Whilst this guide focuses upon flooring for restaurants, many of the recommendations are true for commercial flooring finance of all types.
One of the major costs in opening can be the refurbishment costs. One of the major costs of any refurbishment tends to be flooring, especially in restaurants with a large floorplan. In the UK, there are a number of financing options available to help restaurateurs to manage the cost of their commercial flooring.
Financing options for restaurant flooring in the UK
There are several ways you can finance your restaurant’s flooring installation or upgrade. Understanding your different financing options will allow you to choose a plan that suits your financial situation and restaurant goals.
Business Loans
One of the most common routes, many restaurant operators will opt for a traditional business loan to finance their flooring. UK banks and lending institutions provide loans specifically designed for business improvement. These loans can be used to cover commercial flooring, along with other refurbishment expenses. You will typically pay back the loan over a fixed period of time with interest.
However, restaurant business loans often require a strong credit rating to be eligible for the loan and attractive interest rates. Overall, business loans may be less favourable when it comes to interest rates, ease of qualification and the impact on your cash flow compared to other financial products available to your restaurant, such as asset finance or lease funding.
Asset Finance
Asset finance is a flexible financial product that allows businesses to acquire or upgrade assets such as equipment, machinery, or in this case restaurant flooring. With asset finance, businesses can spread the cost of the asset over a period of time, typically through set monthly payments, whilst benefiting from the immediate use of the asset.
The value of the asset itself (the flooring, in this case) serves as collateral for the financing, reducing the risk for the lenders. This arrangement can be ideal for restaurants looking to upgrade or install flooring without a significant upfront cost, preserving the cash flow for other operational needs.
Hire purchase, a type of asset finance, would be suitable for restaurants. A hire purchase involves a business making an initial deposit, followed by regular fixed monthly repayments. Once all payments are made, the ownership of the asset transfers to the business.
Benefits of Asset Finance
- Preserve cash flow: Asset finance enables businesses to spread the cost of flooring over a period of time, making it easier to manage the day-to-day financing
- Access to higher-quality assets: Asset finance can enable you to invest in more premium options, whether it be commercial LVT for your restaurant, an upgraded EPOS or any number of other restaurant-related assets.
- Cashflow certainty: Fixed monthly repayments make it easier to plan for your restaurant’s financial future.
Considerations before applying for Asset Finance
It is important to calculate the total repayment cost, which will be higher than buying the asset outright due to the interest. You will need to balance whether this higher cost is a price you are willing to pay to have the asset available upfront, as opposed to saving up to purchase the asset. If payments are missed, the lender will have the right to repossess the asset.
Business lines of credit
A business line of credit is a flexible financing option that allows businesses to access funds up to a predetermined limit. Funds can be drawn upon when required. These work similar to a credit card, but are specifically designed for business use, offering more flexibility than traditional loans. This approach to commercial finance is ideal for restaurants looking to manage cash flow, covering short-term expenses or handling unexpected costs, such as restaurant upgrades or repairs.
The primary difference between a business line of credit and a business loan is that unlike a loan which provides a lump sum upfront, a line of credit will enable you to borrow only the amount you need to borrow at that given time. You will pay interest on the amount you draw, not the total credit limit. Once you have repaid the borrowed amount, the funds become available, which makes the line of credit a ‘revolving’ credit facility.
Secured lines of credit
A secured business line of credit will require the business to provide collateral, such as property, equipment or inventory, to secure the loan. This security will serve as a guarantee to the lender, reducing their risk in case of you defaulting. This lower risk could open up a higher credit limit whilst also potentially allowing you to access lower interest rates. However, the application process may be longer as the asset will need to have its value evaluated. Furthermore, you risk losing the collateral if you fall behind in payments.
Unsecured lines of credit
An unsecured line of credit does not require collateral. The interest rates are typically higher compared to a secured line of credit, because the credit comes at a higher risk to the lender. Often, applying for an unsecured line of credit can be quicker as no asset evaluation is required. However, the eligibility requirements are often stricter and the interest rates higher.
Uses of a business line of credit
- Cover seasonal fluctuations: If your restaurant experiences quieter periods, a line of credit can help you to cover operational costs during the low times.
- Manage cash flow: If you are waiting on payments whilst still needing to pay immediate expenses, a line of credit could help.
- Emergency repair or upgrades: If your restaurant needs an urgent repair, a line of credit will give you access to immediate funds that you can repay over time.
Business lines of credit give you the flexibility required to run a restaurant. It lets you access funds when you need them, making it an ideal tool for managing unpredictable cash flows or unexpected expenses. You will only pay interest on the amount you draw, which can be more cost-effective than taking out a traditional loan. Once you have repaid what you have previously drawn, this credit becomes available to you to use again, providing continuous access to capital.
Things to consider with a business line of credit
Lines of credit typically have variable interest rates, meaning they can change over time. The interest rates of lines of credit are often higher than traditional loans, especially if unsecured. It is essential to monitor the fluctuating interest rate and budget accordingly. Your credit limit may also be lower than you would get with a loan, particularly if your line is unsecured.
When applying for a business line of credit, make sure to understand if there are any fees, withdrawal costs or maintenance charges, as well as the repayment terms.
The application process for flooring finance
Whether you are considering a business loan, asset finance or a line of credit, the lender will typically want to assess similar financials. The eligibility criteria will vary between lenders, but the standard criteria includes:
Good credit history
Both your personal and business credit scores will likely be considered. A higher score will increase your chances of approval, whilst also improving your chances at getting a better interest rate.
Consistent revenue
Lenders will want to review your restaurant takings over time. They will want to see a healthy, consistent flow of revenue to ensure you can repay any borrowed funds.
Business financials
You may need to provide financial statements, such as profit and loss accounts, balance sheets and cash flow statements to demonstrate the financial health of your restaurant.
Time in business
Lenders will often require that a business has been operating for at least a year or two to qualify for commercial finance.
Choosing the right flooring for your restaurant
Once you have got the finance sorted, time to explore the different types of flooring best suited for restaurants. It is essential to choose durable, easy-to-clean and attractive flooring that can withstand heavy foot traffic, spills and the overall wear and tear of a busy kitchen or dining area.
Luxury Vinyl Tiles (LVT)
For restaurants looking to combine practicality with style, commercial LVT could be perfect for you. LVT floors are designed to mimic the appearance of natural materials such as wood or granite, but with improved durability, affordability and ease of maintenance.
Installing an LVT floor is also “considerably easier to install and more cost effective to maintain” compared to the real wood, stone or granite alternatives, according to Emily Russell of Crawley Design Flooring.
The designs of commercial LVT are practical as well as adaptable, as the laying patterns are flexible enough to allow for bespoke designs to be created and installed without fuss.
Contract Carpet Tiles
Carpet tiles are amongst the most cost effective solutions for your restaurant floors. They provide a hardwearing floor that can withstand a high pedestrian load.
Crucially, if a tile gets damaged or needs replacing, then just the damaged tile can be replaced for a new tile, as opposed to having to replace the whole floor. This is not only cheaper, but minimises disruption to your restaurant service.
Carpet tiles can be supplied in a range of different colours, styles and textures. Whether you are seeking a decorative centrepiece or a durable patterned carpet to hide the food stains, contract carpet tiles could be ideal for your requirements.
Safety slip resistant flooring
Safety flooring, often referred to as slip resistant floors, are commonplace within commercial kitchens. When comparing safety floors, prioritise floors that are hard wearing, non-slip and easy to clean, to help your infection control.
Tile Flooring
Flooring tiles, whether ceramic or porcelain, offer durability and aesthetic appeal. They are often stain resistant, making them ideal for restaurant environments. Porcelain tiles are particularly durable. One thing to note, tile floors can be costly and time consuming to install and replace over time.
Hardwood flooring
If you are aiming for a classic, upscale look for your restaurant, hardwood flooring is an excellent option. It provides a timeless, elegant aesthetic. However, it is often more costly to purchase, and is more susceptible to scratches, spills and stains compared to the manufactured options such as LVT.
Discuss your restaurant flooring finance options
If you are keen to finance your restaurant’s new flooring and / or wider renovation work, we’ve partnered with specialist commercial finance brokers Mill Wood Finance to offer a range of suitable finance options. To find out which financing route is most suitable for your restaurant and requirements, book your free, no-obligation consultation with the Mill Wood team. Don’t worry if you do not know which type of restaurant finance is right for you – the Mill Wood team will handle all of the heavy lifting with regards to organising you the funds you need to open successfully.