Starting a new restaurant business can become very challenging, when it comes to the initial expenses that you have to make.
Starting a new restaurant business can become very challenging,
especially when it comes to the initial expenses that you have to make. In order to help you start minus the heavy financial burden, you can try looking for an equipment loan or lease. Read this post to understand the difference between the two.
What are the characteristics of loans?
• This is just like other traditional business loans where the owner applies for from banks or other lending providers to purchase the needed supplies for the restaurant.
• Advance deposits are required. This usually ranges between 25 to 40 percent of the total amount needed. The remaining cost shall be divided into subsequent monthly payments.
• The success of your loan application is dependent on a credit check by the financers. An owner needs to present personal financial statements and tax return forms as well. Those with poor credit scores may need a cosigner to get better deals and chances of approval.
• Restaurant owners may also need to pledge other assets for collateral, especially when the amount needed for the loan is high.
• The over-all amount in the terms turn out cheaper compared to leases.
• You get to own the products leased after completing your payments. This are practical for items that you will be needing for a long time such as freezers, dishwashers, gas burners, and ovens.
What are the characteristics of leases?
• Advance deposits are usually not required. If needed, these are often less than 15 percent of the total amount.
• The monthly payments depend on the value of the equipment during the duration of the leasing period.
• It is easier to apply for leases since you are technically just “borrowing” it. You have to return it at the end of your contract.
• Extra caution should be made in handling the things leased since you have to give them back. Penalties would be charged for any damage caused.
• In case you cause damage to the properties leased, it is advisable to have them fixed ahead of time to save money on penalties.
• This is a better option for those who would like to borrow a certain item only for a short period of time. For example, if you want to have special food trucks only during the summer season, you can apply for truck leasing so that you can give it back after your summer promotions.
• Leasing is also good for those who would like to constantly upgrade their supplies. For instance, if you always want to update your ovens yearly, leasing could spare you from trying to resell your old one before getting a newer model.
• Some contracts allow you to purchase the product leased before the contract ends.
