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Everything You Need to Know About Financing Restaurant Equipment

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how-to-finance-restaurant-equipment

Are you a restaurant owner looking to obtain new equipment but grappling with high upfront costs and depreciation? You’re not alone. For countless restaurant owners like yourself, the high costs of kitchen equipment – from refrigerators and freezers to ovens and ventilation systems – can pose a significant challenge. That’s where restaurant equipment financing comes in. It’s a solution that allows you to use state-of-the-art restaurant equipment without owning it, saving you money and maintaining vital cash flow. But how does it work? And just how can it benefit your business? Stick around as we, at Noreast Capital, walk you through everything you need to know about this fantastic financial tool.

Quick Snapshot of Restaurant Equipment Financing:
– Access to much-needed restaurant equipment
– No need for massive upfront purchases
– Preserves your cash flow
– Better equipment for improved efficiency and customer service

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Importance of Equipment Financing for Restaurants

Establishing a successful restaurant demands more than sumptuous recipes; a well-equipped kitchen plays a critical role too. However, cash flow can often prove to be a stumbling block, making equipment financing a necessary lifeline for many restaurant owners. It allows you to secure your essential equipment now while paying for it over an agreed period. The result? You get a fully functioning kitchen without straining your cash resources.

Figuring out how to navigate the realm of restaurant equipment financing can feel daunting, but we are here to simplify it for you. In the coming sections, we’ll break down the nuts and bolts of equipment financing, from understanding the terms to the application process, and even discuss the benefits of leasing as an alternative.

Stick with us as we explore this critical path to windfall savings, efficiency, and success in your restaurant business. Let’s dive in!

Understanding Restaurant Equipment Financing

Before you can confidently navigate restaurant equipment financing, it’s crucial to understand what it means, typical terms and rates, and how commercial equipment financing works.

Definition and Explanation of Restaurant Equipment Financing

Restaurant equipment financing refers to borrowing funds from a lender to purchase the necessary equipment for your restaurant outright. From refrigerators, ovens, and ice machines to furniture and HVAC services, virtually all equipment necessary for your restaurant can be financed.

As we at Noreast Capital always emphasize, the beauty of equipment financing lies in the fact that the equipment itself serves as collateral for the loan. This provides a safety net for lenders and can facilitate more favorable loan terms for borrowers, particularly those without a stellar credit history.

Typical Terms for Equipment Financing

When seeking to finance restaurant equipment, you’ll often find loan terms ranging between three to 10 years. This period is the duration you’ll have to repay the loan amount plus interest.

Down payments are typically required, ranging from 10 percent to 20 percent depending on the lender. Our expert, Vincent Cerniglia, highly recommends that the more you can offer as a down payment, the more favorable the interest rates tend to be.

Typical Equipment Financing Rates

When it comes to interest rates for equipment financing, they can range from as low as 3.49% to as high as 28% or even higher. Your specific rate will depend on several factors, including your credit score, annual revenue, time in business, and the type of industry your restaurant falls into.

Commercial Equipment Financing Explained

Commercial equipment financing is a specific type of loan used to purchase business-related equipment, such as restaurant appliances and machinery. The equipment itself serves as collateral for the loan, which can lead to more favorable terms for you as the borrower.

This type of financing is used by businesses of all sizes, from small to medium enterprises to large corporations. It offers businesses the financial capability to procure new machinery or equipment or upgrade the prevailing machinery without putting a strain on their working capital.

In conclusion, understanding how to finance restaurant equipment is crucial for any restaurant owner. It not only provides an affordable way to acquire necessary equipment but also preserves your working capital for other pressing needs. With the right knowledge and preparation, equipment financing can be a beneficial tool for the growth and success of your restaurant.

Benefits of Financing Restaurant Equipment

When it comes to managing a restaurant, cash flow and capital preservation are key. Learning how to finance restaurant equipment can provide an array of benefits to optimize your business operations and financial health. Here are some key advantages to consider:

Preserving Working Capital

One of the significant benefits of financing restaurant equipment is the ability to preserve your working capital. Instead of making a sizable upfront purchase, financing allows you to spread the cost over a period, often in affordable monthly payments. This leaves your capital free for other essential investments such as marketing, staff training, or menu development. As Vincent Cerniglia, our expert at Noreast Capital, often emphasizes, a sound financial strategy is about maximizing every dollar for growth.

Positive Cash Flow Generation

Restaurant equipment isn’t just a cost; it’s an investment that can generate positive cash flow. Think of it this way: every piece of equipment in your kitchen, from the oven to the refrigerator, contributes to creating the dishes your customers love. By leasing or financing this equipment, you’re effectively paying for it as it contributes to your revenue. In many cases, the profits generated from the productivity of the equipment purchase is greater than the lease payments, leading to a positive cash flow.

Credit Score Preservation

Financing restaurant equipment can help maintain and even improve your credit score. Unlike using up your existing lines of credit, such as credit cards, which can negatively impact your credit score, equipment financing can contribute to a positive payment history as you make regular repayments. A good credit score can be beneficial for future financing needs or even negotiating better terms with suppliers.

Flexibility in Repayment

Another advantage of financing is the flexibility it offers in repayment terms. Equipment financing options are often customizable, allowing you to choose a repayment plan that aligns with your restaurant’s cash flow. This flexibility means that during slower months, your repayments can be lower, providing much-needed relief to restaurant owners.

In conclusion, financing restaurant equipment can offer significant benefits to restaurant owners. It enables you to leverage the latest equipment to enhance your operations while maintaining healthy cash flow and working capital. At Noreast Capital, we’re committed to helping restaurant owners understand and navigate the complexities of equipment financing. With our flexible financing solutions, we can help turn your restaurant dreams into a reality.

How to Apply for Restaurant Equipment Financing

When it comes to understanding how to finance restaurant equipment, the process is quite straightforward and involves a few key steps. At Noreast Capital, we strive to make the experience as seamless as possible, catering to the unique needs of restaurant owners.

Choosing the Right Lender

The first step is to choose the right lender. This should be a lender who understands your industry and can offer flexible financing solutions to meet your specific needs. At Noreast Capital, we specialize in offering tailored financing options for restaurant owners. Our expertise and industry knowledge allow us to offer a seamless financing experience, helping you acquire the equipment you need without breaking the bank.

Preparing Necessary Documents

The next step involves gathering your necessary documents. This typically includes your personal and business financial information to establish your credit history and give lenders confidence in your ability to handle large sums of money. You may also need to provide personal identification, tax information, and potentially even a formal equipment quote. By preparing these documents in advance, you can speed up the funding process significantly.

Application Process and Timeline

Once you have all your documents ready, you can proceed with the application. Applying for restaurant equipment financing with us is quick and easy. Because you already have all your documentation together, you could potentially access financing for your equipment in as little as 24 hours. At Noreast Capital, we understand the urgency that comes with running a restaurant, and we aim to expedite the process as much as possible.

Receiving Funds and Purchasing Equipment

After your application is approved, you will receive the funds and can then purchase the equipment you need. This could range from refrigerators, ovens, and stove ranges to ice machines, beverage dispensers, and dishwashing machines. With your loan, you may also be able to finance furniture for your restaurant and even HVAC services.

The goal of restaurant equipment financing is to help you purchase equipment quickly and efficiently, keeping up with changes in the restaurant industry and ensuring your restaurant can deliver exceptional culinary experiences.

At Noreast Capital, we’re committed to helping you navigate every step of financing your restaurant equipment. Contact us today, and let’s turn your restaurant dreams into a reality!

Leasing as an Alternative to Financing Restaurant Equipment

As a restaurant owner, it’s critical to stay on top of the latest innovations to deliver the best dining experience to your customers. Sometimes, this means investing in new equipment, but what if you’re not ready to purchase? That’s where leasing comes into play. Leasing is an alternative way to finance restaurant equipment that can offer several benefits over traditional financing options.

Understanding Equipment Leasing

Equipment leasing is similar to renting. You pay a fixed amount to use the equipment for a specified period, without the upfront cost or commitment of ownership. This agreement is between you, the lessee, and the lessor, who owns the equipment.

Leasing doesn’t involve taking on debt, unlike traditional financing options. Instead, it allows you to use the latest restaurant equipment without depleting your cash reserves. This flexible solution is often accompanied by lower down payments and monthly payments than traditional loans, as the lessor retains ownership of the asset and can lease it to multiple businesses.

Benefits of Leasing Restaurant Equipment

When you lease equipment, you’re not only saving money upfront but also preserving your working capital for other operational needs. This way, you can invest in improving your restaurant’s service, marketing, or even expanding to a new location.

Another major benefit of leasing is the ability to stay current with evolving technology. For restaurants, having the latest appliances, like high-tech ovens or advanced POS systems, can greatly enhance your efficiency and customer service. By leasing, you can upgrade your equipment regularly without the financial burden of ownership.

Moreover, leasing may not appear as a liability on your balance sheet, leaving your credit lines undisturbed. This means you have more financial flexibility to take care of unexpected expenses or seize new business opportunities when they arise.

How Leasing Works

The process of leasing restaurant equipment is straightforward. First, you choose the equipment you need and negotiate the terms of the lease with the lessor. This includes determining the lease period, usually ranging from one to five years, and the monthly payments.

Once the agreement is in place, you can start using the equipment in your restaurant. At the end of the lease term, you have the option to return the equipment, extend the lease, or, in some cases, purchase the equipment at a reduced price.

At Noreast Capital, we offer flexible leasing solutions tailored to your restaurant’s unique needs. With our expert knowledge and partnership with various lenders, we’re here to help you find the best way to finance your restaurant equipment. Contact us today, and let’s explore how leasing can benefit your restaurant.

Tax Benefits of Financing and Leasing Restaurant Equipment

One of the key advantages of financing or leasing restaurant equipment is the potential for significant tax benefits. Specifically, the Section 179 Deduction is a tax provision that can make a substantial impact on your bottom line.

Section 179 Deduction Explained

The Section 179 Deduction is a tax incentive designed to encourage businesses to invest in themselves by purchasing, financing, or leasing new or used equipment. This provision allows small and medium-sized businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year.

For example, if you spend $10,000 on equipment for your restaurant and qualify for the Section 179 Deduction, you can deduct the entire $10,000 from your net income. If you’re in a 35% tax bracket, this means a tax saving of $3,500. Instead of the equipment costing you $10,000, after tax savings, it effectively costs you only $6,500.

The beauty of Section 179 is that it’s designed to spur economic growth, so nearly all types of “business equipment” that your restaurant needs to operate qualify for the deduction. However, there is a limit on the total amount that can be written off ($1,000,000 for 2020), and a limit on the total amount of the equipment purchased ($2,500,000 for 2020).

How to Take Advantage of Tax Benefits

To leverage these tax benefits, you should consider working with a dedicated tax specialist or your accountant, especially one familiar with the restaurant industry and leasing. They’ll be able to guide you on how to maximize profits within legal bounds while ensuring you don’t face any penalties or audits due to errors.

At Noreast Capital, we understand the importance of financial planning and tax advantages when it comes to financing or leasing your restaurant equipment. We’re here to guide you through the financing process and help you understand the potential tax benefits available to you.

Using the Section 179 Deduction for restaurant equipment financing and leasing could significantly impact your restaurant’s cash flow and overall financial health. However, every business’s situation is unique, and tax regulations frequently change, so it’s important to consult with a tax professional.

In conclusion, leasing and financing restaurant equipment not only helps you preserve your capital and improve cash flow, but it can also provide you with significant tax advantages. At Noreast Capital, we’re committed to helping you understand these benefits and navigate the process of financing or leasing your restaurant’s equipment.

Contact us today to learn more about how to finance restaurant equipment and take advantage of these tax benefits. We’re here to help you turn your restaurant dreams into reality.

Conclusion

Recap of Financing and Leasing Restaurant Equipment

As we’ve explored throughout this guide, figuring out how to finance restaurant equipment is a critical step in the journey of any restaurant business. From traditional equipment financing to leasing alternatives, there are various options available that can cater to your unique needs.

In financing, you borrow money to purchase the equipment outright. It helps preserve working capital, enables positive cash flow generation, and offers flexibility in repayment. On the other hand, leasing is like renting equipment for a specific period, providing the advantage of lower upfront costs, predictable payments, and reduced risks associated with equipment ownership.

Both methods have their unique benefits and can be tailored to fit the specific circumstances of your restaurant business. Moreover, these financing options may also provide you with tax benefits under Section 179, further enhancing the financial viability of your investment in restaurant equipment.

Final Thoughts and Recommendations

Determining the best way to finance your restaurant equipment can be a complex decision. It involves careful evaluation of your financial standing, future needs, and the terms and conditions of financing agreements.

At Noreast Capital, we advise you to take your time to understand the fine print, ask about potential hidden fees, and don’t hesitate to negotiate terms that will best cater to your needs. The goal is to ensure not just the growth but the long-term success of your business.

Should you need assistance in navigating these decisions, our expert, Vincent Cerniglia, is available to guide you through the process. We’re dedicated to helping you secure the equipment you need to take your restaurant to the next level without straining your budget or cash flow.

Reach out today and let us help you turn your restaurant dreams into a reality. We look forward to partnering with you in your journey to success.

For further reading, we recommend exploring our restaurant financing options and getting in touch with us through our contact page.

Restaurant Equipment Financing - how to finance restaurant equipment

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