Business funding for restaurants and cafes

Restaurants and cafes borrow for a kitchen, a refit, a second site or the building itself, and a lender's first question is whether your takings can carry the repayment. Kitchen equipment can sit on hire purchase or a lease, a refit is paid from a business loan, and a freehold purchase needs a commercial mortgage. A funding search through Swoop is open to limited companies and LLPs, and to sole traders and partnerships borrowing more than £25,000.

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What restaurants and cafes borrow for

The money goes into four things. A kitchen: ranges, combination ovens, extraction, refrigeration and a dishwasher that can turn a full service. A refit of the dining room, which is mostly labour, joinery, flooring and lighting. A second site, which needs both plus a rent deposit, legal fees and wages before the doors open. And sometimes the building itself, when the landlord offers to sell the freehold.

A kitchen is a set of machines with serial numbers, so a finance company can own them while you pay, which is how hire purchase and equipment leasing work. A refit leaves plaster and fixed joinery that a lender cannot take back and sell, so it comes from a business loan, from cash, or from a contribution you negotiate with the landlord when you sign the lease.

A second site is judged on the first site’s figures: the lender wants the existing restaurant to cover the new debt while the new one builds its trade. Where security falls short, the Growth Guarantee Scheme lets a participating lender have part of the loan backed by the British Business Bank. Buying your building is a commercial mortgage, or a purchase by your pension scheme, which can let the property to your company at a market rent: using your pension to buy commercial property.

A kitchen on hire purchase

Illustrative example

A cafe replaces its kitchen equipment and spreads the cost over five years. The rate is an assumption; the lender sets the real one.

Equipment cost
£40,000
Term
60 months
Interest rate (assumed)
9% a year
Monthly payment
£830.33
Total repaid
£49,820.05
Cost per week
£191.62
Extra covers a week to pay for it, at an assumed £8 gross profit a cover
24
Interest over the five years
£9,820.05

Put your own quote into the asset finance calculator to see the monthly cost before you ask a lender.

A café worker handing a bagged pastry to a customer across the counter

Card takings and the weekly cash cycle

A restaurant is paid at the table and pays its suppliers weekly or monthly, so day to day it holds cash before the bills fall due. The strain comes from the lumps: a quarter’s rent in advance if your lease sets it that way, and the VAT return at the end of each quarter.

Food and drink eaten on the premises is standard-rated for VAT at 20%, and so is most hot takeaway food. Cold takeaway food is zero-rated unless it is a type that is always standard-rated. VAT loans spread a quarter’s bill over a few months.

Takings come through a card terminal every day, so a merchant cash advance can take a fixed share of each day’s card takings until an agreed sum is repaid, and you pay less in a quiet week. Its cost is a fixed amount set by a factor rate; compare that total with a loan before you sign.

What a lender can take as security

The equipment
Under hire purchase or a lease the finance company owns the kit until the last payment. It looks at what the equipment would fetch second-hand as well as at your trading.
A debenture
A fixed and floating charge over everything the company owns, registered at Companies House. Banks lending to a limited company commonly ask for one. What a debenture covers.
The lease
A leasehold restaurant gives the lender no property to sell, and the lender will want the lease to run beyond the end of the loan.
The freehold
If you own the building, a first legal charge over it is the strongest security a restaurant can offer, and it allows a longer term through a commercial mortgage.
A personal guarantee
Where the company’s assets do not cover the loan, the lender asks the directors to guarantee it. What a personal guarantee means for a director.

What worries a lender about a restaurant

Lenders treat hospitality as a higher-risk trade because a small rise in food, energy or wage costs takes a large share of a thin margin. Wages are the cost they test hardest. The National Living Wage for workers aged 21 and over is £12.71 an hour from April 2026 and £13.21 from April 2027, and employer National Insurance is 15% on pay above £5,000 a year per employee. A lender will rework your figures at next year’s wage rates and ask whether the repayment still fits.

The second worry is that the trade depends on you. If you are the chef, the lender asks what happens if you are ill for three months, which is where key person cover comes in. The third is the premises: a short lease or a landlord’s break clause can end the business before the loan is repaid. Every food business in England, Wales and Northern Ireland registers with its local authority at least 28 days before trading, and the inspection that follows sets its food hygiene rating, which a lender reads as part of the risk.

Documents to have ready

What documents a lender asks for explains what each one is used for.

Funding that fits a restaurant or cafe

Hire purchase and leasing

These pay for the kitchen, the coffee machine, the extraction and the till system, and the finance company holds the equipment as its security until the last payment. Asset finance explains the options.

Business loan

A loan pays for a refit, a second site or a mix of costs that no single asset covers, and it is secured or unsecured depending on what the company owns. Unsecured business loans sets out the difference.

Merchant cash advance

An advance is repaid from a share of card takings, so the repayment rises and falls with the trade. Compare its total cost with a loan before you take one.

Commercial mortgage

A commercial mortgage pays for the building you trade from, over a longer term than a business loan allows. Buying business premises covers the purchase.

Your own position as the owner

If you sign a personal guarantee, your home and savings stand behind the company’s debt. Ask whether it is capped and whether it falls away once the loan is below a set level. Key person cover can pay off a guaranteed loan if you die or cannot work.

When you sell, the buyer’s lender reads the same figures yours did. Business Asset Disposal Relief taxes qualifying gains at 18%, and the Budget on 28 October 2026 cut its lifetime limit from £1 million to £500,000 for disposals on or after 6 April 2027. How much tax you pay when you sell your business and selling your business cover the rest.

Asset finance calculator

The monthly payment on equipment or vehicle finance with a deposit and a balloon payment, and what the finance costs in total.

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Questions people ask

Can I get a loan to open a restaurant?

Yes, though a lender has no trading figures to read, so it relies on you instead: your experience in hospitality, the money you are putting in yourself, a business plan with costed forecasts and a signed or agreed lease. A limited company can ask through a funding search, and so can a sole trader or partnership borrowing more than £25,000. If you are a sole trader borrowing less, look at the government’s Start Up Loans scheme or your own bank. Can a new business get a loan?

What VAT does a cafe charge on food?

Food and drink eaten on the premises is standard-rated at 20%. Hot takeaway food is standard-rated where it meets HM Revenue and Customs’ tests for being hot, such as being heated to order. Cold takeaway food is zero-rated, except for items that are always standard-rated. A cafe that sells eat-in and takeaway has to record which is which at the till, because the VAT due depends on it.

Is a merchant cash advance a good idea for a restaurant?

It suits a restaurant that takes most of its money by card and wants repayments to fall in a quiet month. The cost is a fixed sum agreed at the start, so paying it back sooner does not make it cheaper. Work out the total you repay, compare it with a loan of the same size, and check what happens if you change card terminal provider. The merchant cash advance calculator shows the sums.

Will a lender want a personal guarantee for a restaurant loan?

For a limited company with no property, expect it. The guarantee lets the lender pursue the directors if the company cannot pay. Hire purchase and leasing are secured on the equipment, and some providers ask for a guarantee on top. Ask whether the guarantee can be limited to part of the loan, and read what a personal guarantee means for a director before you sign.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

Funding by sector

Asset finance

Asset finance spreads the cost of equipment, vehicles and machinery over the years you use them, with the asset as the funder’s security.

Read more →

Merchant cash advance

The provider is repaid from a share of your future card takings, at a cost set by a factor rate.

Read more →

Business funding for pubs and bars

A freehold, a lease and a tie each change what a lender will fund for a pub, and the premises licence is checked first.

Read more →

Business funding for hotels

A lender funds a hotel purchase, refurbishment or extension on the strength of the building and its trade together.

Read more →
All business funding

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Start a funding search

Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.

Cover for a personal guarantee

If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.

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