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The True Cost of Restaurant Equipment Financing

Posted On: January 7, 2019 author Paul Kendall

Resturant-Equipment-Costs

Running a restaurant could be a daunting task — managing the chefs, wait staff, the kitchen supplies and the cleaning staff. Add to that the restaurant equipment costs for buying new equipment, maintenance, and upgrades, and you have one more ball to juggle…

With the ever-increasing cost of mission-critical equipment, restaurant equipment leasing could give you a sigh of relief when managing your finances and growing your business.

So…

What’s the true cost of restaurant equipment?

We’ve put together every factor that goes into restaurant equipment finance. Here’s everything you need to know about the true cost of restaurant equipment.

What Can You Do to Protect Yourself from Fraudulent Lenders?

There are a couple steps you can take to protect yourself from fraudulent lenders before signing a restaurant equipment leasing agreement.

  1. Attorney Review

    Make sure to get the restaurant equipment leasing agreement reviewed by an attorney. Ignoring this could leave you vulnerable to falling into legal traps
  2. Better Business Bureau (BBB)

    BBB accredited businesses and firms meet tough acceptance standards and when accredited agree to follow high principles of business ethics and voluntary self-regulation. If a company isn’t accredited by the BBB, that’s a huge red flag. Be cautious when doing business with companies like this, or you could wind up stuck with higher restaurant equipment costs along with poor-quality equipment.
  3. References or testimonials

    To really solidify the reputation of an equipment leasing company, seek references or real testimonials from other past customers.

What Are the Potential Challenges When Seeking Finance for your Restaurant Equipment?

 

financing-your-resturant-parts


Although leasing restaurant equipment is lucrative and will help you get the necessary appliances for your kitchen, such as the ovens, refrigerators and commercial ranges, there are many things that you need to be aware of while applying for restaurant equipment leasing.

These challenges to be aware of are…

Get all the information before signing, including the final cost of restaurant equipment

Because of the systems put in place by financing companies, you should ensure that you have all the payment information before you sign anything for your restaurant equipment lease.

It’s CRUCIAL to read ALL the fine print on the equipment leasing documents.

Proposal vs. Approval

Be aware of the difference between a proposal and an approval. What you might think is an approval letter from the leasing company could actually just be a proposal for your restaurant equipment leasing.

It’s definitely not very ethical, but there are some companies who are out there just to get your money rather than give you a good deal on restaurant equipment lease.

In such cases, if you have agreed with the proposal, the company can come back and charge you a larger monthly amount than stated in the proposal.

The last thing to keep in mind is…

You could lose loads of money for backing out

Keep in mind that if you later disagree with the payments being charged and opt to back out, you will lose money for dissolving the restaurant equipment rental agreement.

Proper research could save you money that you can’t afford to lose.

Be sure to do your research and check out financing companies with the BBB, and always be sure to read the fine print of a contract. See if they have references or real testimonials.

Be sure to do your research and check out financing companies with the BBB, and always be sure to read the fine print of a contract. See if they have references or real testimonials.

Better to be safe than sorry…

What Are the Parameters That Will Affect Your Restaurant Equipment Leasing?

The true cost of your restaurant equipment leasing is directly proportional to the risks involved in undertaking the business.

The true cost will vary greatly when comparing restaurant equipment rental rates for startups to a franchise. These true costs can be drastically different…

Startup restaurant equipment rental true costs

In the case of startups, there is higher risk involved due to uncertainty of reputation, food safety, cleanliness and customer feedback.

This can spike the interest rate and increase the numbers for your monthly payment on your restaurant equipment leasing contract, increasing overall restaurant equipment costs when this is entirely avoidable.

On the other hand, franchises qualify for much lower costs…

Franchise restaurant equipment rental true cost

If you are seeking a restaurant equipment lease for a franchise you are more likely to get a good deal. Franchises have a proven track record of being in business and have a brand image about the quality of food and cleanliness.

Another point to consider: Since they provide established operating guidelines for the restaurant, there is a lower risk of failure as compared to a start-up neighborhood restaurant.

Thus…

The cost of your restaurant equipment leasing, in this case, will be much lower.

Bear in mind…

Your equipment has more perceived value to you because it gets food on the table for your customers. But to the lending firm, it is a risk that they are undertaking, and this is the driving factor that increases the true cost of your restaurant equipment leasing.

What Are the Factors That Will Help in Securing a Great Restaurant Equipment Lease?

As in securing any funding, a good line of credit always helps. A higher personal credit score acts in your favor to get your equipment lease approved much faster.

In addition to that, a lending company will require a business plan detailing the future growth of the restaurant.

Look: The basic goal is to give a comprehensive summary of your business including years in business, profit and loss statements, and balance sheets or cash flow statements. All of these will help expedite your restaurant equipment leasing approval process.

To make things easier, some equipment leasing companies will allow you to add some working capital on top of your equipment financing agreement.

What Are the Benefits of Financing Your Restaurant Equipment?


leasing-cafe-equipment

There are plenty of factors that can help to secure a great line of credit.

These factors are…

  • Good Credit
  • Detailed Business plan
  • Working Capital

As in securing any funding, a good line of credit always helps. A higher personal credit score acts in your favor to get your equipment lease approved much faster.

In addition to that, a lending company will require a business plan detailing the future growth of the restaurant.

Look:

The basic goal is to give a comprehensive summary of your business including years in business, profit and loss statements, and balance sheets or cash flow statements. All of these will help expedite your restaurant equipment leasing approval process.

To make things easier, some equipment leasing companies will allow you to add some working capital on top of your equipment financing agreement.

What Are the Benefits of Financing Your Restaurant Equipment?

Restaurant equipment financing for your larger more expensive purchases is always a smart decision when considering the overall cash flow of the business.

The benefits are endless but…

Here are a few…

Firstly:

It aids in managing costs and reduces the one time out of pocket bulk payment into bite-size manageable payments.

Secondly:

This gives you more reserve capital for investing in other areas of the business. For example, the cash can now be utilized to obtain less expensive items which aids productivity.

Thus…

Financing your equipment purchase is a great option both for short-term and long-term benefits.

Apart from conservation of capital and preservation of cash flow…

Leasing your restaurant equipment has other benefits as well. For example, the lease can be structured around a balance sheet.

Or you can work with an accountant or tax adviser to make the lease work towards tax advantages, which helps further reduce the overall cost of restaurant equipment.

Additionally:

Leasing provides convenience and a much faster way of completing the transaction compared to traditional financing alternatives.

Final Thoughts on the True Cost of Restaurant Equipment Financing

In order for you get a quick idea of what your payments will be on your restaurant equipment financing, you need to determine your lease rate with an equipment lease calculator.

Once you have done that, you can then calculate the exact dollar amount of your payments. Knowing your payments will help you decide how much equipment you can lease.

Restaurant-Equipment-Financing-Rates

As a sample calculation

If you are looking for restaurant equipment leasing worth $100K for a period of 60 months, you should be able to afford that with a payment of $2225 a month (if you are a start-up) or a payment of $1998 (if you are an established business over two years).

With restaurant equipment leasing, you’ll get to finance 100% of the equipment’s cost with a flexible plan that suits your budget. Include taxes, shipping, warranty, and installation.

You can even get working capital added onto the same equipment lease term. Add working capital up to 25% of the restaurant equipment cost to your agreement.

At Trust Capital, a leading equipment finance company, we are dedicated to helping you get you the financing needed for your equipment in a prompt and efficient manner. For a quick calculation to see how much equipment you can afford, click here or call Trust Capital at 866-458-4777.

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