What is restaurant equipment financing?
Restaurant equipment financing is a broad term for any way to pay for equipment over time, instead of all at once. This can cover commercial kitchen equipment like ovens, freezers, ice machines, prep tables, commercial mixers, and commercial dishwashers. It also covers restaurant furniture and fixtures for your dining room.
With many equipment financing companies, the equipment itself acts as collateral. That makes qualifying easier than with an unsecured bank loan, since the lender has something to reclaim if payments stop.
This category includes both financing, where you own the equipment once it's paid off, and restaurant equipment leasing, where you don't own it unless you use a buyout option. That difference matters, and we'll cover it in detail below.
Financing options for restaurant equipment
There's no single best option. The right fit depends on how long you've been in business, your credit profile, how fast you need funding, and whether you want to own the equipment outright. Here's a look at the most common restaurant equipment loans and other financing solutions available today.
Equipment loans
With a dedicated equipment loan, the lender funds the purchase of specific cooking equipment, like commercial ovens, walk-in coolers, or reach-in refrigerators. The equipment itself secures the loan, so you typically don't need to put up other collateral. Repayment terms usually run up to 10 years, matching how long the equipment is expected to last.
Because the loan is self-secured, approval requirements are usually more relaxed than those of an unsecured bank loan or other general business loans. Interest rates (APR) typically range from 8% to 30%, depending on your credit score and financial history. Some lenders even offer 100% financing, meaning no down payment is required to get started.
Funding can move fast. Some online lenders can fund an equipment loan within one business day, which helps if a broken oven is holding up service today.
Equipment leasing
Restaurant equipment leasing lets you use equipment you don't own, in exchange for regular payments, similar to renting an apartment. Monthly payments are typically lower than loan payments for the same equipment, which can ease pressure on cash flow.
The tradeoff: you don't build equity, and over the long term, leasing can cost more than buying. Leasing tends to work well for equipment that becomes outdated quickly, like point of sale (POS) systems, or when you'd rather keep more working capital available for day-to-day operations.
SBA loans
The U.S. Small Business Administration (SBA) doesn't lend money directly. It guarantees a portion of loans made by approved lenders, which lowers the lender's risk and can lead to better terms for you.
An SBA 7(a) loan can be used for equipment purchases and offers up to $5 million, according to the SBA. It often comes with lower interest rates than private lenders and repayment terms up to 25 years.
The tradeoff is time. SBA loans usually take longer to process than those from online lenders and require more documentation. They tend to work best for an established business making a significant equipment investment.
Business line of credit
A business line of credit is revolving credit: you can draw funds up to a set limit, repay them, and draw again. Unlike a term loan, you don't have to use it all at once.
This can help when equipment needs are ongoing or hard to predict, like replacing a fryer this month and an ice machine next quarter. Rates are typically higher than equipment loans, and your credit limit depends on your restaurant's financial profile.
Merchant cash advance
A merchant cash advance (MCA) provides upfront capital in exchange for a percentage of future sales. Repayment rises and falls with daily revenue, which can ease pressure on cash flow during slow periods.
An MCA is not a loan. MCAs are generally faster to access than traditional financing, with less focus on credit score. Repayment also flexes with your sales, so during a slow week you owe less, unlike a fixed loan payment. The tradeoff is that the overall cost of capital tends to run higher than a bank or SBA loan.
This option works best for restaurants that need funds quickly, have consistent daily sales, or want to skip a lengthy application. If you're on DoorDash Marketplace, you may have access to DoorDash Capital, a merchant cash advance available through Merchant Portal for eligible merchants. Offers are pre-approved based on your Marketplace sales performance, so there's no separate application to fill out — you just review and accept a offer that's already been generated for you.
This option works best for restaurants that need funds quickly and have consistent daily sales. If you're on DoorDash Marketplace, you may have access to DoorDash Capital, a merchant cash advance available through Merchant Portal for eligible merchants, with offers based on Marketplace sales performance.
How to qualify for restaurant equipment financing
Whether you run a full-service restaurant or a food truck, lenders look at the same core factors when deciding whether to approve financing. Knowing what they look for helps you set realistic expectations and avoid wasting time on options you're unlikely to qualify for right now.
Credit score
Minimum credit score requirements vary by lender and loan type. For equipment-specific loans, lenders generally want to see a personal credit score of at least 630. SBA loans typically require a 650 or higher.
Time in business
Most traditional lenders prefer to see at least two years in business before approving equipment financing. Newer restaurants aren't automatically disqualified. Some lenders specialize in startup financing or weigh projected revenue more heavily.
Newer or smaller operators without a long track record should expect higher rates or smaller offers. SBA microloans and some online lenders have more flexible time-in-business requirements.
Annual revenue
Lenders use annual revenue to judge whether your restaurant can handle the added payments. A common minimum threshold is around $130,000 in annual revenue, according to the Federal Reserve's small business survey.
Be ready to provide bank statements, tax returns, or profit and loss (P&L) statements to document your revenue. Having financial statements organized ahead of time can speed up the credit decision on your application.
Financing vs. leasing: which is right for your restaurant?
This is the most common decision point for owners comparing options. Here's how the two paths stack up, based on your actual situation rather than an abstract list of pros and cons.
Factor | Financing | Leasing |
|---|---|---|
Ownership | You own the equipment once it's paid off | You don't own it unless you buy it out |
Down payment | Often required (some loans offer 100% financing) | Usually none |
Monthly payment | Typically higher | Typically lower |
Total cost over time | Often lower if you keep the equipment long-term | Can be higher over the equipment's life |
Best for | Long-life equipment: commercial ovens, walk-in coolers, freezers | Fast-aging equipment: POS systems, specialty machines |
Some equipment is core to daily service and lasts a long time. Commercial ovens, walk-in coolers, and reach-in refrigerators are good examples. For these, financing to own it usually makes more financial sense.
Other equipment is technology-dependent and needs replacing every three to five years, like POS systems. For this type, leasing can lower the risk of getting stuck with outdated equipment.
Leasing requires no down payment. Financing typically does, but lower monthly payments over the life of the loan can offset that upfront cost. Either way, ask your accountant whether the purchase is tax-deductible under Section 179, which can let you deduct the full equipment cost in the year you buy it.
How to apply for restaurant equipment financing
The exact steps vary by lender, but the sequence stays the same: figure out how much funding you need, choose the right financing type, gather your documents, submit an application, and wait for a decision.
Online lenders tend to move fastest, with same-day or next-day decisions common for equipment loans. Traditional banks and SBA loans move more slowly but often offer better rates and longer repayment terms.
You'll typically need to gather a few things before you apply:
Personal and business credit information
Financial statements
Proof of time in business
Monthly or annual revenue
Business registration documents, like Limited Liability Company (LLC), corporation, or sole proprietor paperwork
If you're opening a new location, a ready business plan can also strengthen your application. It shows lenders how the equipment fits your growth plans.
Start gathering these documents today, even before you've chosen a lender. It's the kind of prep work that saves time later.
Tips for getting the best financing terms
Know your number before you apply. Get quotes on the equipment first, so the loan amount matches the actual cost. Borrowing more than you need means paying interest on capital you don't use.
Check your credit before lenders do. Free business credit reports are available through several services. Knowing where you stand lets you target the right lenders and skip hard inquiries on options you won't qualify for.
Compare total cost, not just the monthly payment. A lower monthly payment with a longer term can cost more overall. Use the loan amount, rate, and term length to calculate total repayment before you commit.
Ask about prepayment penalties. Some lenders charge a fee for paying off a loan early. If your cash flow improves, being able to pay down the balance early can save you money.
How eligible DoorDash merchants can explore additional capital
If you're already on DoorDash Marketplace, you may be eligible for DoorDash Capital, a merchant cash advance available through Merchant Portal in partnership with Parafin. Offers are pre-approved based on Marketplace sales performance and can be reviewed and accepted in Merchant Portal.
Funds may arrive within one to three business days. Repayment is based on a percentage of your weekly Marketplace sales, so payments adjust with your sales volume. DoorDash Capital uses a one-time fee rather than a traditional interest rate.
This can complement traditional equipment financing, especially for a smaller equipment purchase or to help cover a down payment on a larger financing plan.
