Restaurant Financing 101: How to Fund Your Business

Restaurant financing is money used to open, run, or grow a restaurant through loans, lines of credit, equipment financing, or investment. The right option depends on what you need to fund and what your business can afford.

For restaurants already serving customers, the sales recorded each day can help lenders understand what the business can repay. Toast Capital uses sales and Toast account history to help determine eligibility for loans issued by WebBank, putting those existing records to work in the financing process.

This guide explains your financing options, what lenders look for, and how to compare costs and repayment terms before choosing an offer.

Key takeaways

• Match the financing type and repayment period to what your restaurant needs to fund.

• Lenders evaluate repayment ability using factors such as sales, cash flow, credit, and operating history.

• Compare total borrowing costs, fees, and payment schedules—not just the advertised rate.

• Make sure repayments leave room for essential bills, including during slower periods.

• Toast Capital considers sales and account history without a credit-score requirement, but approval is not guaranteed.

What restaurant financing options are available?

Restaurants can finance everything from a replacement refrigerator to a second location, but those expenses may call for different funding arrangements. A seasonal cash shortage is different from purchasing a building or opening your first restaurant.

Start with a restaurant budget that identifies what you need, when you need it, and how much it will cost. Then compare the options that match that purpose.

Keep in mind that SBA programs serve different purposes:

• SBA 7(a) loans: Can fund working capital, equipment, business acquisitions, and qualifying real estate expenses.

• SBA 504 loans: Support major fixed assets, such as buildings and qualifying long-term equipment, but cannot fund working capital or inventory.

• SBA microloans: Provide up to $50,000 through nonprofit intermediary lenders for uses such as supplies, equipment, and working capital.

Payment structure matters, too. Toast Capital, for example, is a business loan—not a merchant cash advance. Repayment includes the amount borrowed plus a fixed fee, collected through a percentage of daily card transactions. Payments vary with sales, but a final repayment deadline and any applicable minimum repayment milestones still apply.

What do lenders look for when financing a restaurant?

Lenders evaluate whether the restaurant can repay the requested financing. The information they use varies, so a restaurant that doesn’t qualify for one product may still meet another lender’s requirements. Common considerations include:

• Sales history: Revenue consistency, seasonal patterns, and recent changes in demand.

• Cash flow: Money available after operating expenses and existing debt payments.

• Operating history: How long the restaurant has been open and its financial track record.

• Credit history: Personal or business credit, depending on the lender.

• Existing obligations: Outstanding loans, liens, and other repayment commitments.

• Owner investment and security: Any required cash contribution, collateral, or personal guarantee.

• Funding purpose: What the money will accomplish and how it supports the business.

Sales records help show what’s happening beyond a single bank balance. Toast Point of Sale brings transaction activity into connected reporting, helping operators review sales trends and document business performance. Those records are useful alongside expense and cash-flow information; revenue alone doesn’t establish repayment capacity.

For Toast Capital, eligibility considers factors including card-processing volume and time on Toast, without a credit-score requirement. Loans remain subject to credit approval.

New restaurants have a different challenge: there may be no sales history to review. Applicants may need to rely more heavily on owner finances, relevant experience, projections, and a clear business plan.

How much does restaurant financing cost?

Restaurant financing costs depend on the amount borrowed, rate or fee, repayment period, and additional charges. The advertised rate is only one part of the comparison. Before accepting an offer, review:

• Amount received: Confirm how much reaches your account after any upfront deductions.

• Total repayment: Add the principal, interest, and applicable fees to understand the full dollar commitment.

• Rate or fee structure: An interest rate, APR, fixed fee, and factor rate describe different things; a flat fee percentage is not an annual borrowing rate.

• Payment schedule: Monthly, weekly, daily, and sales-linked payments affect available cash differently.

• Repayment term: A longer term may reduce individual payments while increasing total interest.

• Prepayment conditions: Check whether paying early reduces the cost and whether any penalties apply.

• Security requirements: Understand which business assets or personal obligations could be at risk if the loan is not repaid.

For example, a hypothetical $50,000 loan with a 10% fixed annual interest rate, repaid over 60 equal monthly payments, would cost approximately $1,062 per month before fees. Total payments would be about $63,741. 

That’s an illustration, not a current market quote or Toast Capital offer. A different rate, repayment period, or fee structure changes the result.

Your profit and loss statement helps establish whether the business is profitable, but it doesn’t show every cash obligation. Loan principal repayments, for example, use cash without appearing as an operating expense. Review both profitability and projected cash flow before deciding what the restaurant can afford.

How to choose and apply for restaurant financing

A strong application starts with a clear funding need and a realistic repayment plan. You don’t need to apply for every available product; focus on options that fit the expense and the business.

1. Define the need: Identify the expense, deadline, and expected benefit. Replacing essential equipment requires a different plan from testing a new catering service.

2. Calculate the funding gap: Subtract the cash you can contribute without leaving payroll, rent, and other commitments short. Include a reasonable cushion for project delays or unexpected costs.

3. Test repayment affordability: Forecast cash flow during normal and slower periods. Include existing debt payments and any delay before the investment begins producing results.

4. Shortlist suitable options: Compare eligibility, permitted uses, funding timelines, and repayment terms. Look for a repayment period that fits how the money will be used.

5. Prepare the requested documents: Depending on the lender, these may include bank statements, tax returns, a balance sheet, income statements, ownership details, and equipment quotes.

6. Compare written offers: Review the same borrowing amount across providers, including total cost, payment timing, guarantees, and default terms. Ask the lender to explain anything unclear before signing.

Documentation varies by loan type and lender. A streamlined application may use existing business information, but that doesn’t mean approval is automatic or that additional documents will never be requested.

If recurring operating losses are creating the funding gap, address the underlying costs, pricing, or sales problem alongside the financing decision. Borrowing can provide time to make changes, but it can’t make those changes for you.

How to manage cash flow alongside restaurant financing

Once funding arrives, repayments need a place in the same cash plan as payroll, rent, ingredients, and taxes. It also helps to distinguish needing additional capital from waiting for money the restaurant has already earned.

• Set aside essential expenses: Toast Checking offers Jars that automatically allocate portions of daily card sales for expenses such as payroll and rent. Banking services are provided by Thread Bank, Member FDIC; Toast is not an FDIC-insured bank.

• Review deposit timing: Instant Deposit provides faster access to eligible sales proceeds, subject to fees, limits, and eligibility. It is not a loan and does not create additional revenue.

• Plan around repayments: Account for scheduled payments or sales-linked deductions before deciding how much cash is available for other purchases.

• Track the result: Compare the financed project’s actual costs and benefits with the original plan, whether the goal was lower repair costs, faster service, or additional sales.

Keeping these decisions connected helps prevent a healthy-looking account balance from hiding upcoming obligations.

Find funding that fits your budget

A new oven or a second location needs funding, but payroll and rent still need paying. Seeing those costs together makes it easier to decide how much to borrow and what you can afford to repay.

Toast Finance puts tools for managing deposits, setting money aside, and finding funding in one place. Eligible operators can check Toast Capital offers and compare the repayments with their budget before taking the next step.

FAQ

Can you finance a restaurant?

Yes, restaurants can use business loans, lines of credit, equipment financing, or investment to cover opening costs, everyday operations, improvements, or expansion.

What is the monthly payment on a $50,000 business loan?

A hypothetical $50,000 business loan with a 10% fixed annual interest rate and 60 equal monthly payments would cost approximately $1,062 per month before fees.

Do commercial loans require 20% down?

No—a 20% down payment is not a universal requirement because the amount you must contribute depends on the lender, loan program, and what you’re financing.

What is the best loan for a restaurant?

The best restaurant loan matches the expense you need to fund, meets your eligibility needs, and has a total cost and repayment schedule your business can afford.

What credit score do you need for restaurant financing?

Credit-score requirements vary by lender, and some options, including Toast Capital, have no credit-score requirement but still require eligibility review and credit approval.

How long does it take to pay off a restaurant loan?

Restaurant loan repayment can range from a few months to 25 years, depending on the financing type, loan purpose, and repayment terms in your agreement.