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Guide to Business Loans for Cafes and Coffee Shops

Business Loans for Cafes and Coffee Shops
Lauren Ward
Lauren WardUpdated March 29, 2024
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Whether you’re looking to open a European-style cafe, purchase a coffee shop franchise, or expand a coffeehouse you already own, you may need financing to bring your business vision to life.The good news is that coffee entrepreneurs have access to a wide range of business financing options, including loans backed by the Small Business Administration (SBA), bank and online loans, equipment loans, merchant cash advances, and business lines of credit.The best loan for your burgeoning coffee business will depend on how much capital you need, how you plan to use the funds, and your qualifications as a borrower. Read on to learn what types of loans are available for starting, buying, or expanding a coffee shop, as well as how to find and apply for a cafe loan.  

What Are Business Loans for Cafes?

A cafe loan is any type of small business loan that will be used to start, expand, or purchase a cafe or coffee shop. Cafe loans can be short-term or long-term, and come with varying rates, terms, costs, and required qualifications. You can find coffee shop loans at banks, through SBA lenders, or via an online lending platform. 

How Do Business Loans for Cafes Work?

A coffee shop loan is a business loan, which means that if your business already has its own established business credit score, you may be able to take the loan out entirely in your business’s name. If the business is new, you may need to sign a personal guarantee or take the loan out in your name. Many business loans require some sort of collateral to secure the loan. Should you default on payments, this gives the bank some sort of recourse, meaning it could seize any assets you collateralized in lieu of payment. There are many types of business loans on the market that have unique repayment options. Standard business loans require a set monthly payment, while other loan types may take a small percentage of credit card payments for each sale. No matter which loan you choose, expect to start making payments shortly after disbursement. 

Uses for Business Loans for Cafes


Unless you’re planning on being a one-person show, you’re going to need to pay people to work for you. You'll likely need baristas, servers, and cashiers to keep your coffee shop running smoothly. 


You can use a coffee shop loan to open a second location or to enlarge your current cafe so you can serve more customers. 


In a coffee shop, customer service is everything. However, there may be times when unpaid invoices and slow sales can prevent you from running payroll. A cafe loan can prevent you from losing your valued and well-trained staff.


A loan or business line of credit can help ensure that sudden, unexpected costs – such a costly refrigerator repair or a pest problem – don’t derail your business.      


Of course, you’ll need to invest in coffee to start your coffee shop. You’ll also need non-coffee items, such as tea, bottled water or juices, and baked goods. You may also want to include salads, ready-made sandwiches, and coffee-related products (like mugs and thermos containers) in your inventory. 

Types of Business Loans for Cafes

Lenders offer different types of business loans that you can use to start, expand, buy, or renovate a coffee shop. Here are some cafe financing options you may want to consider.

SBA Loans

A loan backed by the SBA can be a great option for a coffee shop. The SBA itself doesn’t provide the financing, but instead works in partnership with banks and other lenders to guarantee a large portion of the loan’s proceeds in the event that the borrower defaults. Because this reduces the risk to the lender, SBA loans offer borrowers low rates, high amounts (up to $5 million), and long repayment terms (as long as 25 years). With the popular SBA 7(a) loan, you can use the funds toward almost any business expense for your cafe. If you're looking to buy a building for your coffee shop, you might want to look into an SBA 504/CDC loan, which is meant specifically for buying large fixed assets, including commercial real estate. If you're starting a new cafe that will give back to the community or is female-, minority- or veteran-owned, you might be a candidate for an SBA microloan, which provides up to $50,000.SBA loans can be difficult to obtain, however, due to rigid qualification requirements and an extensive application process. And, it can take several months before you will have access to the funds.

Term Loans

A term loan is a traditional business loan. Like an SBA loan, you get a lump sum deposited into your business bank account that must be repaid on a monthly or semimonthly basis. Short term loans generally have six- to 18-month repayment terms and are often available through online lenders. They tend to be easier to qualify for, but come with higher interest rates than long term loans. Long term loans, on the other hand, have a repayment period of two years or more. These loans typically come with higher amounts, lower interest rates, and tougher qualification requirements. They are available through banks, credit unions, and SBA lenders.

Equipment Financing

To start a cafe or coffee shop you need to invest in commercial-grade equipment, such as espresso machines, brewers, roasters, and refrigerators. If you don’t need the flexibility of working capital but want funds to purchase big-ticket items, you might be best served with financing for equipment.With equipment financing, the equipment itself acts as collateral, which keeps the interest rate low and your other assets (either business or personal) safe. You would typically get a quote for the equipment you’d like to buy, and a lender would then front you all or a large portion of the cost. Equipment financing can be limiting, however, as you can only use the funds for business-related equipment.

Business Line of Credit

If you prefer to have access to cash when you need it as opposed to getting it all at once, a business line of credit can be a good source of cafe financing. You can draw funds whenever you need to make purchases up to an agreed-upon credit limit and only pay interest on what you draw. Once you’ve paid back the loan, you can draw from it again. A line of credit can be a good thing to have in your back pocket to cover unexpected cafe expenses, seize a good pricing opportunity on inventory, or manage cash flow during slow periods.

Invoice Financing

If cash flow is getting low and you have invoices out to clients that haven’t paid you yet, invoice financing can be a way to bridge the gap. With this type of financing, you sell your unpaid invoices to a lender who advances anywhere from 60% to 95% of their value, then take over the collection process. Once your customer pays the outstanding invoice, you receive the money that’s left (minus fees). Invoice financing can help solve a cash crunch but tends to be more costly than other types of cafe financing.

Merchant Cash Advance

A merchant cash advance (MCA) is another form of short-term financing that may be worth considering if you need cash quickly or don’t have strong credit. With this type of financing, you receive a lump sum of money from an MCA company. In return, you give that company a small percentage of each credit card sale you make until the advance is paid off (plus fees). For a cafe business, where a majority of sales are likely to come from credit and debit cards, this can be a valid way to borrow money with minimal risk. However, costs tend to be higher than other forms of business financing.Recommended: Your Guide to Restaurant Loans 

Getting a Business Loan for a Cafe

Finding Out What Kind of Loan You Want

To determine which type of cafe loan is the right fit for your needs, first think about whether your business needs money up front with a fixed term or more flexible access through a line of credit. Also look at your qualifications as a borrower, since that will have a significant impact on your loan options. If you have solid credit and strong financials, you may be able to qualify for a low interest SBA or bank term loan. If you’re just starting out or don’t have strong personal or business credit, you may want to look into a short-term loan from an online lender, equipment financing, invoice financing, or a merchant cash advance.

How Much of a Loan Do You Need?

To determine how much money your cafe needs to borrow, you should create a detailed budget for how you will use the proceeds of the loan, and also estimate the revenue that you will generate by having access to the funds. Since there will likely be a delay before you see a return on your investment, you'll also want to look at your cash flow to determine how much of a monthly loan payment you could comfortably afford to make. 

Gathering Documents

You’ll need a variety of documents to apply for a small business loan. Exactly which ones will depend on the lender and whether you are starting a cafe or already have one operation. The list may include:
  • Personal and business bank statements
  • Personal and business tax returns
  • Resume (for you and any other owners)
  • Business license and registration
  • Balance sheets 
  • Profit and loss statements 
  • Information on other loans
  • Proof of collateral 
  • Business plan
  • A clear explanation of how you’d use the loan

Applying for Your Loan   

Once you've collected all the needed paperwork, actually applying for a small business loan should be relatively simple. The exact steps involved will depend on the lender. With an online lender, you may be able to do the whole thing online, whereas a bank or credit union may require you to apply in person at a branch or over the phone. Either way, when filling out a business loan application, be sure to include everything the lender asked for and in the correct format. This can reduce any unnecessary back and forth and help make sure you get a decision as quickly as possible.Once you’re approved, make sure to review the loan agreement carefully to know exactly the terms you’re signing up for. Look especially closely at the annual percentage rate (APR). The APR represents the real cost per year of borrowing money because it includes interest as well as added fees. It’s also the best metric to use as a comparison if you’re evaluating multiple loan offers.

Compare Business Loans Today

With so many different cafe financing options available, it can take a bit of legwork to figure out which loan and lender will fit your needs best. One way to simplify the search process is to use a loan comparison site. With Lantern by SoFi’s online lending tool, you can receive a small business loan offer that meets your cafe’s needs and qualifications. There’s no obligation and you only need to fill out one application.

Frequently Asked Questions

Can you use a loan to open a cafe or coffee shop?
What kinds of loans are available for cafe owners?
Is a coffee shop a restaurant for the purpose of small business loans?
Photo credit: iStock/doble-d

About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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