Business Loans for Coffee Shops

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Coffee – Americans love it. According to the National Coffee Association, 62% of Americans drink coffee daily, 7 in 10 drink it weekly. Almost half of coffee drinkers buy their coffee outside the house, and those who drink espresso-based beverages have grown by a whopping 50% since 2015. Coffee beans sales have also grown, and represent $319.9 million annually in sales, with a growth rate of 7.97% annually. Coffee shop owners can grow their business by adding bean sales, or a drive thru, and many small coffee shops thrive in small towns and large cities across America. If you’re thinking about opening or expanding your business, here’s what you need to know about how borrowing can make it happen.

Below is a list of the requirements to get approved for business funding with our most basic program. There may be additional factors that are considered, meeting these three requirements though gives you a very high chance of having your application approved.

Applying has never been easier. You can either call our toll free number 24 hours 7 days a week at

 (888) 882-6117

Submit your online application by clicking apply below and entering a few basic details about your business.

Why Would a Coffee Shop Owner Need to Borrow?

Borrowed capital can be used effectively to grow or support existing business operations. By using borrowed money, business owners conserve their cash flows to support ongoing operations. It can allow them to reach new business goals – such as an expansion – that existing cash flows might not support.

Here are some of the common reasons that coffee shop owners borrow: 

  • Invest in new machinery to replace outdated/broken machinery or expand product offerings.
  • Hire and train new staff and managers.
  • Invest in inventory such as beans, paper cups, filters, and milk products.
  • Remodeling or expanding an existing space.
  • Opening a new coffee shop or building out an older space. 
  • Marketing your business.
  • Adding a drive thru lane – almost 50% of Americans who drink coffee outside the home go through a drive thru to get it.
  • Invest in a franchise such as Dunkin Donuts (average cost to invest $97,500 to $1.7 million)

Businesses often require capital investments before the project will generate new revenues, which is why 70% of small businesses carry some form of debt. But for your borrowing experience to succeed, ask yourself these questions.

Questions to Ask Before Borrowing

Borrowing money is incurring a financial responsibility that will impact your business. Whether or not you have a successful borrowing experience depends on many factors. Just like there’s no foolproof way to ensure business success, the same is true for taking out a loan. 

But if you know the answers to these questions before you borrow, you increase your odds of having a positive borrowing experience.

How much money do you need to borrow? 

The reason that you need to borrow leads to how much you need to borrow. If you’re borrowing to cover rent and payroll during a slow month, or season, you should take out a loan large enough to cover that purpose. Borrowing to invest in opening a new location will require a much larger loan amount.

Banks and traditional lenders prefer to extend larger loans. Their costs to underwrite and fund a loan are often the same, no matter the loan size, but they make more money on a larger loan. If you need to borrow a smaller amount, for example, $20,000, it could be a waste of time to apply with a traditional lender. Alternative lenders extend loans in smaller amounts. 

Before approaching lenders, know how much you need to borrow so you can use your time wisely.

How long do you need to use the funds?

When putting together your project plan or budget, determine how long you need to use borrowed capital. Typically speaking, you want the loan’s term to align with how long you plan on using the funds. 

Do you need to cover a few months of working capital expenses, or amortize the cost of acquiring another coffee shop over the first few years of ownership? Maybe you’re investing in a commercial espresso machine and need an equipment financing loan whose term matches its useful life.

Banks also prefer to extend loans for longer periods of time – typically, they won’t lend for less than two years. But you may only need access to capital for a few months to a year. While banks do extend equipment financing loans, they prefer to lend above $100,000 and for two to five years. 

Will the project be profitable? 

Sometimes, you need to borrow to keep the doors open. If your commercial roaster or espresso machine breaks, you’ll have to replace it. But other times you’re borrowing for a larger business purpose.

Larger purposes include expanding into and remodeling the open storefront next door. Investing in a commercial oven to start making and offering your own breakfast pastries. Realizing your dreams of growing a local chain or acquiring another franchise. 

Before you borrow to fund a project like this, spend some time crunching the numbers. Borrowing for a large capital project can sink an otherwise profitable business if the project fails. Run cash flow projections, talk to an accountant or other business expert, and try to be reasonably sure that the project will be profitable before applying for a large business loan.

Can you afford the loan payments?

The next step is to determine if your business can afford the loan payments. If you haven’t already, prepare a budget and add in the expected loan payment amount. 

If you’re borrowing for large project (as outlined above), it’s important to know if your business’ existing cash flows make payments before the project generates revenues. That way, even if the plan isn’t successful or doesn’t generate the profits you expected, you’re not hurting your core business. 

Even if you’re borrowing for another purpose, a loan must be repaid. If you don’t have a repayment plan you could fall into a debt cycle of constantly borrowing to pay off the last loan. Ultimately, this will hurt your business.

What is your credit score? 

Banks prefer to work with borrowers who have credit scores of 720 and up. For certain loan products – such as an equipment financing loan where the bank has collateral – they might work with a borrower who has a score as low as 650. But they’ll rarely dip below that number.

Before beginning the loan application process, check your credit score. Review your credit report, identify any errors, and get them fixed, or work on improving your score if it’s lower. While borrowers with low credit scores can still obtain capital, you’ll pay a much higher interest rate. 

The Best Business Loans for Coffee Shops

The best business loan for your business shop depends on the answers to the above questions. Loan products vary, from the interest rate you pay to the loan’s repymanet term. One of these loans will be the best fit for your borrowing need. 

1. Equipment Financing Loans

Starting a new coffee shop takes a lot of equipment. Estimated costs include: espresso machine $500 – $2,500, coffee roasters $3,000 and up, coffee maker $500 to $2,500, refrigeration $500 to $12,000, water filtration system $1,500 to $10,000. Equipment financing loans are a great lending product to help new or existing coffee shop owners.

Equipment wears out and will need to be replaced eventually. Maybe you want to add a new machine to support adding a drive thru window or to meet higher demand. Whatever the reason you’re considering purchasing new equipment, an equipment financing loan can help.

Equipment financing loans have lower interest rates than some of the other loan products on this list. The equipment you’re purchasing with the loan serves as collateral, which lowers the lender’s risk. If you defaulted on the loan, the lender could seize the equipment to recoup their losses. This lower risk of loss in turn lowers the loan’s interest rate. 

An equipment financing loans fund up to $150,000, or up to $250,000 if you have a stronger credit profile. A newer coffee shop open less than one year can borrow up to $25,000, and with two years in business you can borrow up to $35,000. 

2. Small Business Loans for Inventory

Do you need to invest in beans, grab and go, novelty cups to sell, and other items to meet customer demand? Then consider applying for a small business loan for inventory. It can help fund the initial investment if you’re opening a new shop, manage inventory if you need to place an order but are struggling to balance cahs flow, or pay for an investment in inventory management software. 

A small business loan for inventory can also serve other purposes. Sometimes, an opportunity arises to take advantage of supplier discounts or buy the stock of a coffee shop that’s closing their doors. If you have a minimum credit score of 530, at least three months in business, and $10,000 of minimum monthly revenues you can qualify for a small business loan for inventory.

3. Merchant Cash Advances

Do your customers primarily pay by credit card? If so, you could be a good candidate for a merchant cash advance or MCA. A MCA credit extended based on past credit card sales, and the lender collects their repayment from future sales.  

When you apply for a MCA, lenders analyze your past few months of credit card sales. You’ll need minimum monthly revenues of $8,000. Based on these statements, the lender estimates future sales and advances money based on that estimate. 

Because sales matter more to the lender than how long you’ve been in business or credit score, you can qualify after just two months in business and with a credit score as low as 500. The advance is repaid through automatic deductions every time a customer swipes their card – so you don’t have to worry about budgeting for a large, monthly lump-sum payment. Repayment also aligns with cash flows, so if it’s a slow month the loan payment won’t be a burden.

However, there is a cost to the convenience of a MCA. Interest rates are between 24% to 49%. 

4. Bad Credit Business Loans

The reality is that many small business owners learn financial management the hard way. It’s common for first-time businesses to use credit cards and multiple loans to fund their business at the beginning. But multiple forms of open credit, plus an occasional missed or late payment, could have hurt your credit score. 

If this is your situation, you might need to work with an alternative lender to apply for a bad credit business loan. Alternative lenders offer these loans to borrowers with lower credit scores, often borrowers that banks reject out-of-hand. They’ll work with you if your credit score is as low as 500. 

While your credit score could disqualify you for a bank loan, other factors could also lead to a bank rejecting your loan application – such as how long you’ve been in business or lower revenues. Or, sometimes borrowers chose to work with alternative lenders because don’t have the months to devote to a getting a loan approved at a bank.

Alternative lenders can approve loans within 24 hours and disburse funds in days. Coffee shops with  monthly revenues above $8,000 can qualify for financing with an alternative lender. Shield Funding funds loans in amounts ranging from $5,000 to $1 million, at rates of 12% to 45%, and you can take two to eighteen months to repay the loan.

5. Fast Business Loans

It’s in the name – a fast business loan funds fast. If you have an emergency – a broken machine that can’t be repaired, a vendor is demanding payment and you don’t have the cash on hand, but if you don’t pay them you won’t have espresso beans for next week, a fast business loan can bail you out. Alternative lenders approve these loans within hours, and the money is in your bank account within as little as a day. 

Because these loans fund quickly, lenders have minimal time for underwriting and thus – higher risk. Expect to pay higher interest rates of 9% to 45% compensate the lender for the risk they’re taking. But if you have a minimum credit score of 530, have been in business for three months, and your coffee shop has $10,000 of minimum monthly revenues, you could get the capital you need in a short timeframe.


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