Restaurant business loans break into seven distinct categories, each with different rate ranges, close times, and use cases. SBA 7(a) is the cheapest (8.5%–11.5%) but slowest (4–8 weeks). Equipment financing is fast (24–72 hours) but more expensive (5.99%–24%). MCAs are the fastest cash (same day) but the most expensive (40%–150% effective APR). This guide ranks all seven by realistic operator scenarios.
1. SBA 7(a) — large planned investments, full build-out, real estate purchase. 8.5%–11.5% APR, 10–25 yr terms, 4–8 week close.
2. SBA microloan — startup restaurants, small equipment buys (≤$50K). 8%–13% APR, 4–6 yr terms, 2–4 week close.
3. Equipment financing — specific equipment buys with tight install timelines. 5.99%–24% APR, 24–84 month terms, 24–72 hour close.
4. Business line of credit — working capital, seasonality, opportunity cash. 8%–25% APR, revolving, draw as needed.
5. EFA (Equipment Finance Agreement) — restaurant-vertical equipment, faster than SBA, simpler than equipment financing. 7%–20% APR, 24–60 month terms, 3–5 day close.
6. Restaurant business credit card — smallwares, short-term timing, employee expenses. 18%–28% APR, revolving, instant access.
7. MCA — emergency cash, last resort. 1.2x–1.5x factor rate (40%–150% effective APR), same-day funding. Avoid unless you have no other option.
Most operators stack 2–3 of the above. Typical pattern: SBA 7(a) for the largest piece (build-out, real estate, opening costs), equipment financing for specific high-cost items added later (replacement walk-in, new POS, additional refrigeration), business line of credit for working capital and slow-season cash flow. MCAs and credit cards as bridge tools when timing breaks. Pure SBA-only or pure equipment-financing-only restaurants are rare.
Top 5 decline reasons: (1) revenue too low — most lenders want $10K+/mo for any meaningful loan, $50K+/mo for SBA. (2) Time in business under 12 months — knockout for most lenders, fixable with restaurant-vertical specialists. (3) Personal credit under 580 — fixable with co-signer or higher down payment. (4) Industry concentration — some lenders cap restaurant exposure; rotate to a different lender. (5) Cash flow ratio (debt service coverage) under 1.25x — fixable by reducing loan size.
Merchant cash advance is the most expensive money in restaurant financing. A $50K MCA at 1.4 factor = $70K total repayment over 6–12 months = 40–80% effective APR. The only times MCA makes operational sense: (a) you need same-day cash for an emergency repair (broken hood, broken walk-in compressor), (b) you have a confirmed near-term cash inflow (insurance settlement, partner buy-in) and can repay within 60 days, (c) you've literally exhausted every other option. Otherwise, MCA is a slow leak that kills more restaurants than it saves.
| Loan Type | Rate Range | Term | Close Time | Best Use |
|---|---|---|---|---|
| SBA 7(a) | 8.5%–11.5% | 10–25 yr | 4–8 weeks | Large planned investment |
| SBA Microloan | 8%–13% | 4–6 yr | 2–4 weeks | Startup, ≤$50K |
| Equipment Financing | 5.99%–24% | 24–84 mo | 24–72 hrs | Specific equipment buys |
| EFA | 7%–20% | 24–60 mo | 3–5 days | Restaurant standard |
| Line of Credit | 8%–25% | Revolving | 1–2 weeks | Working capital |
| Credit Card | 18%–28% | Revolving | Instant | Smallwares, short-term |
| MCA | 40%–150% APR | 6–12 mo | Same day | Emergency only |
Equipment financing through restaurant-vertical lenders (Beacon Funding, Crest Capital) for established operators with 600+ credit. Approval rates run 70–85% on clean applications. MCAs are technically easier but should be avoided.
SBA 7(a) at 8.5%–11.5% APR, hands down. The trade-off is paperwork (80–150 page application) and time (4–8 week close). For loans under $50K, SBA microloan at 8%–13% is the cheapest small-loan option.
Yes — restaurant-vertical equipment lenders approve down to 550 credit with 20–25% down and 15–28% APR. SBA usually requires 650+. Avoid MCAs even though they'll approve sub-500 credit — the effective APR is too damaging.
Focus on three routes: (1) SBA microloan — designed for startups, accepts 0 time in business. (2) Restaurant-vertical equipment lenders (Beacon, Crest, eLease) — higher down payment but they'll approve. (3) Vendor financing through equipment dealers — convenient if buying from one supplier. Avoid MCAs at all costs in year 1.
Depends on loan type and your financials. Rule of thumb: total business debt should not exceed 30–40% of gross annual revenue, debt service should not exceed 1/0.8 of monthly net cash flow (debt service coverage ratio of 1.25x). A restaurant with $50K/mo revenue can typically support $200K–$300K in total business debt.
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