Financing Second Hand Restaurant Equipment: Better Ways to Update Your Kitchen

The restaurant industry is in good shape and has been continually growing in 2018. With away-from-home food purchasing on the rise and the percentage of household income being spent on food alone is at a high of 12.6%, the restaurant industry shows no signs of slowing down. Knowing that the restaurant industry as a whole is on the rise, you should expect to grow your restaurant business as well in terms of sales and revenue. One way to do this is to finance an equipment expansion with a Small Business Administration (SBA) 504 loan through a Certified Development Company (CDC) like TMC Financing.

How to Improve your Restaurant

There are many intangible ways to improve your restaurant, such as creating a positive work environment for your employees. In fact, one of the biggest challenges you will face as a restaurant owner is recruiting qualified employees.

Recruitment and retention of employees is continuing to grow as one of the top challenges for restaurant operators. This is due to  economic growth and rising employment levels which is creating more competition for employers and forcing restaurant owners specifically to set themselves apart in order to attract new employees. One of the best tangible ways to improve the work environment for employees and potential employees alike is to improve the area where they will likely spend the most amount of time: the kitchen.

As mentioned above, one of the reasons to purchase second hand restaurant equipment is to update your kitchen in order to attract new talent and employees, but there are certainly other benefits and driving reasons to do so.

Why Restaurant Owners Purchase Second Hand Equipment

Let’s look at some of the reasons why restaurant owners would want to purchase second hand equipment to try to update their kitchen.

  • Less Expense: While purchasing brand new restaurant equipment can be fun, the shine and glamour wears off quickly after you look at the price tag and attempt to purchase or finance that brand new equipment. Second hand equipment allows you to upgrade your kitchen at a fraction of the cost.
  • Easy to Find: Unfortunately, the odds are stacked against first time restaurant owners; without proper financing, many fail within the first 1-3 years of opening their doors. The good news is that this means there are plenty of purchasing options for second hand equipment that has barely been used. Take advantage of this opportunity in order to upgrade your kitchen.
  • Less Depreciation: When you purchase brand new restaurant equipment, it depreciates rapidly. If you wanted to sell your equipment for some reason, you would be likely to lose a large portion of the purchase price to depreciation. On the flip side, if you buy used restaurant equipment, the biggest dip in depreciation has already occurred therefore you lose less money to depreciation in the long run.
  • Tax Advantage: In most cases, you can deduct the cost of your restaurant equipment on your tax filing in the same year that you purchased the equipment, whether or not that equipment in used or brand new. So, the tax benefit remains the same for second hand restaurant equipment.
  • Eco-Friendly: Lastly, purchasing second hand restaurant equipment is an eco-friendly option for your business. You are effectively recycling old equipment and therefore taking at least a portion of your restaurant into that green space. If you want to go even more eco-friendly, consider the SBA Green Energy Program. If you are able to meet one or more of their requirements, you could be eligible to receive additional financing through the SBA 504 loan up to $5.5 million.

What if you could achieve all of the above mentioned benefits but also receive the benefit of brand new kitchen equipment? There is a low cost solution and that is achieved by using the 504 Loan through the SBA. A low interest loan specifically used for financing new equipment is a win/win scenario for you and your employees.

How to Finance New Restaurant Equipment with an SBA 504 Loan

One of the best ways to finance restaurant equipment is with an SBA 504 loan. This is part of the Small Business Association’s program that caters to small business owners, like your restaurant. They offer low interest rate loans that can accomodate the purchase of restaurant equipment.

The 504 loan is administered by a Certified Development Company (CDC) such as TMC Financing. The loan itself is granted in conjunction with a conventional lender that will provide 50% of the total loan amount. These type of loans offer a fixed, below-market rate. You would need to provide 10%-15% of the loan amount as a down payment. Many times, this down payment is less than traditional commercial loans or equipment leasing options.

You can find out more about the loan program for your restaurant from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender, and has funded projects worth more than $9 billion across California and Nevada, resulting in the creation of an estimated 60,000 jobs. They have worked with restaurant owners and business leaders for over 35 years. TMC can help you find the financing that is best to purchase your second hand restaurant equipment. Contact TMC Financing today.

Jennifer Davis

Based in Southern California, Jennifer Davis has been in the financial services industry for more than 20 years. Jennifer is responsible for educating business owners, commercial mortgage lenders and commercial real estate brokers about the SBA 504 program and other lending opportunities available through TMC. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs.