Equipment Financing for Restaurants: The Complete 2025 Guide to Funding Your Kitchen

A single commercial oven costs $15,000–$50,000. A walk-in cooler runs $5,000–$15,000. A full kitchen buildout for a new restaurant? That's $100,000–$300,000 before you serve your first plate.

Most restaurant owners don't have that kind of cash sitting around. They shouldn't tie it up in equipment even if they do.

Equipment financing lets you spread those costs over 2–7 years, keeping cash free for payroll, inventory, and the dozen emergencies that hit every restaurant in year one. The equipment itself serves as collateral, which means approval rates run higher and interest rates lower than unsecured loans.

This guide breaks down every equipment financing option available to restaurant owners in 2025 — what each costs, who qualifies, and how to pick the right one for your situation.

Why Equipment Financing Makes Sense for Restaurants

The Cash Flow Math

Restaurants operate on thin margins. The National Restaurant Association reports average profit margins of 3–5% for full-service restaurants. Dropping $50,000 on a combi oven wipes out months of profit overnight.

Equipment financing flips that equation. Instead of a $50,000 hit, you're paying $900–$1,200/month. That oven generates revenue from day one while you pay it off over five years.

Here's what a typical restaurant kitchen equipment package looks like:

Tax Advantages

Section 179 of the IRS tax code lets you deduct the full purchase price of financed equipment in the year you buy it, up to $1,160,000 for 2025. A $100,000 kitchen buildout financed over five years could still be fully deducted in year one.

[CALLOUT-TIP: Section 179 deduction applies to financed equipment, not just cash purchases. Talk to your accountant before year-end to maximize your 2025 deduction.]

Bonus depreciation remains available at 40% for 2025, giving you another deduction layer if you exceed Section 179 limits.

The Preservation Principle

The Preservation Principle — keeping your cash reserves intact while still acquiring essential assets — sits at the core of smart restaurant financing. A restaurant with $100,000 in the bank and a $100,000 equipment loan is in a far stronger position than one that spent all its cash on equipment. The first restaurant can survive a slow February, a broken HVAC system, or a health inspection shutdown. The second is one bad week from a cash crisis.

This principle applies double for restaurants because of seasonal revenue swings. Your July revenue might be triple your January numbers. Financing locks in a fixed monthly payment regardless of season, while your cash reserves absorb the dips.

Types of Equipment Financing for Restaurants

Equipment Loans

An equipment loan works like a car loan. You borrow a specific amount, buy the equipment, and repay with interest over a set term. You own the equipment from day one.

Best for: Established restaurants with 2+ years in business and strong credit buying equipment with a long useful life (walk-in coolers, ventilation systems, commercial ranges).

Typical terms:

• Interest rates: 6–12% for strong credit, 12–25% for newer businesses
• Terms: 2–7 years
• Down payment: 0–20%
• Credit score minimum: 600+ (lower available with higher rates)

The equipment secures the loan. If you default, the lender takes the equipment — but nothing else. This makes equipment loans less risky for both sides compared to unsecured financing.

Equipment Leasing

Leasing means you pay for the use of equipment without owning it. At lease end, you either return it, buy it at fair market value, or sign a new lease for updated equipment.

Best for: Technology that becomes outdated fast (POS systems, digital menu boards) or restaurants testing a concept before committing to ownership.

Two main lease types matter for restaurants:

Capital Lease (or $1 Buyout Lease): Functions like a loan. You pay the full equipment value plus interest over the lease term, then buy it for $1 at the end. Shows as an asset and liability on your balance sheet.

Operating Lease (or Fair Market Value Lease): Lower monthly payments because you're not paying for full ownership. At lease end, you buy at fair market value, return it, or re-lease. Stays off your balance sheet as an operating expense.

[CALLOUT-NOTE: An operating lease on a $40,000 combi oven might run $700/month over 5 years. A capital lease on the same oven runs $850/month — but you own it at the end for $1.]

SBA Loans

The Small Business Administration's 7(a) and 504 loan programs offer some of the lowest rates available for equipment financing.

SBA 7(a) Loan:

• Up to $5 million
• Rates: Prime + 2.25–4.75% (currently around 9–13%)
• Terms: Up to 10 years for equipment
• Down payment: 10–20%

SBA 504 Loan:

• Designed for major fixed assets
• Rates: Often below 7%
• Terms: 10–20 years
• Down payment: 10%

The catch: SBA loans take 30–90 days to close. The paperwork fills binders. You'll need 2–3 years of tax returns, detailed financial projections, and a business plan. For a $200,000+ kitchen buildout, the lower rate justifies the wait. For a $15,000 ice machine, it doesn't.

Vendor/Manufacturer Financing

Many restaurant equipment manufacturers and distributors offer in-house financing. Companies like Hobart, True Manufacturing, and Rational run their own financing programs.

Pros:

• Fastest approval (sometimes same-day)
• Promotional rates (0% for 6–12 months is common)
• Bundled service/maintenance agreements

Cons:

• Limited to that vendor's equipment
• Rates jump after the promotional period (often to 18–24%)
• Less flexibility on terms

[CALLOUT-WARNING: Watch for deferred interest on vendor financing. A "0% for 12 months" offer often means if you don't pay in full by month 12, you owe interest retroactively on the entire original balance. Read the fine print.]

Online/Alternative Lenders

Online lenders like FundLocal, Kabbage, and OnDeck fill the gap between traditional bank loans and vendor financing. Approval is fast — often within hours — and credit requirements are lower.

Typical terms:

• Interest rates: 8–30%
• Terms: 1–5 years
• Minimum credit score: 550+
• Time in business: 6+ months
• Minimum revenue: $100,000+/year

The tradeoff is cost. A restaurant owner with a 620 credit score might pay 18% through an online lender versus 10% at a bank. But if the bank says no — or takes 6 weeks to say yes while your broken fryer costs you $500/day in lost sales — the math changes fast.

How to Qualify: What Lenders Look At

The Five Factors

1. Time in Business

• Under 1 year: Limited to vendor financing, online lenders, or SBA microloans
• 1–2 years: Most online lenders, some equipment leasing companies
• 2+ years: Full range of options including banks and SBA loans

2. Credit Score

• 700+: Best rates across all lender types
• 650–699: Good options, slightly higher rates
• 600–649: Online lenders and some equipment lessors
• Below 600: Vendor financing, secured options with larger down payments

3. Annual Revenue Most lenders want to see at least $100,000 in annual revenue. Equipment loan payments shouldn't exceed 20–25% of monthly net income.

4. Debt Service Coverage Ratio (DSCR) Lenders divide your net operating income by your total debt payments. They want to see 1.25 or higher — meaning you earn $1.25 for every $1 in debt obligations.

5. The Equipment Itself Lenders finance equipment based on its useful life and resale value. A stainless steel walk-in cooler with a 15-year lifespan is easy to finance for 7 years. A specialty food processor with limited resale value gets shorter terms and stricter requirements.

New Restaurant Considerations

Opening a new restaurant with no operating history is the toughest financing scenario. Here's what works:

• SBA microloans (up to $50,000) through Community Development Financial Institutions
• Vendor financing with equipment as collateral
• Personal credit-based equipment loans through online lenders
• Equipment leasing with a personal guarantee

Expect to put 15–25% down and pay rates 3–5 percentage points higher than established restaurants. A strong business plan, restaurant industry experience, and a signed lease for your space all help your application.

The Application Process: Step by Step

Before You Apply

Step 1: Know exactly what you need. Get specific quotes for each piece of equipment — make, model, vendor, price. "About $50,000 for kitchen equipment" won't cut it.

Step 2: Gather your documents.

• 2–3 years of business tax returns (or personal if pre-revenue)
• 6 months of bank statements
• Profit & loss statement
• Equipment quotes with vendor details
• Business plan (for new restaurants)
• Commercial lease agreement

Step 3: Check your credit. Pull your business and personal credit reports. Dispute errors before applying — a single fixed error can move your score 20–40 points.

Comparing Offers

Never take the first offer. Apply to at least three lenders and compare:

[CALLOUT-INSIGHT: A 10% interest rate over 5 years on $100,000 costs $27,480 in total interest. A 15% rate over 3 years costs $24,870. The "higher" rate actually costs less because of the shorter term. Always compare total cost, not just the rate.]

The Preservation Principle applies here too. A slightly higher rate that requires zero down payment might preserve more cash than a lower rate with 20% down. Run the numbers for your specific situation.

Smart Strategies for Restaurant Equipment Financing

Bundle Strategically

Financing a complete kitchen package ($100,000+) often gets you better terms than financing individual pieces. Lenders prefer larger deals — their processing costs are similar whether the loan is $15,000 or $150,000.

If you're opening a new restaurant, get quotes for the entire equipment package and finance it together. If you're upgrading an existing kitchen, batch your purchases into a single financing application.

Time Your Purchases

Equipment dealers are most flexible on price in October through December, when they're pushing to hit annual sales targets. Finance approval in hand before you negotiate gives you buyer leverage — dealers prefer a sure sale at a lower margin over a maybe at full price.

Used Equipment: Hidden Value

A 3-year-old commercial range that cost $30,000 new might sell for $12,000–$15,000. Most lenders finance used equipment, though with shorter terms and sometimes higher rates.

For a new restaurant on a tight budget, financing used equipment from a dealer who offers refurbishment warranties is a strong middle ground. You get quality equipment at 40–60% of new prices with warranty protection.

Auction sites like BidOnEquipment.com and RestaurantEquipment.bid regularly list kitchen equipment from closed restaurants at steep discounts.

Refinance When You Can

If you financed equipment at 18% because your restaurant was new, revisit that debt after 18–24 months of solid revenue. Refinancing at 10% on a $75,000 balance saves roughly $250/month — that's $3,000/year back in your pocket.

Common Mistakes That Cost Restaurant Owners Money

Mistake #1: Financing Equipment You Should Lease

If you're opening a fast-casual concept and aren't sure you'll stick with your POS system for 5 years, don't finance it over 5 years. Lease it for 2–3 years. You'll pay slightly more per month but retain flexibility to upgrade without eating a depreciated asset.

Mistake #2: Ignoring Total Cost of Ownership

A $3,000 ice machine with a $200/month maintenance cost totals $15,600 over 3 years in maintenance alone. A $5,000 ice machine with a $50/month maintenance cost totals $6,800. The "expensive" machine saves $5,800.

Factor maintenance, energy costs, and expected repairs into every financing decision.

Mistake #3: Maxing Out Your Borrowing Capacity

Getting approved for $200,000 doesn't mean you should borrow $200,000. The Preservation Principle reminds us: keep borrowing capacity in reserve. Restaurants hit unexpected expenses — a failed grease trap, a sudden menu pivot, a patio expansion opportunity. Borrow what you need now and preserve room to borrow later.

Mistake #4: Skipping the Personal Guarantee Negotiation

Most lenders require a personal guarantee on restaurant equipment loans. Few borrowers know this is negotiable — especially after 2+ years of business with strong financials. Ask for a limited or partial guarantee, or negotiate a sunset clause that releases the personal guarantee after 24 months of on-time payments.

Equipment Financing for Specific Restaurant Types

Food Trucks

Equipment financing for food trucks covers the truck itself plus the kitchen buildout inside. Total cost: $50,000–$200,000. Many lenders treat the truck as a vehicle loan and the equipment separately, so you may need two financing arrangements.

SBA microloans and online lenders are the most common funding sources. Credit requirements start lower (580+) because the truck itself provides strong collateral.

Ghost Kitchens/Virtual Restaurants

Ghost kitchens need the same commercial equipment as traditional restaurants minus the front-of-house costs. Lower total equipment needs ($40,000–$80,000) make these easier to finance, but some lenders hesitate on the model's track record.

Strong delivery revenue numbers and contracts with platforms like DoorDash or Uber Eats strengthen your application.

Franchise Restaurants

Franchise equipment financing is often simpler because lenders know exactly what equipment a Subway or McDonald's needs and what it costs. Many franchisors have preferred lender relationships with pre-negotiated rates. Check with your franchisor first — you might get better terms through their network than shopping independently.

When to Choose FundLocal

Traditional banks take weeks. SBA loans take months. Vendor financing locks you into one brand.

FundLocal exists because restaurant owners need a faster path. Here's when we're the right fit:

• Speed matters: You need equipment this week, not next quarter
• Your credit isn't perfect: We work with scores starting at 550
• You want flexibility: Finance from any vendor, any equipment type
• You hate paperwork: Our application takes minutes, not binders

We don't replace SBA loans for $300,000 buildouts — those deserve the lower rate even with the longer timeline. But for $10,000–$150,000 in equipment financing with a decision today, that's our sweet spot.

Your Next Move

Here's your action plan for this week:

1. Today: List every piece of equipment you need with specific makes, models, and prices.
2. Tomorrow: Pull your business and personal credit reports. Fix anything that's wrong.
3. Day 3: Apply to three lenders — one bank, one online lender (start with FundLocal), one vendor financing option.
4. Day 5: Compare total costs side by side. Pick the offer that preserves the most cash while keeping payments comfortable in your slowest month.

Every day without the right equipment is lost revenue. That broken fryer isn't fixing itself. That cramped prep area isn't getting bigger. The math on financing almost always beats the math on waiting.

Stop running your kitchen around broken equipment. Get your quotes together and apply today.