Equipment Financing for Restaurants: How It Works and When It Makes Sense

· 8 min read · KitchenEquipmentTrader Editorial

Most restaurant operators don't have $15,000 sitting around to write a check for a commercial range. That's not a failure of planning — that's just the reality of running a restaurant, where cash is always chasing payroll, food cost, and the next repair. Equipment financing exists precisely for this gap: it lets you get the equipment generating revenue now and pay for it over time.

But financing isn't always the right answer, the rates on used equipment are not the same as on new, and not every lender will touch a secondhand combi oven. Here's what you actually need to know.

Financing vs. Leasing: Not the Same Thing

These two terms get used interchangeably, but they're structurally different — and choosing the wrong one costs you money.

Equipment financing (also called an equipment loan) is a secured loan. The equipment itself serves as collateral. You own the equipment from day one, build equity in it, and at the end of the loan term, it's yours free and clear. You can sell it, trade it, or run it until it dies.

Equipment leasing means you're paying for the right to use the equipment without owning it. At the end of the lease term, you typically return the equipment, renew, or exercise a buyout option (often at fair market value or a fixed residual like $1). Monthly payments on leases tend to be lower than loans, but you're not building ownership.

When leasing makes sense:

  • Technology-heavy equipment that becomes obsolete quickly (POS systems, certain combi ovens with proprietary software)
  • You want off-balance-sheet treatment for accounting purposes
  • You know you'll want to upgrade in 3-4 years anyway
  • Cash flow is very tight and you need the lowest possible monthly number

When financing (owning) makes sense:

  • Durable equipment with long service lives — Hobart mixers, ranges, refrigeration
  • You're buying used equipment (leasing used gear is rare; most lessors want new)
  • You want the ability to resell the asset later
  • You plan to hold the equipment for the full productive life

For most used equipment purchases, you'll be financing, not leasing. Lessors overwhelmingly prefer new equipment with a predictable residual value. If you're shopping the used market, a loan is almost always the path.

How the Application Process Works

Commercial equipment financing moves faster than you'd expect. The application process for amounts under $150,000 is often fully digital and can close in 24-72 hours with the right lender.

Here's the typical flow:

  1. Application: Basic business info, time in business, estimated credit profile. Most lenders want 2+ years in business for standard terms; startups can qualify but expect higher rates and may need a personal guarantee.
  2. Soft credit pull: Initial pre-qualification usually doesn't hit your credit.
  3. Documentation: For smaller deals (under $75K), many lenders do "app-only" — no financials required, just the application. Above that, expect 2 years of tax returns and recent bank statements.
  4. Approval and terms: You'll receive an approval with the rate, term, and any required down payment.
  5. Equipment verification: Lender may require an invoice or listing from the seller. For used equipment, some lenders want photos or a third-party inspection.
  6. Funding: Funds go directly to the seller; you begin making payments.

Pro Tip: Apply to 2-3 lenders simultaneously. Each lender has different underwriting criteria, and one "no" doesn't mean you can't get funded. Rate shopping is standard practice and most lenders expect it.

Realistic Rates and Terms

The range is wide because creditworthiness drives rates more than anything else:

  • Loan terms: 24 to 60 months is standard. Longer terms lower your monthly payment but increase total interest paid.
  • Interest rates: 6% to 20% APR. Strong credit (700+ personal score, established business) gets you to the low end. Newer businesses or lower credit scores push toward the high end.
  • Down payment: Zero to 20%. Many lenders advertise "100% financing" — no down payment required — but higher-risk borrowers may be asked for 10-20% down.

The math on a $15,000 purchase:

| Term | Rate | Monthly Payment | Total Paid | |------|------|-----------------|------------| | 36 months | 8% | ~$470 | ~$16,920 | | 48 months | 10% | ~$380 | ~$18,240 | | 60 months | 14% | ~$350 | ~$21,000 |

The shorter the term and the better your rate, the less you pay overall. A 60-month term at 14% costs you $6,000 more than the sticker price. That's real money — which is why the math on "wait vs. finance" matters.

Which Lenders Actually Finance Used Equipment

This is where many buyers get tripped up. They approach a lender, find out the equipment is used, and get told no — or get hit with rates that don't make sense for the deal.

Some lenders will only finance new equipment. They don't want the valuation uncertainty of used gear. Used equipment financing is a specific niche, and you need to work with lenders who understand it.

Lenders with established used equipment programs:

  • Balboa Capital (balboacapital.com): Known for speed and flexibility; does used equipment with competitive terms
  • Crest Capital (crestcapital.com): Solid reputation in the restaurant and foodservice space; handles used equipment; app-only up to $250K
  • Currency Capital: Works with used equipment; fast approvals; good for operators with less-than-perfect credit
  • Direct Capital: Has foodservice-specific programs; used equipment eligible
  • TimePayment: Specializes in smaller deal sizes and credits that other lenders pass on; higher rates but broader approval window

A note on manufacturer captive finance programs: Hobart and Manitowoc have their own financing arms, but these are designed for new equipment sales through their dealer networks. Don't count on them for used purchases.

Pro Tip: Tell the lender upfront that the equipment is used and give them the approximate age and condition. Lenders who are going to have a problem with it will tell you quickly, saving you from a hard credit pull that goes nowhere.

SBA Loans: The Long Game for Bigger Purchases

If you're outfitting a full kitchen — or adding a second location — the SBA 7(a) loan becomes worth the extra paperwork.

  • Maximum loan: up to $5 million
  • Terms: 5 to 10 years for equipment
  • Rates: Prime + 2.25-4.75% — typically lower than commercial equipment loans
  • The catch: 30-90 days to close, extensive documentation, SBA approval required on top of the bank's

The SBA 504 loan is designed for large fixed-asset purchases of $150,000 or more. It pairs a bank loan with a CDC (Certified Development Company) and the SBA. You put in 10%, the CDC covers 40%, the bank covers 50%. Rates are typically fixed and very competitive. For a full kitchen build-out or a major equipment package, this is worth investigating.

Where to start: sba.gov/funding-programs/loans

The SBA route makes most sense when:

  • Your purchase is $50K or more
  • You have time to wait (30-90 days minimum)
  • Your business financials are clean and documented
  • You want the lowest possible long-term rate

For a single piece of equipment under $25K, conventional equipment financing is faster and simpler.

Financing Used vs. New Equipment: The Tradeoffs

Buying used saves money upfront. Financing used saves even more cash upfront. But there are real tradeoffs to understand.

Financing used equipment — the upside:

  • Purchase price is 40-60% lower than new, so you finance a smaller amount
  • The equipment may already be broken in, with known quirks and performance history
  • For high-value brands (Hobart, Rational, True), used equipment still has substantial remaining service life

Financing used equipment — the downside:

  • Higher interest rates (lenders perceive more risk)
  • Fewer lenders willing to participate
  • Lenders may cap financing at 80% of appraised value — and their appraised value may be lower than what you're paying
  • No manufacturer warranty on used equipment (unless a refurbished unit with dealer warranty)
  • If the equipment fails, you still owe the loan

Financing new equipment — the upside:

  • Lower rates, broader lender choice
  • Manufacturer warranty for 1-2 years (covers you during the loan period)
  • Easier to get 100% financing

Financing new equipment — the downside:

  • Post-COVID new equipment prices are still 15-30% above pre-2020 levels Source: NRA Research
  • You're financing a higher starting number
  • Immediate depreciation on day one

The practical sweet spot for used equipment financing: buy recognized brands in good condition. A 5-year-old Hobart mixer or a 3-year-old True refrigerator has documented resale value, and lenders know it. Generic or off-brand used equipment is harder to finance because lenders can't easily value it — and honestly, it may not be worth financing anyway.

When Financing Makes Sense vs. Waiting to Save

The right answer depends on one thing: can the equipment generate more revenue than it costs to finance?

A $15,000 commercial range financed at $400/month over 48 months costs you roughly $3,200 in total interest. If having that range allows you to open your restaurant (or add a service that generates $2,000+ per month in revenue), you've made back the financing cost in 6 weeks. The math is obvious — finance it now.

Where operators get into trouble is financing equipment they don't strictly need yet, or financing at rates so high the monthly burden chokes cash flow. At 20% APR on a 60-month term, you're paying 54% above the purchase price. That math works for replacing a broken piece of critical equipment with no alternative. It doesn't work for a nice-to-have addition.

Rules of thumb:

  • If the equipment directly enables revenue you don't currently have: finance it
  • If the equipment replaces a failed piece that's stopping operations: finance it
  • If you can wait 3-6 months and save: consider waiting (especially if your credit is marginal and you'd qualify for better rates with time)
  • If you're buying used equipment in the $3,000-$8,000 range and have any other credit option (HELOC, business line of credit), compare rates — your existing credit may beat a standalone equipment loan

Pro Tip: Many equipment dealers — including dealers on KitchenEquipmentTrader — have financing partners they work with directly. Ask the seller before you go find your own lender. Dealer-arranged financing sometimes includes promotional rates or streamlined approvals because the lender has a volume relationship with the dealer.

What Dealers Won't Tell You (But Should)

Some used equipment dealers partner with finance companies that pay referral fees — which means they have an incentive to steer you toward their preferred lender even if that lender's rates aren't the best for you. Nothing wrong with using dealer-arranged financing, but compare it against at least one outside quote.

Also: if a dealer can't tell you the age, service history, or last calibration date of the equipment, that's the same information a lender will want. Deals that fall apart at the financing stage usually fall apart because the equipment's provenance is murky. Ask for documentation before you apply.

The used commercial kitchen equipment market runs around $3-5 billion annually. Lenders know this space. The financing infrastructure exists — you just need to find the right lender for your situation, and approach the process with clean documentation and realistic expectations on rate.