Business credit

Term Loans for Coffee Shops

Updated: August 3rd, 2023

working capital loan

Starbucks may be the most recognizable name in the coffee game but there are plenty of smaller coffee shops that are thriving alongside the big-name competition. To keep the java flowing, many coffee shop owners turn to term loans to meet their financing needs. If you’re in search of capital, keep reading to learn:

  • How term loans work
  • How coffee shops can leverage term loans
  • What’s required to qualify for a term loan

Term Loan Basics

Simply put, a term loan is a loan that has a fixed repayment period and either a fixed or variable interest rate. Short-term loans have shorter repayment terms, usually lasting 18 months or less. Long-term loans usually have repayment periods of one to five years, although some lenders will extend it up to 10 years.

Term loan benefits

Coffee shop owners have numerous financing options to choose from when they need working capital. Some, such as invoice factoring, are faster in terms of funding but the trade-off may be a higher interest rate. Bank and SBA loans, on the other hand, have lower rates but they can take longer to process. That can be problematic if you need funding for your coffee shop and time is of the essence.

Business term loans offer the best of both worlds. When you’re working with an online lender, the funding speed can be cut down to a matter of days. Funding Circle, for instance, is able to process loan applications in as little as 24 hours after document submission.

You’re also more likely to fare better where the interest rate is concerned with a term loan versus something like a merchant cash advance. Getting the lowest APR possible is crucial from a cost perspective because the less you pay in interest, the better where your bottom line is concerned.

Finally, getting a term loan through an online lender may present fewer obstacles for a coffee shop owner than angling for a loan from a bank. Jonathan Rubinstein, founder of the infamous New York City’s Joe Coffee, was able to secure a term loan after hitting a dead end with traditional banks.

How Coffee Shop Owners Can Use Term Loans

The great thing about term loans is that they’re designed to fill a number of financing needs. That works in your favor if you need funding because:

  • You have a growing customer base and you’re ready to add a second location since your current shop is no longer large enough to handle the increase in demand.
  • You want to move beyond serving coffee and add breakfast foods and pastries to the menu, which means investing in some new kitchen equipment.
  • You’re ready to renovate your coffee shop and add a few customer-friendly perks like free WiFi but you need to spend some cash to make the necessary upgrades.
  • You’ve got a great idea for your own product line of gourmet coffees but you’re having trouble convincing a bank to give you a loan.
  • It’s time to replace your old espresso machine and you’d like to get a top of the line model without pulling all of your cash out of the bank.

Those are just some of the ways you can use a term loan to your advantage. Ultimately, term loan financing can help you tackle any issue that may challenge your coffee shop’s sustainability, large or small.

Qualifying for a Term Loan

As mentioned earlier, getting approved for a term loan through an online lender may be less of a headache. In general, online lenders are looking for things like:

Funding Circle, for instance, works with coffee shop owners who have been in business for two years or more, and a personal credit score of at least 620. As you’re weighing your term loan options, take a look at what’s needed to qualify as well as the terms a particular lender is offering to make sure you find the loan that best fits your needs.

Funding Circle is 100% focused on small businesses, which is why we made a loan that’s faster, more flexible and made exclusively for you. To date, we’ve helped 77,000 small businesses across the world access over $10.9 billion in financing.


Affordable business financing. Crazy fast.

Funds delivered in days, not months.

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