Canadian restaurants need capital for ovens, cashflow gaps, equipment replacement, and expansion. The food-service industry has the highest failure rate of any small business (60% close within 5 years), which means lenders price restaurant loans 2-4% higher than other small business. But the right structure makes the math work.
4LOAN STRUCTURES · BY USE-CASE
★ THE 4 RESTAURANT LOAN TYPES ★
Pick by need + structure
Merchant Cash Advance
RANGE$5K-$500K
COSTFactor 1.2-1.5
Working capital · paid via daily card sales
Equipment Financing
RANGE$10K-$1M
COST7-15% APR
Ovens, fridges, dishwashers, POS
Business Line of Credit
RANGE$10K-$250K
COSTPrime + 2-5%
Cashflow smoothing · slow Tuesday's
SBA / BDC Term Loan
RANGE$50K-$5M
COST7-9% APR
Expansion, renovation, second location
★ THE MCA TRAP
Merchant Cash Advance (MCA) is the most common form of restaurant financing — and the most expensive. A "factor rate" of 1.35 on a 9-month advance equals ~70% APR. The daily debit from your POS feels small, but adds up fast. Use MCA only for short-term needs (4-6 months). Use SBA/BDC term loans for everything else.
★ THE DECISION TREE ★
Which loan for which problem
NEED CASH IN 48 HOURS?→ MCA (but only if absolutely necessary)
BUYING A NEW $40K OVEN?→ Equipment Financing (secured by the oven)
SLOW WINTER MONTHS?→ Business Line of Credit (draw + repay flexibly)
OPENING A SECOND LOCATION?→ BDC or CSBFP term loan (15-yr terms available)
BUYING OUT A PARTNER?→ Term loan with personal guarantee + buyout clause