The short answer
Most New Zealand restaurants and cafés are funded with a mix of the owner's own money and one or more of: a bank business loan, equipment finance for the kitchen, a loan secured by property the owner already has, and, when buying an existing café, some help from the seller or the landlord.
Lenders see hospitality as a higher-risk industry. Margins are thin, trade is seasonal and a lot of what you spend money on, such as the fit-out, is fixed to a building you usually lease. That is why the best funding option depends less on the loan and more on what you can offer as security, how much experience you have, and how the money will be repaid.
What restaurant owners usually need money for
- A fit-out. Kitchen extraction, plumbing, seating, counters and signage for a new site or a refresh.
- Equipment. Ovens, combi ovens, refrigeration, coffee machines, dishwashers and point-of-sale systems.
- Buying an existing restaurant or café. The purchase price, plus legal costs, stock at settlement and the lease bond.
- Working capital. Covering wages, rent and suppliers through a quiet season or while a new site builds up trade.
- Expansion. A second site, a bigger kitchen, catering or a takeaway arm.
- Catching up. GST, PAYE or supplier arrears after a hard stretch.
Restaurant funding options in New Zealand
Bank business loan or overdraft
Usually the cheapest money if you fit. Banks look for trading history, good accounts, an experienced operator and security, often your home. New restaurants and owners without hospitality experience often find a bank slow or unwilling. Read more about the main types of business finance in NZ.
Equipment finance
A hire purchase or lease secured over the equipment itself. It suits new, standard items such as a combi oven or a commercial coffee machine, and the lender registers its interest on the Personal Property Securities Register (PPSR). It works less well for second-hand equipment and does not usually cover a fit-out, because extraction, plumbing and joinery fixed to a leased building have little value to a lender. Our guide what is asset finance? explains the types and the GST points.
A loan secured by property
If you or your business own a home or commercial property with equity in it, a lender can secure a business loan against that property instead of against the restaurant. That opens up funding for things equipment lenders will not touch, such as a fit-out, buying a café, working capital or tax arrears. The trade-off is plain: the property is at risk if the loan is not repaid. See using your home to secure a business loan.
Unsecured loans and restaurant cash advances
Online lenders offer unsecured loans and "cash advances" repaid from a share of your daily card takings. They can be quick, but they are usually expensive, the amounts are smaller, and daily or weekly deductions can squeeze a business whose takings swing with the weather and the season. Work out the total cost in dollars before you sign. Our guide to unsecured business loans compares them with secured lending.
Help from the seller or the landlord
When you buy a café, the seller may agree to be paid part of the price later (vendor finance). When you sign a new lease, some landlords contribute to the fit-out or give a rent-free period. Both are worth asking for, and a lender will see them as a sign the deal is sound.
Grants
Grants that pay for opening a restaurant or for its fit-out are uncommon in New Zealand, so do not build a plan around one. Check business.govt.nz for current government support before you assume there is none.
Starting a restaurant or buying an existing one
Starting from scratch is the hardest to fund. With no trading history, lenders lean on your experience in hospitality, a realistic plan with costs and sales by month, how much of your own money is going in, and the security you can offer.
Buying an existing restaurant or café is easier to assess because there are accounts to look at. Before you commit:
- Get at least two years of accounts and recent GST returns, not just the seller's summary.
- Check how many years are left on the lease and whether the landlord will agree to assign it to you.
- Search the PPSR for finance registered over the equipment you are buying.
- If the business sells alcohol, plan the licence. Councils explain that an alcohol licence belongs to the owner, not the business, so a buyer usually needs a temporary authority (it lasts three months) and must apply for its own on-licence. District Licensing Committees, run through your local council, decide on-licences and managers' certificates.
- Make sure the food business is registered and its verification checks are up to date. MPI says most cafés and restaurants use the template food control plan and register with their local council, and every food business is checked by a verifier.
Our page on finance for buying a business covers the purchase process in more detail.
What lenders look at for a restaurant or café
- Your experience. Years in hospitality, and whether you have run a kitchen or a front of house before.
- The lease. The term left, rent reviews and make-good obligations. A loan that outlasts the lease is a warning sign.
- Trading. Sales trends, seasonality, wage costs as a share of sales and food costs.
- Tax. Whether GST and PAYE are up to date with IRD, or there is an arrangement in place.
- Licences and food safety. Food registration, verification results and, where relevant, the alcohol licence.
- Security and repayment. What the loan is secured by, and how it will be repaid: from trading, a sale, or a refinance with a bank once the numbers improve.
The risks to weigh
- Do not borrow to fund ongoing losses. Finance can bridge a quiet season or pay for a change that lifts sales. It cannot fix a restaurant that loses money every month.
- Know what you are putting up. Personal guarantees and property security mean your own assets are on the line if the business fails.
- Watch daily repayments. Cash advances that take a slice of every day's takings can leave little for wages and suppliers in a slow week.
- Allow for the unexpected. Fit-outs run over budget and council consents take time. Keep a buffer.
Before you apply
- Write down exactly what the money is for and how much each part costs.
- Get quotes for the fit-out and equipment.
- Prepare your latest accounts, GST returns and a simple monthly cash flow forecast.
- Check your lease term and any landlord consents you need.
- Decide what security you can offer, and get your current mortgage balances.
- Work out how the loan will be repaid, and what happens if trade is slower than planned.
- Compare the total cost in dollars across your options, not just the headline rate.
Where HomeSec fits
HomeSec is a direct, privately funded New Zealand lender, not a broker. We lend $20,000 to $1,000,000 for genuine business purposes on open-term facilities, secured by a first or second mortgage over suitable residential or commercial property almost anywhere in New Zealand. Open term means the loan does not have to be repaid by a fixed early date, and you can repay at any time.
For restaurant and café owners, that can fund a fit-out, kitchen equipment, buying a café, a second site, working capital through a quiet season, or GST and PAYE arrears. Because the security is property, we can help where an equipment lender or a bank will not. If your equipment is new and standard, equipment finance is often cheaper, and if your bank will lend and you can wait, a bank is usually the cheapest option. We will tell you if that is the case.
No valuations or cashflow records are needed to start an enquiry. Funding may be possible in as little as 24 hours once assessment, documents, security, legal work and settlement line up, and approved facilities may offer up to six months with no scheduled payments. Interest still accrues during that time, and approval is never guaranteed.
Running a bar? Read business finance for bars and nightclubs. For other uses, see working capital loans, fit-out finance and equipment and machinery.
Common questions
Can I get a loan to start a restaurant with no experience?
It is hard. Most lenders want to see hospitality experience, a realistic plan and some of your own money going in. Strong property security helps, and so does a partner or head chef with a track record.
Can I get a loan to expand my restaurant?
Yes, and it is often easier than starting out, because there are accounts to show. Lenders will want to see how the expansion lifts sales, what it costs, and how the loan will be repaid if the new site or kitchen takes time to build trade.
What is a restaurant cash advance?
A lump sum repaid from a set share of your daily card takings. It can be quick to arrange, but the total cost is usually high and the daily deductions reduce the cash you have for wages and suppliers. Compare the full cost in dollars before you sign.
Can equipment finance pay for a fit-out?
Usually not. Equipment lenders secure the loan over the item itself, and a fit-out fixed to a leased building has little resale value. A fit-out is more often funded from savings, a bank loan, a landlord contribution or a loan secured by property.
How quickly can HomeSec fund a restaurant or café?
Funding may be possible in as little as 24 hours, subject to approval, documents, security, legal work and settlement requirements. Starting your enquiry early, with the amount, purpose and property details ready, helps.