Scenario
Restaurant doing $150K monthly: term loan vs. line of credit vs. revenue-based funding
Same restaurant, same $150,000, three structures. The monthly payment ranges from about $5,000 to nearly $19,500. Here is how each behaves in a slow January, and which job each one is actually for.
Which is better for a restaurant: a term loan, line of credit, or revenue-based funding?
For a qualified restaurant doing $150K a month, a term loan is usually best for remodels and equipment because it has the lowest payment and total cost. A line of credit is best for seasonal dips and short gaps. Revenue-based funding is fastest and easiest to qualify for but costs the most; use it for urgent needs or when the others are not available.
The situation
A full-service restaurant, 5 years open, doing about $150,000 a month, with roughly 70% of sales on cards. January and February run about 25% below average. The owner wants $150,000 to remodel the dining room and replace kitchen equipment, and would like a cushion for the slow season. Credit is 690, clean statements, no open advances.
Restaurant margins are thin, so the payment matters as much as the price. The three structures owners usually weigh behave very differently when a slow month arrives. For all restaurant-specific options, see restaurant business loans.
Side by side on $150,000
| Term loan | Line of credit | Revenue-based funding | |
|---|---|---|---|
| Illustrative pricing | 13% APR, 36 months | 20% APR on what you draw | Factor 1.30, about 10 months |
| Monthly payment | $5,054 | Depends on draws; $13,895 if fully drawn and repaid over 12 months | ≈ $19,470 |
| Share of revenue | 3.4% | Varies | ≈ 13% |
| Total cost | $31,947 | Interest only on days drawn | $45,000 |
| Speed | 48 to 72 hours | 3 to 10 days | Same day to 2 days |
| Slow month | Payment stays fixed | Draw more, repay later | Flexes only with a true percentage split |
| Best for | Remodels, equipment, a new location | Seasonal dips, repairs, inventory | Urgent needs, or files that do not qualify for the others |
Illustrative, before fees. Revenue-based payment shown as a monthly equivalent. Model your own with the loan payment calculator and factor rate calculator.
Term loan: the remodel
A remodel lasts for years, so it should be paid for over years. At about $5,054 a month, a 36-month term loan takes around 3% of revenue and costs about $13,000 less than the revenue-based option. With 5 years open and a 690 score, this restaurant should qualify. Kitchen equipment can also go on equipment financing, where the equipment secures the deal and terms can be longer. Qualified files can fund in 48 to 72 hours once documents are in, though it asks for more paperwork than the other two.
Line of credit: the slow season
A line of credit is the right tool for January, not for the remodel. Draw $60,000 to carry payroll and food costs through the slow months, repay as spring sales return, and you pay roughly $4,000 in interest if it is out for about four months at 20%. Nothing drawn, nothing owed. Using a line for a $150,000 remodel defeats its purpose: it ties up the limit for a year at a higher rate than a term loan.
Revenue-based funding: speed and flexibility, at a price
Revenue-based funding is sized on card and bank deposits, can fund the same day, and accepts files the other two will not. It is the most expensive of the three here, at about $45,000 on $150,000. The key question is how repayment works:
A true percentage holdback falls about $4,900 in a slow month; a fixed daily debit does not. Many “revenue-based” offers are actually fixed debits with a reconciliation clause, so read that section of the contract before relying on the flexibility.
What this restaurant should do
- Finance the remodel and equipment with a term loan or equipment financing, the lowest monthly payment and the lowest total cost.
- Open a line of credit now, while statements are strong, and leave it unused until January.
- Keep revenue-based funding as the backup for a true emergency, such as a walk-in cooler failing on a Friday, or if the term loan is declined.
If this restaurant had a 560 score, 10 months open, or two advances already running, the order would flip: revenue-based funding first, then refinance into a term loan once the file improves.
Plug your figures into the funding comparison tool to rate every product for your file, then price specific offers with the factor rate calculator or the loan payment calculator.
Common questions
How much can a restaurant doing $150K a month borrow?
Revenue-based offers often land around half to one and a half times monthly sales, roughly $75K to $225K. Term loans and equipment financing are sized on cash flow and can go higher when profit supports the payment.
Is revenue-based funding the same as a merchant cash advance?
They are closely related. Both are repaid from sales, usually with a factor rate. The practical difference to check is whether the payment is a true percentage of sales or a fixed daily debit.
Can a restaurant get an SBA loan?
Yes, restaurants are eligible for SBA 7(a) loans. Expect a longer process, detailed financials, and lender caution about the industry. It can be the lowest-cost option for an established restaurant that can wait.
What do lenders look at for restaurant financing?
Card and bank deposits, consistency across seasons, average balance, NSFs, existing advances, time open and owner credit. Equipment and remodel lenders also look at the lease term remaining on the location.
See what you qualify for
One application, about five minutes, soft pull only. A funding specialist comes back with the offers you qualify for — and explains every term before you sign.