Equipment Loan Vs Equipment Leasing? Choosing the Right Solution for Your Catering Business

Equipping Your Catering Business: Smart Solutions to Finance Catering Equipment

Suppose you’re a world-class chef who’s decided to start your own catering business or maybe been catering from home and have decided to expand on a larger scale. Even better, you’re an established or relatively new restaurant with a walk-in business model that has decided to expand your business with offsite catering but to do that, you’ll need more supplies and top-of-the-line equipment to ensure your catering business’s success.

Either way, you’re in the right place to learn about restaurant equipment financing and the best ways to finance catering equipment, whether you plan to buy new equipment or lease it.

Types of Catering Equipment That Can Be Financed

Catering equipment, like restaurant equipment, encompasses a wide range of items, many of them expensive. Thankfully, you can finance catering equipment through a catering equipment loan, including things like:

• Commercial kitchen equipment and appliances (stoves, fryers, burners, ovens, mixers, dishwashers, freezers, ice machines, and refrigeration)
• Restaurant supplies
• Delivery van or food truck
• Salad bar equipment
• Portable grills
• Holding cabinets
• Chafers
• Food service trays
• Insulated food carriers
• Outdoor coolers
• Rolling carts
• Mobile bar
• Steamers
• Beverage dispensers
• Espresso machines
• Coffee makers
• Canopies and tents
• Tables and chairs
• Tablecloths
• Pitchers and glassware
• Serving ware
• Cutting boards
• Display and decor items
• Uniforms
• Cleaning supplies

Equipment Loan Vs Equipment Leasing? Choosing the Right Solution for Your Catering Business

Many caterers feel conflicted about whether it’s best to lease or buy their equipment. Let’s take a look at the pros and cons of each:

Benefits of Leasing Catering Equipment

Leasing often works best for new entrepreneurs just starting their catering business. You may not have the credit needed to secure finance catering equipment with good terms and low interest.

The benefits of leasing your catering equipment include:

• Lower Up-Front Costs: Leasing your catering equipment allows you to get high-quality equipment without the huge costs of purchasing it. You also don’t have to come up with a large downpayment for a loan. Since you save on costs, you can use that money elsewhere in your business.
• Predictable Monthly Payments: With leasing, you have a set monthly lease payment that makes it easy to work into your budget.
• Maintenance is Included: Typically, most equipment leasing contracts include maintenance. This means, if your equipment breaks down, you’re not responsible for repairing or replacing it.
• Flexibility to Upgrade: Technology is always progressing and there are always new trends. Leasing your catering equipment gives you the flexibility of upgrading to more efficient equipment to better serve your clientele.

Disadvantages of Leasing Equipment

Leasing may initially seem a better option than finance catering equipment. But, as with everything, it has its downfalls. These include:

• Often Has Higher Overall Costs: Leasing your catering equipment often means you’ll pay more over the long term once you factor in interest. This is especially the case if you’re charged high interest due to poor credit.
• You Don’t Own the Equipment: Owning your own equipment has its perks. Some small business owners prefer the idea of building equity in their equipment.
• Longer Repayment Period: Leasing your equipment can mean a longer repayment term. That might seem like a good idea, but equipment often becomes obsolete. Some leasing contracts charge a penalty if you terminate the lease early.

Benefits of Purchasing Catering Equipment

Owning your equipment has many benefits. Here’s a look at the advantages of buying vs signing a catering equipment lease.

• Gives Complete Ownership: Most caterers would agree that owning their equipment is satisfying. Ownership of your catering equipment is most beneficial if it has a longer, useful life and you aren’t likely to want to update it anytime soon.
• Has Built-In Collateral: Many types of small business loans require collateral. However, to finance catering equipment, you often don’t need collateral because the equipment purchased with the loan funds becomes collateral.
• Builds Business Credit: The long-term advantage of buying vs leasing your business’s catering equipment is it helps build your creditworthiness as a small business owner. An equipment loan isn’t likely to be the last small business loan you’ll need. If you finance your equipment and make timely payments, you can get approved for other loans with favorable loan terms as you grow your business.
• Interest Rates Are Usually Better Than Leasing: The majority of equipment loans will typically charge a lower interest rate than equipment leasing agreements.
• Offers Tax Deductions: As of 2025, Section 179 of the IRS code allows you to deduct the total purchase price of qualifying equipment up to $1,250,000. If you purchase a qualifying vehicle to use in your catering business, you can deduct up to $31,300. You can carry over some of your deductions if you want. Consult a tax specialist to learn more.

Disadvantages of Buying Catering Equipment

• May Require a Downpayment: While equipment financing typically doesn’t require a downpayment, some lenders may still require one in certain situations. For example, if your credit score is lower or you haven’t been in business for long, traditional banks may still require a downpayment.
• Chance Equipment Could Become Outdated: Anytime you finance assets, there’s always the chance that they can become outdated. In the meantime, you still have to pay off your loan.

Options To Finance Catering Equipment

If you decide to purchase and finance catering equipment for your business instead of signing up for a catering equipment lease, the next step is choosing a loan provider.

Traditional Lender

Traditional lenders, like banks and credit unions, often brick and mortar locations, and can be local or regional, as well as national. With traditional lenders, the application process tends to be stringent and can be lengthy. But if time is on your side and you have excellent credit, a small business loan from a bank or credit union may come with favorable repayment terms.

Alternative Lenders or Online Loan Specialists

Alternative or online lenders typically offer faster financing than traditional lenders, and some may offer more financing options as well. Payment options with an online lender tend to be more flexible as they offer financing with regular monthly payments or options based on your monthly revenue. Repayment terms and interest rates can vary dramatically. Higher credit scores, more time in business, and meeting annual revenue requirements are likely to get more favorable terms, but online lenders typically have lower credit requirements than banks and credit unions.

Equipment Manufacturer Financing

Some catering equipment manufacturers partner with financial institutions to provide financing for large purchases. This can streamline the purchase process, as you can get the financing right when you buy the piece of equipment. However, they may not offer the best terms, as the manufacturer may only work with a single financial institution, so there won’t be any comparing rates to get the best terms.

Catering Equipment Lease to Buy

A lease-to-own agreement can be a buffer between choosing to buy or lease your catering equipment. In this type of contract, you’ll have an option to purchase the equipment at the end of the lease term. In the meantime, your monthly payments will go toward the total purchase price of the equipment, but you won’t own the equipment until the lease has ended and you exercise your option to buy the equipment.

Tips for Applying for a Loan to Finance Catering Equipment

The first step when you want to finance catering equipment for your business is determining your equipment needs. Then, get quotes from different vendors and merchants to get the best value for your money.

Next, compile a good business plan to present to lenders. Your business plan should convey to lenders that you’ll have enough working capital to repay the loan. Lenders evaluate this by examining financial disclosures such as balance sheets, profit and loss statements, bank statements, and more.

Research different lenders to learn more about their loan application processes and what they require from you as a borrower. Learn which financial documents they require as well as requirements they have for your business, including annual revenue and time in business stipulations.

Once you’ve determined which lender best fits your business needs, apply and submit all required documentation. If you meet the requirements and your numbers make sense, hopefully at that point they will offer you the financing you need!

FAQs

How much does catering equipment cost?

The cost of your catering equipment will depend on whether or not you lease or buy your equipment, your business model, and the type of equipment you need.

Can I finance catering equipment if I don’t have excellent credit?

Equipment loans use the equipment as collateral, you may be able to finance catering equipment even if you have poor credit. That being said, if you have low credit, you may have an easier time being approved by an online or alternative lender than a bank.

Will they do a credit check if I lease my catering equipment?

Usually, yes, any reputable equipment provider will run your credit to establish your creditworthiness and set terms for the leasing agreement. As with a purchase, repayment terms will usually be more favorable if you have good credit. However, some leasing agreements have set interest rates that are higher than some small business loans.

Can I get restaurant equipment lease financing?

Yes, you can lease some restaurant equipment. Alternatively, you may be able to roll your equipment lease costs into your operational costs and get a term loan, business line of credit, or revenue-based financing to help cover your lease costs.

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