Restaurant Equipment Financing: Kitchens, Hoods, Refrigeration and POS
By MercFinancial · Published 2026-10-21
Restaurant equipment financing is the most available capital in the industry because the hood, the line and the walk-in secure the loan. What lenders fund, lease versus loan, soft costs and what a start-up needs.
Restaurant equipment financing is the most available capital in the industry: a lender or lessor funds the hood, the cook line, the walk-in, the dish machine and the POS against the equipment itself, and because the collateral is specific and serial-numbered, the lender accepts a thinner history than any bank would. Start-ups get it with a down payment and the owner's credit. Operating restaurants get it on a vendor quote and a few months of statements.
This guide covers what equipment lenders will and will not fund, the difference between a lease and a loan for a restaurant, new versus used equipment, the soft costs of installation, ventilation and electrical work that trip up a quote, vendor programs, the Section 179 question in general terms, and what a start-up needs that an existing restaurant does not. It ends with how a broker places an equipment file.
- Restaurant equipment financing is secured by the equipment itself, so lenders fund start-ups and thin-file restaurants that banks decline.
- Restaurant equipment lenders commonly ask for 10 to 20 percent down on a start-up and little or nothing down from an operating restaurant with clean statements.
- Soft costs such as installation, ventilation and electrical work are often capped by restaurant equipment lenders, because they cannot be repossessed.
- Restaurant equipment placed in service may be expensed under Section 179, subject to limits and the owner's circumstances, so the lease-or-loan choice is partly a tax question.
The hood can be repossessed. The electrician who hung it cannot, and that is the whole logic of restaurant equipment underwriting.
Why equipment is the easiest restaurant capital to place
Every other kind of restaurant lending runs into the same wall: a leased location, perishable inventory and a buildout that belongs to the landlord. Equipment lending steps around it. The lender funds a specific list of items, records a lien against them with a UCC filing, and can repossess and resell them if the loan fails. Margins still matter, but the collateral does most of the work, which is why equipment lenders write hospitality files that banks will not, and why they do it at ticket sizes a bank would not bother with.
The same logic sets the limits. An equipment lender wants items it can identify by serial number, remove from the building and sell to the next restaurant. The further a cost drifts from that description, the less of it the lender will fund. The reasons banks pass on the rest of the file are set out in why banks decline restaurants.
What restaurant equipment lenders fund, and what they don't
Most of a commercial kitchen qualifies. The exceptions are the costs that cannot be carried out the back door.
| Item | Typically financed | What the lender thinks about |
|---|---|---|
| Cook line: ranges, fryers, griddles, ovens | Yes, routinely | Serial-numbered, resells readily, long useful life |
| Hoods and ventilation | Yes, with a cap on installation | The hood resells, the ductwork and fire suppression do not |
| Walk-ins and reach-in refrigeration | Yes | Walk-in panels are semi-fixtures, so a landlord waiver matters |
| Dish machines and ice machines | Yes, often on vendor programs | Short lives, so leases are common |
| POS and kitchen display systems | Yes, usually leased | Technology ages fast, resale is weak |
| Furniture, fixtures and seating | Case by case | Some FF&E lenders only, lower advance |
| Installation, electrical, plumbing, permits | Limited, as soft costs | Cannot be repossessed, so capped as a share of the deal |
| Smallwares, inventory, deposits | No | Not collateral at all, funded from working capital |
The landlord's waiver is the item owners forget. Hoods and walk-ins bolted into a leased building can be claimed as fixtures by the landlord, so most lenders ask the landlord to sign a waiver giving the lender access to remove its collateral. Get that conversation started when the lease is negotiated, not at closing.
Lease or loan: which one a restaurant should choose
An equipment loan advances the invoice less the down payment, and the restaurant owns the equipment with the lender's lien on it until the last payment. A dollar-buyout lease reaches the same place through lease paperwork: title transfers for a nominal amount at the end. A fair-market-value lease carries the lowest payment because the lessor keeps a residual, and at the end the restaurant returns the equipment, renews or buys it at market.
The decision follows the equipment's life. A range or a walk-in that will be in the kitchen for a decade is usually bought, on a loan or a dollar-buyout lease. A POS system, kitchen display screens or a dish machine that will be replaced in a few years often suits a fair-market-value lease, where the restaurant pays for the use and hands back the aging unit. Purchased equipment placed in service in the tax year may be expensed under Section 179, subject to limits and the owner's circumstances, so confirm with a tax adviser before choosing the structure. The general mechanics are in equipment financing and Section 179. A restaurant that already owns its equipment outright can sometimes raise cash with a sale-leaseback of the kitchen, though the advance on used kitchen equipment is modest.
New versus used, and the soft-cost problem
Lenders finance used restaurant equipment readily when it comes from a dealer with an invoice, a condition report and some form of warranty. Used equipment from a closing restaurant or a private seller is harder: the lender has to verify there is no existing lien, value items with no invoice, and accept that a failed compressor is now its problem. Age limits apply, measured at the end of the term, so older units get shorter terms and more cash down.
Soft costs are where restaurant equipment quotes go wrong. A hood package is not only the hood: it is ductwork, a fire-suppression system, a make-up air unit, an electrician, a plumber, permits and an inspection. Lenders commonly cap soft costs at a share of the total they will fund, because none of it can be repossessed. Ask the dealer and the contractor for a quote that separates equipment from installation, so the lender can fund the hardware and you can plan the rest from working capital or a small unsecured loan. Vendor programs, where the manufacturer or dealer has a lender behind it, can be the easiest route for dish machines, ice machines and POS, and are worth comparing with an independent approval rather than accepting on sight.
What a start-up restaurant needs that an operating one does not
Equipment lenders write both, but the file is different.
| What the lender asks for | Operating restaurant | Start-up restaurant |
|---|---|---|
| Down payment | Often little or none with clean statements | Commonly 10 to 20 percent, more with thin credit |
| Statements and returns | Recent bank statements, sometimes a return | Personal returns and statements, the opening budget |
| Owner credit | Matters, but the business history helps | Carries the decision |
| Experience | Shown by the restaurant itself | A resume in kitchens or management |
| Lease | Already in place | Executed lease and a landlord waiver before funding |
| Vendor quote | Itemized, equipment separate from install | Same, plus a full opening equipment list |
A start-up should expect the lender to fund the kitchen in one schedule rather than piecemeal, to want the lease signed before it funds, and to look at the opening budget for working capital that covers the first months. A restaurant opening its second unit sits between the two columns, and its file is covered in financing a second restaurant location. The wider set of structures is on the business funding page.
Where MercFinancial fits
MercFinancial is a commercial funding brokerage in Houston, not a lender, and it does not have an equipment program of its own. It reads the file first: the itemized quote, the lease and landlord position, the statements, the owner's credit and whether the restaurant is new or operating. It then identifies which of its more than 160 funding sources have a credit policy that allows hospitality equipment at this ticket size and stage, places one file with them, and compares the offers on down payment, term, structure and total cost against any vendor program on the table. Whether a product is available depends on the funding source, and when nothing fits, you are told that plainly. Stephanie pre-qualifies a request in a few minutes with a soft credit pull, and the specialist call is free. The rest of the industry is on the restaurant business funding hub.
Frequently Asked Questions
Can a new restaurant get equipment financing?
Yes. Equipment lenders write start-up restaurants because the equipment secures the loan, but the file rests on the owner: personal credit, a down payment commonly in the range of 10 to 20 percent, kitchen or management experience, an executed lease and an opening budget that covers the first months. Expect the lender to fund the whole kitchen on one schedule once the lease is signed.
Is it better to lease or buy restaurant equipment?
Buy, on a loan or a dollar-buyout lease, what will be in the kitchen for years: ranges, ovens, walk-ins. Lease on a fair-market-value basis what you will replace soon: POS, display screens, sometimes dish machines. Purchased equipment may be expensed under Section 179, subject to limits and the owner's circumstances, so confirm the tax side with an adviser before choosing.
Does restaurant equipment financing cover installation?
Partly. Lenders treat installation, ductwork, fire suppression, electrical and plumbing as soft costs and commonly cap them at a share of the total, because none of it can be repossessed. Ask the dealer and contractor for a quote that separates equipment from installation, fund the hardware on the equipment schedule, and plan the rest from working capital or a small unsecured loan.
Can I finance used restaurant equipment?
Yes, most readily from a dealer that supplies an invoice, a condition report and a warranty. Used equipment from a closing restaurant or a private seller is harder, because the lender must check for liens, value items without an invoice and accept the condition risk. Age limits are measured at the end of the term, so older units get shorter terms and more cash down.
What credit score do you need for restaurant equipment financing?
There is no single score. Equipment lenders work in tiers: clean credit gets the longest terms and the smallest down payment, and challenged credit is offset with a larger down payment, a shorter term and newer equipment that resells easily. A recent bankruptcy or repossession narrows the field more than a low score does. The funding source decides, and the collateral carries much of the weight.
Get the quote split and the terms compared before you sign with the dealer. A funding specialist reads the equipment list, the install, the lease and your credit together and tells you which lenders will fund it and on what structure. Stephanie, our AI lending assistant, pre-qualifies in 2-3 minutes with a soft credit pull that won't affect your score, or book a free 30-minute call with a funding specialist at (830) 587-5022.
Get Pre-Qualified with Stephanie Book a Free 30-Minute CallMercFinancial is a commercial funding brokerage in Houston, Texas. MercFinancial is a broker, not a lender: every loan is made by a third-party funding source, every request is subject to that source's underwriting and credit approval, and loan amounts, advance rates, interest rates, terms, fees, collateral and guaranty requirements vary by funding source and borrower and are not guaranteed. Nothing here is a commitment to lend or an offer of credit, and financing is for business purposes only. Any example in this guide is hypothetical and illustrative; actual terms and outcomes vary. Restaurants are subject to health, liquor and labor regulation that varies by jurisdiction; financing availability depends on the funding source's policies. This guide is educational only and is not legal, tax, accounting or investment advice.