What is Restaurant Equipment Financing?
Restaurant equipment financing is a kind of lending that exists to help restaurateurs purchase the large equipment they need that might otherwise be out of their reach. It’s not easy starting a new restaurant, and it’s not exactly a cakewalk to keep a successful one running without a hitch day-in and day-out. Having a dishwashing machine break or a fridge stop working can make or break a day, week, or lifetime of sales in a business as volatile as the food industry. It’s not easy to foot the bill for a lot of this equipment, even if your restaurant is profitable, and it’s rare to keep a float of thousands of dollars sitting around for repairs and replacements. Restaurant equipment financing can help you keep your kitchen up and running without cooking the books.
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Financiers tend to not be the biggest fans of the restaurant industry when offering equipment financing. This is because well over 60% of restaurants fail, which is a pretty big red flag when it comes to weighing the odds about a financiers returns. For this reason, it’s pretty common to find interest rates going all the way up to 50% on restaurant equipment financing.
Of course, this depends on your credit score. If you have a great score and good financial history you can see those interest rates go all the way down to 5%, but when it comes to restaurant equipment financing, don’t expect much less than that even with the best of credit scores.
Because of the volatility of the restaurant industry, most interest rates are quite high on restaurant equipment financing. However when it comes to credit requirements, financiers tend to be quite lenient. You can have a credit score in the low 500s, not much credit history and even been bankrupt in the past and still get approved for financing from some vendors.
However, a credit history in that range is going to land you an interest rate close to 50%, so in the end it may not be worth the cost. If you have a poor credit history and are looking for new equipment for your restaurant, it can be worthwhile to look into buying used equipment from another restaurant. The resale value on a lot of restaurant equipment is quite low, so if you’re willing to purchase something a little older with some mileage on it, you may be able to avoid taking out a financing plan altogether.