A restaurant line of credit works like a business credit card, where you access a fixed amount of credit and can draw from it whenever you need funds. You only pay interest on the withdrawn amount, unlike a conventional term loan, where you pay interest on the entire amount. As you repay what you’ve used, the credit line replenishes.
Lines of credit allow restaurants to handle recurring expenses, such as repairs, payroll, equipment purchases, and inventory, even in slower months, without the inconvenience of repeatedly applying for new loans.
Below, we review the eligibility requirements your restaurant needs to meet to qualify for a line of credit. Then, we walk you through, step by step, the process of applying for one, including the necessary paperwork.
We’ll wrap up with five due diligence strategies to help you evaluate line of credit offers and choose the one that best fits your business needs.
At Redline Capital, we’ve been providing restaurants nationwide with low APR lines of credit for over 10 years. For reasons we’ll discuss below, our qualification criteria are more lenient than those of most lenders, and we can close within a day or two. Submit four months of bank statements, and we’ll send you multiple offers within a few hours.
| Funding Features | Redline Capital Terms |
| Loan amount | $30K to $750K |
| Line of credit term | 12 to 24 months |
| Repayment terms | Monthly and weekly |
| Minimum FICO score | 600 |
| Minimum time in business | 12 months |
| Minimum monthly revenue | $30K |
Requirements to Secure a Restaurant Line of Credit
You can secure a restaurant line of credit through two main avenues: traditional banks or revenue-based financing providers.
Here’s a general overview of the requirements banks look for in line of credit applications. However, the exact criteria can vary from one bank to another:
- A 720+ personal credit score
- Tax returns dating back two years
- Low debt-to-income ratio, generally below 35%
- Consistent annual revenue that doesn’t fluctuate much
- Documents proving you’ve been in business for at least three years
- Cash reserves equal to about three months of operating costs
- Collateral such as restaurant equipment, accounts receivable, or a personal guarantee
Most businesses struggle to meet these requirements because of challenges unique to the hospitality and restaurant industry. Restaurants operate on razor-thin profit margins, usually 5% to 10%, and have high revenue volatility due to seasonality changes. Banks are highly risk-averse and typically shy away from this type of exposure.
Consequently, we strongly recommend opting for a revenue-based financing partner for your line of credit. This is because they have significantly simpler requirements and mainly focus on your monthly revenue. They don’t evaluate all the other factors that banks do, such as debt-to-income ratio, tax returns, collateral, or cash reserves.
For example, when you apply with Redline Capital, your restaurant only has to meet three requirements:
- Be based in the U.S.
- Be open for at least 12 months.
- Generate over $30K per month in total revenue.
This simplified and more lenient qualification criteria makes it much more possible for restaurants to secure lines of credit at competitive rates.
It also allows restaurants to access larger credit limits and have greater flexibility when covering bigger expenses, instead of being constrained by a small line of credit that requires repayment before borrowing again. We frequently fund lines of credit worth 200% of a business’s monthly revenue, whereas banks rarely fund more than 50%.
Read more: Top 5 Private Lenders for Business Loans & How to Choose
How to Apply for a Restaurant Line of Credit
Banks are slow to close restaurant lines of credit, usually taking between two weeks and three months. This is largely due to three things: all the paperwork that they ask for and must underwrite, their bureaucratic nature, and the slow and outdated processes they use to move your loan application forward (e.g., email, phone call, walk-in appointments).
Here’s what you can expect:
- Book an appointment with a loan officer and visit a branch to discuss your business financing options with them.
- The loan officer will ask you to explain why you need a line of credit and guide you through what documents to submit. This typically includes financial statements showing food and beverage sales, restaurant tax returns, licenses and permits, a business plan, and personal guarantee documents.
- The loan officer sends your line of credit application to the bank’s underwriters, who conduct a financial and credit evaluation of your restaurant, considering your profitability, growth, credit history, revenue fluctuations, and credit card sales, among other factors. This process typically takes several weeks.
- After the approval process, the bank sends a line of credit offer specifying the credit limit you qualify for, your interest rates, fees, and duration.
Because the application and closing process can take months, banks remain an impractical option for restaurants that need funds quickly.
With Redline Capital, however, we’ve simplified this process so you can apply in under five minutes and receive funds on the same day or the next. Here’s what our application process looks like:
- Fill out this short application form to let us know how much you need, your gross monthly revenue, your credit score, and your restaurant operating time. The only paperwork we need from you is four months of bank statements.
- Underwriters review your application and conduct a soft credit check, which doesn’t hurt your credit score, to determine the amount you qualify for. Our underwriting process only takes a few hours because the main underwriting factor is your four months of bank statements.
- We email line of credit offers that you qualify for within a few hours. Each offer shows your credit limit, rate, fees, and term length. Once you accept an offer, you’ll immediately receive a link to a portal where you can withdraw from a lump sum amount. This takes one to two days.
How to Evaluate Restaurant Line of Credit Offers
How Long Before You Get Access to the Line of Credit?
The first factor to consider is how long it takes before you can access the funds from your line of credit. This is especially important for restaurants, which often require quick funds for urgent kitchen repairs or to cover payroll during slow months. It’s simply not possible to wait multiple weeks or months to close.
With a revenue-based financing company like Redline Capital, we only need to assess four months of bank statements, speeding up closing considerably. We consistently close restaurants’ lines of credit on the same day or the next. We’ve even had restaurants approach us needing funds before the end of the day, and we funded them in a few hours.
Applying with a traditional bank means waiting between two weeks and three months before you can draw from your line of credit due to the complexity of their underwriting.
How Much Do You Need to Repay?
You should also take into account the full amount you will need to repay. This matters because you don’t want to end up stuck in a high-interest line of credit.
To secure the lowest rates possible, we recommend applying with a high-quality broker like Redline Capital.
We help you secure lower rates because we’ve generated hundreds of borrower applications for leading business lenders such as OnDeck, Idea247, and Rapid Finance. In exchange for this business, they give our applications preferred pricing, longer terms, wholesale rates, and higher limits that wouldn’t be available to one-off applicants.
By leveraging our established relationships with lenders, you can access the lowest available rates on your line of credit.
How Long Is the Financing Term?
Pay close attention to the duration of your line of credit, as it dictates both the timeframe for repaying what you’ve borrowed and how long you can continue using the credit before reapplying.
We suggest opting for longer-term credit lines because it means you have more time to repay the loan, resulting in more manageable weekly or monthly payments. Once approved, you won’t have to reapply for some time.
As we mentioned above, when you apply through Redline Capital, you access longer and more favorable restaurant financing options due to our strong relationships with leading business lenders.
Does the Lender Ask for Small Business Collateral?
Most banks and alternative lenders require restaurants to pledge collateral upfront to secure a line of credit. In many cases, restaurant owners offer kitchen equipment, food trucks, real estate, or even their own personal assets as collateral.
We advise choosing a line of credit offer that does not require collateral because it lowers your personal risk. If you cannot repay the line of credit, the lender cannot claim equipment or bank accounts needed to operate your restaurant.
In addition, unsecured lines of credit can close much faster because the lender doesn’t have to underwrite and appraise the collateral’s value.
With Redline Capital, our funding options are all unsecured, meaning you don’t need collateral to qualify. Banks rarely extend unsecured credit lines to restaurants unless they are in impeccable financial condition.
How Reputable Is the Restaurant Financing Provider?
The final factor you should consider is the credibility of the line of credit provider, and an effective way to gauge this is by reading online reviews.
In our experience, many restaurant financing providers, particularly subprime online lenders, lack professionalism and fall short in how they conduct themselves. Their focus is often solely on closing the deal to earn a commission, which can lead to bad terms and aggressive pressure tactics, including persistent calls and emails.
At Redline Capital, we’ve built a reputation for being professional and putting zero pressure on borrowers. We will send you offers, but you’re the one who decides whether to proceed.
In addition, we genuinely care about our borrowers. So if you don’t qualify for a line of credit, we will send you offers for products that are easier to qualify for, such as small business loans, working capital loans, short-term merchant cash advances, equipment financing, and SBA loans. With other financing providers, if you apply for a line of credit and don’t qualify, they’ll simply reject your application without offering further guidance or alternatives.
Here’s what our clients say about our application and closing process:
You can learn more about what our clients have to say here:
Frequently Asked Questions
Is It Hard to Get Approved for a Business Line of Credit?
The difficulty of qualifying for a business line of credit varies depending on the lender’s requirements. Qualifying at a large bank is extremely difficult because you need near-perfect credit, collateral, and cash reserves. With a revenue-based financing company like Redline Capital, you only need $30K in monthly revenue, a 12-month business history, and a U.S. location.
What Is the Downside of a Line of Credit?
One of the big downsides of a line of credit is how difficult it is to qualify. In fact, lines of credit are typically the most challenging financing product to qualify for, often more so than term or working capital loans. Most banks require great credit, collateral, cash reserves, and explosive growth. Fortunately, at Redline Capital, we strive to make lines of credit more accessible, requiring just a 600 credit score, $30K in monthly revenue, and 12 months in business.
Where Can You Get a Business Line of Credit?
The most accessible way to secure a small business line of credit is through a revenue-based financing company. These companies primarily look for good revenue; for example, we at Redline Capital only require $30K per month in revenue. You don’t need all the things that banks ask for.
What Are Restaurant Business Loans Generally Used For?
Business owners can use restaurant business loans and lines of credit for almost any expenses, including payroll, inventory purchases, remodeling, new equipment, renovations, marketing campaigns, and working capital during slower seasons.
How Can a Line of Credit Benefit My Restaurant Business?
Lines of credit offer restaurants a lot of cash flow flexibility because they’re always available for use. Restaurateurs can draw from the line of credit anytime they need funds (i.e., using it like a credit card), and they don’t have to apply for a new loan whenever an expense arises.
Qualify for a Restaurant Line of Credit with Just 4 Months of Bank Statements
Submit four months of bank statements and we’ll send you competitive line of credit offers that can close within 24 to 48 hours.