating capital loan doesn’t mean that you are out of options. A good option for a restaurant looking for fast working capital is to obtain an alternative working capital loan. While an alternative working capital loan isn’t as cheap as loans offered by a bank or SBA lenders, the rates are very affordable (unlike many cash advances).

  • Rates: 10-25%
  • Terms: 1-5 years

Private Restaurant Working Capital Loans

Private loans for restaurant working capital aren’t necessarily easy to find unless you are familiar with outlets and marketplaces that provide them. But if you are able to obtain a private working capital loan, you are generally obtaining flexible business financing at a fairly affordable rate. Private business loans are a type of financing that is provided by non-bank lenders who have much more flexibility and less overhead than conventional bank and SBA lenders.

  • Rates: 10-20%
  • Terms: 1-3 years

Restaurant Working Capital Cash Advances

A very common way for a restaurant to get working capital is to sell a portion of their future business earnings (receivables) to get funding today. A restaurant cash advance isn’t technically a working capital “loan” because no money is being lent. Financing is instead supplied by the restaurant selling a portion of their future revenue to a third party funder at a discount. So, in essence, a restaurant cash advance is a very easy way for restaurants to get paid today for sales that will happen in the future. Restaurant cash advance programs include:

  • ACH Program: merchant cash advances where the cash advance funder is repaid each day using Automated Clearing House. The funder will remit a set amount each business day from the restaurant’s bank accounts until the restaurant cash advance is fully-repaid.
  • MCA Split Program: merchant cash advance where the funder is repaid by splitting each day’s credit card sales with the restaurant. Rather than having a set amount of money remitted, the funder will take percentage agreed upon by the restaurant owner and funder.
  • Factor Rates: 1.08 – 1.49
  • Terms: 4-24 months

Asset Based Restaurant Working Capital

If you own commercial real estate, personal real estate or land with a decent amount of equity, an option for your restaurant to obtain working capital could be to use your real estate as collateral to obtain business financing for your dining establishment. The asset based lender will look at the property’s equity, and then provide financing based on that equity.

  • Rates: 15-30%
  • Terms: 1-3 years


There are thousands upon thousands of lenders that provide working capital loans and advances to restaurants and dining establishments. Finding the right working capital lender is important to make sure they are a right fit for your needs, but also to make sure you are obtaining the lowest-rate financing product available to make sure your restaurant not only runs smoothly, but to also keep as much profit as possible for yourself. If you need help obtaining the best possible option, please reach-out to us and we will walk your through all of the available business loan options.

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GUD Capital is a nationally recognized leader in the financing industry for providing the best business lending solutions available to small and mid-sized businesses. We leverage our network of 4,000 competing commercial lenders to provide your business the largest selection of commercial financing options.

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