Ever had a dream for a restaurant? Chez You? (Rhetorical question — you wouldn't be here otherwise).

Launching a restaurant is tricky business, made harder by the upfront costs of commercial-grade kitchen equipment. If you're starting a restaurant from scratch, you'll need some way to get your hands on the right tools — that's where restaurant equipment financing comes in.

In this guide we'll break down all you need to know about it (in exchange for a discount whenever we come visit!) We'll cover:

• What restaurant equipment financing is
• Leasing vs buying
• 3 different financing options
• 3 specialized lenders
• Application & eligibility

By the way — if you're also a homeowner, you can actually use your home equity to finance your restaurant equipment, at much more favourable interest rates. Lotly works with 50+ lenders across Canada, and we can help you find the best deal for your particular situation. Get a free consultation today to see if we're the right fit!

What is restaurant equipment financing?

Restaurant equipment financing refers to the process of obtaining funding or financial assistance to purchase the necessary equipment and supplies for a restaurant business.

Commercial-grade kitchen appliances, furniture, and other essential items for a restaurant business can get very expensive, very quickly. If you're just starting out, or looking to upgrade your existing equipment, restaurant equipment financing can be an excellent option for you.

How does restaurant equipment financing work?

• Restaurant equipment financing typically involves obtaining a loan from a lender specifically to purchase needed equipment.
• This type of loan is often called an "equipment loan" and is secured by the equipment itself.
• If you cannot repay the loan, the lender has the right to repossess or take back the equipment.

Some lenders may also offer leasing options for restaurant equipment. Leasing allows you to use the equipment for a set period while making monthly payments. At the end of the lease term, you may have the option to purchase the equipment or renew the lease.

Why should I consider restaurant equipment financing?

There are several reasons why restaurant owners might choose to finance their equipment rather than pay for it upfront:

• Preserve cash flow: With financing, you can keep your cash flow intact and use it for other business expenses such as inventory, payroll, and marketing.
• Lower initial costs: Financing allows you to spread out the cost of expensive equipment over time, making it more affordable for small businesses with limited budgets.
• Potential tax benefits: In some instances, the interest on your equipment loan may be tax-deductible. Consult with a tax professional to see if this applies to your situation.
• Stay up-to-date with technology: Restaurant equipment financing allows you to keep your equipment current and up-to-date without making a hefty upfront investment.

Equipment financing means you can get Chez You off the ground quicker, maintain your cash flow, and keep up with the latest trends and technology in the industry.

What kind of equipment can you finance?

As a restaurant owner, you may be wondering what kind of equipment you can finance. The truth is, almost any type of restaurant equipment can be financed, including:

• Stoves and ovens
• Refrigerators and freezers
• Dishwashers
• Fryers and grills
• Prep tables and counters
• POS systems

Some lenders may also offer financing for small wares such as utensils, plates, and glassware. It's important to discuss your specific needs with a lender to see what options are available for your business.

Leasing vs buying your equipment

Pros of leasing

• Lower upfront costs: Leasing typically requires little to no money down, making it a more affordable option for businesses with limited funds.
• Tax benefits: Lease payments may be tax-deductible as a business expense. Consult with a tax professional to see if this applies to your situation.
• Flexibility: Leases often come with flexible terms and options, allowing you to upgrade or add equipment as needed.

Cons of leasing

• Higher total cost: While monthly lease payments may be lower than loan payments, the overall cost of leasing is usually higher due to interest and fees.
• No ownership: With leasing, you do not own the equipment and must return it at the end of the lease term. This means you won't have any assets to sell or use as collateral in the future.
• Restrictions: Leasing agreements may come with restrictions on how you can use and maintain the equipment.

Pros of buying

• Ownership: When you buy equipment, you own it outright and can use it however you see fit. You may also be able to sell or trade in the equipment in the future.
• Lower total cost: Buying typically has a lower overall cost than leasing since you’re not paying interest (or at the very least, paying less).
• No restrictions: As an owner, you have complete control over how you use and maintain your equipment.

Cons of buying

• Higher upfront costs: Buying usually requires a significant upfront investment, which may be difficult for businesses with limited funds.
• Depreciation: Equipment loses value over time, so you may not recoup your initial investment if you decide to sell it in the future.
• Maintenance costs: As an owner, you are responsible for all maintenance and repairs on the equipment.

3 different financing options for buying restaurant equipment

Equipment loans are one of many financial instruments you can use to finance your restaurant equipment needs. Here are three other financing options you may want to consider:

1. Equipment leasing: As mentioned earlier, leasing allows you to use equipment for a set period in exchange for monthly payments. This can be a good option if you need specific equipment for a short-term project or if you don't have the funds for an upfront purchase.
2. Business loans: Another option is to take out a business loan specifically for purchasing equipment. This can be a good choice if you want to own the equipment outright and have the ability to make fixed monthly payments.
3. Secured loans: If you're a homeowner, you may be able to use your home equity to secure a loan for purchasing restaurant equipment. This can be a good option if you have a large amount of equity and want to avoid high interest rates that may come with other types of loans. However, remember that using your home as collateral puts it at risk if you cannot repay the loan. Carefully consider all factors before choosing this financing option — get in touch with us here at Lotly to see if it's the right fit for you.

3 lenders that specialize in restaurant equipment financing

1. Soluco Financial Group

Soluco offers lease financing solutions tailored for restaurant owners to acquire equipment without tying up capital.

• Rates: Varies based on equipment type and lease term, typically competitive in the leasing market.
• Repayment terms: Lease terms range from 24 to 60 months, with flexible payment schedules.
• Best for: Businesses looking for fast approval (within 48 hours) and 100% tax-deductible lease payments​.

2. MicroCapital

MicroCapital provides fixed-term loans for restaurant equipment, with amounts ranging from $5,000 to $800,000.

• Rates: Interest rates range from 8% to 29%, depending on the business’s financial standing.
• Repayment terms: Fixed repayments over a term of up to 60 months, with same-day fund disbursement for approved loans.
• Best for: Restaurants needing quick access to funds and flexible financing options​.

3. Vortex Restaurant Equipment

Vortex specializes in leasing and renting restaurant equipment, providing flexibility in acquiring both new and used equipment.

• Rates: Rates depend on the lease duration (typically 2-5 years) and the type of equipment.
• Repayment terms: Lease-to-own options are available, with terms up to 66 months and no penalties for early buyout.
• Best for: Owners looking for leasing options with the flexibility to trade up equipment during the lease term​.

Application and eligibility requirements

Before applying for restaurant equipment financing in Canada, it’s essential to understand the key application and eligibility requirements. Here’s a breakdown with actual data from Canadian lenders:

General requirements

Financial documentation:

• Recent tax returns (usually 2 years) to verify your income.
• Business bank statements from the past 3-6 months to assess cash flow.
• A business plan detailing your restaurant’s goals, expected revenue, and equipment needs​.

Eligibility:

• Many lenders work with businesses operating for at least 6-12 months and generate annual revenue of at least $120,000​.
• Established businesses with a longer track record may be favored, but newer restaurants can still qualify through leasing options.

Credit score requirements:

• Credit score: Most lenders require a personal credit score of at least 550
• A stronger credit history can help you secure better rates, while lower scores might result in higher interest rates (8% to 29%)​.

Industry-specific considerations:

• Some lenders cater specifically to restaurants, offering more flexible terms for equipment like ovens, dishwashers, and food prep machinery.
• Leasing options might be preferred for restaurants still establishing themselves, as they offer lower upfront costs and the possibility to upgrade equipment during the lease term​.

Additional tips

• Gather references from other restaurant owners or professionals who can vouch for your management experience and financial reliability. This can strengthen your application, especially if you're a newer business.
• Some lenders may impose time-in-business requirements (e.g., MicroCapital requires a minimum of 6 months of operation)​.
• Check for any collateral requirements—while equipment loans are typically secured by the equipment itself, some lenders may require additional assets as security​.

By preparing the required documentation and ensuring you meet the basic eligibility criteria, you can increase your chances of securing the best financing option for your restaurant.

Build your dream restaurant today with Lotly

Let's recap what we've learned:

• Restaurant equipment financing helps you get the essential tools without upfront costs. Whether through loans or leases, it allows you to spread the expense of commercial kitchen equipment while keeping your cash flow intact.
• Leasing vs buying has pros and cons based on your business needs. Leasing requires lower upfront costs and offers flexibility, while buying provides full ownership but demands a greater initial investment and maintenance responsibilities.
• Different lenders offer specialized options for restaurant equipment financing. Companies like Soluco, MicroCapital, and Vortex provide varying rates and terms depending on your financial standing and whether you prefer leasing or owning your equipment.

Restaurants can become community staples and family businesses for generations, but they need a way to get off the ground. Equipment financing can be a perfect way to kick-start your dream restaurant and build a successful business for years to come.

With Lotly's network of over 50 lenders from across the country, you can use home equity financing to kickstart your dream restaurant at the best rates for your financial situation. Get a free consultation today to get started!

Frequently Asked Questions

What is the interest rate for restaurant equipment financing?

The interest rate for restaurant equipment financing can vary depending on factors like your credit score, the type of financing you choose, and the lender you work with. Generally, interest rates for equipment financing can range from 6% to 20%.

Is collateral required for restaurant equipment financing?

Collateral is not always required for restaurant equipment financing, but it may be necessary if you have a low credit score or seek a larger loan. Lenders typically use the equipment itself as collateral, or they may require additional assets such as real estate.

How long does the application process take?

The application process for restaurant equipment financing can vary depending on the lender, but it typically takes anywhere from a few days to a couple of weeks. Have all necessary documents and information prepared beforehand to expedite the process.

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