By Bob Callander

Restaurant Supplier Financing VS Traditional Financing Options

Restaurant Supplier Financing vs Traditional Financing Options

Most restaurant equipment is expensive.  That goes for stoves, ovens, hoods, freezers, prep stations, seating, tables, bars, signage etc.  It all adds up fast.  Restaurant equipment suppliers know this and use easy financing terms to help them sell.  Typically, it’s much easier to present a small monthly payment than a large lump sum cost.  This “Point of Sale” financing is popular for another reason as well…it’s very profitable for the suppliers.  The combination of financing as a sales tool and financing as a profit center make a very compelling supplier strategy.

How do supplier financing plans stack up against more traditional financing offered by local financial institutions?  There are pros and cons of each.

Pros of Equipment Supplier Financing

  1. Fast and easy – Supplier financing at the point of sale can be as easy as “sign right here.” That’s music to the ears of anyone trying to run a business.
  1. Limited credit investigation – Digging out and submitting historical financial statements and tax returns takes time, and often gets in the way of solving more immediate business problems. Businesses are always looking for ways to minimize this unwanted extra step.
  1. Extended warranties protection – To further enhance the sale, supplier financing can build in longer warranties, at an additional cost. This is particularly attractive to users acquiring new equipment for the first time.

Cons of Equipment Supplier Financing

  1. Rates and fees – The price of fast and easy credit approval based on limited credit investigation comes with added cost. A company needs to understand this cost and evaluate it before deciding whether it’s justified.
  1. Unwanted surprises in the contract language – All financial contracts, including those from equipment suppliers, should be read and understood BEFORE they are signed. If not, some of the contract language might later come as a surprise.  Be careful to look for additional fees, late charges, early payoff penalties, unexpected taxes, and any other unwanted and costly contract language.
  1. Limitations on specific equipment brands and types – Many supplier financing programs are only intended for new equipment, not previously used, and limited to equipment sold by the supplier, while excluding other equipment types and brands.

Restaurant owners are often tempted to take the first and easiest equipment financing option available, especially when overwhelmed by the day to day complexities of providing quality food service, but there are other options available too.  The best advice is to ask questions and fully understand the costs and limitations of supplier financing plans before signing any agreement.  Call a local banker or independent equipment leasing expert first.