Everything you must know about restaurant equipment leasing

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Are you planning to open up your restaurant? There are several things you can do before you open one for yourself. You should have your strategy and a great location with sufficient capital, just like any other business. It is where you should also consider the option to go for restaurant equipment leasing

Setting up your restaurant is never the cheapest thing you can do in the world, and some individuals can hardly shell out the capital required for it and work with it on their own. Restaurant owners have several finance options, mainly for their equipment, luckily for the ones who require help in that area.

You might check out that using the proper equipment finance option is vital, and it is a massive factor that helps you decide the success behind your restaurant, even if your restaurant has been operating for a while. Restaurants need to change the equipment often to ensure that the food preparation is done appropriately for one thing. They would also find themselves in need of equipment to stay competitive.

Sadly, outfitting the restaurant with new kitchen equipment and furniture is expensive. As you try to acquire the new equipment with only your working capital leads to financial issues later. You should know to use the proper equipment finance options at low-interest rates.

Overview of a Lease

Leases always involve the lessor – the company or the person who allows out a piece of their property or equipment to the lessee agreeing to pay for the property or equipment over a specific period. The lease involves all the services and products while the agreement signed both by the lessee or the lessor before the beginning of the lease period includes the terms & conditions and the duration.

It is extremely vital to understand that renting only allows you to use the equipment in return for a monthly payment. In contrast, these leases allow you to make the balloon payment at the end of the lease term while buying the equipment for good, although many individuals might confuse renting vs. leasing the restaurant equipment.

Leasing Restaurant Equipment: A New Way of Buying

Several restaurant owners are wondering whether or not they should buy or rent restaurant equipment. The increased availability of leases helps business owners to avail the better restaurant finance options. Restaurant equipment leasing allows you to use, upgrade and service the equipment under the agreement; however, the lessors even allow the business owners to purchase the equipment at the end of the term. Leasing entails two primary benefits as opposed to the other options for procurement, such as:

  • Nominal expense: The upfront cost for the leases are never high as the price tags for the new equipment will allow you to hold onto more capital. The restaurant equipment leasing needs distinctive upgrades every few years that allow the establishment to revamp its existing arsenal at cost-effective prices.
  • Lease-to-own equipment: Lease agreements often offer the option of purchasing the equipment in return for balloon payments. It would make it a viable option for restaurant owners whenever they consider leasing restaurant equipment against buying it upfront. These options allow businesses to get the equipment’s feel before committing to it. They can easily opt-out to the buying option and instead select an upgrade if the business owners are eager for a change.

What Are the Benefits of Leasing Restaurant Equipment?

Leasing commercial restaurant equipment might become a viable option than what the homeowners are using. Commercial kitchen appliances are costly and place a significant dent into your initial investment leading to greater interest fees. The following are a couple of reasons why you should lease instead of owning restaurant equipment:

  • Equipment Access with Less Capital

With restaurant equipment leasing, you will gain better access to the equipment you need to get your new business up and to operate, even if you do not have much cash. The smaller monthly payment is a highly affordable option for you instead of one lump sum payment. You need not necessarily have to attain good credit for leasing the equipment, making it a perfect option for several business owners.

The rise in the interest payments takes out that much money could have you over your head even if you acquire the required funds to own equipment. Remember that since you are approved for a certain amount, it does not mean you should take out the entire amount at once. Ensure that you are able to afford the monthly payment on your business loans and become realistic with the amount you wish to make while starting out.

  • Tax Deductions

Your lease payments might involve the tax-deductible since they are operating at business expenses, depending on how this CRA classifies your leasing agreements. You need to pay the taxes upfront on it however whenever you are leasing it, you are paying the taxes every month instead of the large lump sum whenever you are purchasing an item. Although you need to understand that you will not make any tax deductions for the devaluations on the items you lease.

  • Short Term Needs

If your business is just starting, it is always better to opt for the affordable ones, involving the light-duty ones, before you know the number of customers who expect to serve daily. You will always have the opportunity to return the equipment at the end of the lease term. Keep in mind to check out the lease contract thoroughly to know the end of the lease options.

Leasing is the best for business owners who are not certain about the kind of equipment they require as it is that way, you do not have to worry about regretting the major purchases and having to sell them for less than whatever you have bought them since it is used.

  • Opportunity to Buy

Several leasing services offer buy-out options at the end of the lease term; however, the approval might depend on your credit score. It is the ideal option that is best for the items you plan on retaining for the entire business life however you might not afford the purchases upfront. This way, you can continue using items you have already installed in your kitchen, which are completely yours.

Restaurant Equipment Finance Options to Choose From

As mentioned, you will have several restaurant equipment financing options. You have to pick the one that is right as you are more likely to check out the better returns from it later on. But it depends on the state of your business and how you use the equipment finance options for the restaurant. You can make a wise pick for your restaurant business when you know more about each one.

  1. SBA Loans for Restaurants

SBA loan is one of the ideal equipment finance options, also known as the US Small Business Administration loan. SBA loan is a highly affordable option because it has long repayment terms.

Additionally, the SBA loan is the perfect one for business financing or the leasing option to buy long-term investments such as restaurant remodeling, etc.

SBA loan is the ideal option for borrowers with a huge personal credit profile apart from that. The owners of the restaurant businesses can easily avail of the SBA loan as long as their credit score is over 700, as they are showing an income of over six figures while injecting 10-30% equity into the businesses.

SBA loans are not the perfect equipment finance option if you need the restaurant equipment instantly as it is since the SBA loans generally are the ones with the longest funds.

The following are your eligibility qualifications:

  • A credit score of more than 700
  • Over 100,000 annual income
  • Down payment of 10%
  • In certain instances, the collateral is even required, mainly if you are a startup business searching for larger SBA loans.
  1. Restaurant Equipment Loans

 

 

Restaurant equipment loans are the ideal solution for any other business finance options for several ones. Restaurant equipment loans are the ideal solution since this is the kind of loan easily acquired whenever your credit or cash flow is good since you will have no open tax liens.

A part of this arrives from the fact that several equipment lenders offering these loans never demand any kind of collateral. The equipment itself here is collateral with the restaurant equipment loans. In reality, most equipment lenders only ask for short easy equipment loan applications, which means there are fewer documents to prepare while applying for these straightforward loans.

It will benefit you in terms of how instantly you can decide on the equipment lender for these loans. However, you need to understand:

  • You can submit faster requirements
  • Lenders can instantly look over them quickly.

The entire process gets expedited compared to the review processing with your local banks. You will get a chance to make fast decisions than you would with the other business finance options.

If you get the approval, your funding still entirely depends partly on the credit applications. The better your financial circumstances are, the more alluring the terms of the loans become. Either way, using the restaurant equipment loans will help you acquire the necessary equipment as soon as possible. It tends to be the preferred restaurant equipment leasing and business finance option.

  • Business Cash Advance

The business cash advance is a better version of a traditional merchant cash advance. In this type of financing, you will sell the “future sales” of your business. This is one of the best ways to get additional funds quickly, and that’s why many people seeking quick equipment finance options tend to consider it.

But you will have to repay the funds a couple of days or weeks after receiving it. You will even share the profit with your lender till the debt gets paid.

On the better end, even though you need to repay your finances quickly, it never affects the capital massively. It is due to the way these cash advances get repaid. The lender attains around 8% to 13% of the sales this way while lowering it to the average; however, it is worth pointing out that it affects the cash flow during this off-season.

How you repay a business cash advance should not offer you any financial issues. However, you might need to consider them circumspection if the businesses have a seasonal income. Naturally, you will have a tough time repaying the borrowed cash if you have lower sales. Therefore, if the sales are not dependable or continuous, it is best to use the rest of the equipment finance options.

  • Business Lines of Credit

It is one of the options for equipment financing for restaurants as it is since you will only have to pay for whatever you are using with these. The business lines of credit help in several ways as they get used in bulk purchases to fix short-term cash flow issues and offer you rapid access to the working capital.

The option is also a recurring one among the other equipment financing options. Luckily for those who are interested in the option, it is better to get the funds through the help of the business lines of credit, which is easy, and you should follow the steps for qualifying:

  • A credit score of more than 600
  • Being in the line of business for 2 years
  • $150,000+ under the annual business revenues.

The terms are mainly 3 months to 24 months, while you only have to pay for the interest on the money you are taking out so that you can get the approval for a hundred thousand dollars and only use twenty thousand dollars on the interest.

  • Short-Term Restaurant Loans

A short-term restaurant loan is generally utilized for plugging the gaps between the short-term working capital. At times, these are even used for investing in the company’s growth.

Furthermore, it can aid you in financing the equipment for your restaurant while the loan can amount to up to $500,000 and gets funded in just one to three days. The money assists you in acquiring the required equipment for operating your restaurant.

These short-term restaurant loans are acquired easily while the lenders are aiming more on the recent business history and not personal creditworthiness. It involves higher interests. With this being mentioned, you can now have a lower capital cost than traditional loans and even start paying off the borrowed money in a year or less.

Finding the right Business Finance Partner

Any one of these equipment finance options can help grow your restaurant business. But you might have to think more instead of picking the one to use. It is since the success of restaurant equipment leasing even depends on your pick of the right equipment financing partner.

Although it is not sweet as it sounds, a couple of lenders take advantage of their clients, and they are the only ones who benefit from the equipment finance options they offer here.

As such, you have to associate with trusted finance companies that care about their client’s success as much as their own. There are several equipment finance companies these days that you can pick from. But only a few of them are reliable, like Trust Capital.

Trust Capital is a highly reliable equipment finance company as they are known to help their clients succeed and grow by offering the ideal equipment finance options. These are the companies covering several industries too. Trust Capital can help your restaurant business through the companies offering finances with a couple of requirements as follows:

  • The active business entity or business licenses with the state secretary
  • Personal guarantees are required from every owner
  • A credit score of a minimum of 600
  • No bankruptcies in the past seven years
  • No unresolved tax liaisons

After you receive approval, you can easily access over myriads of benefits that include the following:

  • 100% purchase financial programs
  • Up to $250,000 with an easier one-page application
  • Financial disclosure to about $5000000
  • Pre-funding and next-day funding available for the eligible equipment vendors
  • Deferred payments terms to about seven years
  • No down payment involved
  • Same-day approval in one to two hours.
  • No restrictions on age
  • Eligibility for every new and used restaurant equipment purchase

Consider using a restaurant equipment loan calculator to determine your monthly payments and interest rate. 

Figure out what the monthly payments and interest rates would be while considering using the restaurant equipment loan calculator online.

Conclusion

Today, we discussed the equipment finance options to help restaurant owners. These owners mainly have issues related to their capital, and it is because they have to get their equipment replaced daily. They need a lot of money to replace the equipment, not because restaurant equipment is costly but because you can easily avail of restaurant equipment leasing.

But, they can resolve this issue easily since there are several equipment finance options you can pick from.

The general equipment finance options are SBA loans, business cash advances, short-term restaurant loans, and restaurant equipment loans. Those under the equipment leased options can help the restaurant owners. But, success would depend on the hand-picked financial partner.

It is the reason why it is always best to associate with reliable equipment finance companies like Trust Capital, as they are the ones who are the most respected under the equipment financing solutions through the firms.

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