Small Business Loans for Catering Businesses

According to a January 2021 report, the American catering industry is worth $11.6 billion, and 2% growth is projected over the course of the year. However, this growth follows a year of significant decline, as the industry’s size dropped from just under $13 billion in 2019 to $11.35 billion in 2020 – the biggest year-to-year drop recorded after 2010. You may also have experienced several years of declining profits since, on average, the catering industry contracted 1.2% every year between 2016 and 2021. As such, it’s understandable if you’re having a tougher time than usual funding your business.

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Despite these figures, catering industry growth is expected in 2021 since urban populations are predicted to grow throughout the year. According to the aforementioned January 2021 report, urban populations are directly correlated with increased demand for catering since city dwellers are more likely to have hectic schedules and thus require catering for special events. This demand could accelerate further if current COVID-19 vaccination efforts achieve herd immunity in the U.S. and allow for the easing of event and gathering restrictions.

This is all to say: Now might be a great time to invest in growing your catering business. Several low-cost funding options exist to assist with this investment, and these financing methods can also help stabilize your company if it is struggling. Read on to learn more.

Funding challenges and opportunities for catering businesses

Among the biggest funding challenges you might face as a caterer is the industry’s recent years of contraction. Lenders may be hesitant to approve borrowers who work in declining sectors, especially when the sector in question has experienced year-after-year decline as with catering. You may face further challenges if your company is relatively new or you lack business ownership experience, as lenders often see both these conditions as high-risk and thus undesirable in borrowers.

Of course, as mentioned earlier, the catering industry may grow in the near future. Lenders aware of this fact may see approving catering loans as a worthwhile investment and thus approve your small business loans for catering. Knowing ahead of time whether you’ll face a favorable or difficult lending market is always a bit of a toss-up, but there’s one surefire way to find out for sure: Getting out there and applying for loans. Below, learn all about your many small business funding options.

Funding options for catering businesses

To obtain small business loans for catering businesses, you can pursue government SBA loans or several non-government funding options. No two loans will look exactly the same, but you can get an idea of what to expect with the below guidelines.

The SBA 7(a) loan program

Small business experts often see low-cost SBA 7(a) loans as the best funding options due to their low rates, low monthly payments, and long terms. SBA 7(a) loans can be used for:

  • Working Capital Working capital is often the clearest indicator of your company’s financial health. To determine your working capital, deduct your current liabilities from your current assets or count how much cash you have immediately available. Negative working capital means that you should grow your assets through new equipment purchases or employee hires, and you can use your SBA 7(a) loans toward both these ends.
  • Debt Consolidation – Through SBA 7(a) debt consolidation loans, you can refinance your catering company’s loans. SBA 7(a) debt consolidation loans can be ideal for refinancing short-term business loans, merchant cash advances, daily or weekly payment loans, and high-interest business loans.
  • Commercial Real Estate – You can use SBA 7(a) loans to purchase owner-occupied real estate for use as office space, a warehouse, or any other business purpose. Alternatively, you can use SBA 7(a) loans to refinance your current commercial real estate mortgages.

Advantages of SBA 7(a) loans for catering businesses

SBA 7(a) loans are known as the small business funding “gold standard” due to their:

  • Lack of prepayment penalties
  • Wide use of funds
  • Low rates
  • 10-year terms (25 years for commercial real estate loans)
  • Affordable monthly payments
  • Availability in all 50 states

Requirements for catering businesses to apply for SBA 7(a) loans

You and your company must meet all the below conditions to qualify for SBA 7(a) loans:

  • You must be at least 21 years old
  • You must be a U.S. citizen or lawful permanent resident
  • You must have no bankruptcies or foreclosures in the last three years
  • You must have a personal credit score no lower than 650
  • Your company must be based in the U.S.
  • Your company must not have outstanding charge-offs, recent settlements, or tax liens
  • Your company must be no less than two years old
  • You and your company must be on-schedule with all government-related loan repayments

Some, though not all, lenders may impose additional requirements. For example, a business plan presentation requirement is somewhat common, but SmartBiz Loans has no such policy.


How to apply for an SBA 7(a) loan for catering businesses

Step 1: First, confirm that you and your company meet the above SBA 7(a) loan requirements – if not, you can always try other non-government options. Learn more about your requirements via the SmartBiz Loans guide to SBA Loan Requirements for Existing Businesses.

To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also recommends ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.*

Step 2: If you do qualify for SBA 7(a) loans, then once you’re ready to apply, compile all your required paperwork. This step can be tedious and time-consuming, so you may want to ask your bookkeeper, accountant, or another financial expert for assistance. Read the SmartBiz Loans Guide to SBA Loans to learn more.

Step 3:  Choose your lender based on their:

Loan terms

Any loans to which you agree should have clear fine print that leaves a few questions. If not, you could encounter unexpected costs and payment schedules that impose additional funding challenges. That’s why you should ask your lender about your potential prepayment penalties, total loan amounts, collateral requirements, and payment frequencies and amounts. Any hesitance to provide clear answers may indicate that you should obtain your loan elsewhere.


Even before speaking with a lender, take a look through their Google, TrustPilot, and Consumer Affairs reviews. Make sure you’re reading reviews from actual customers, and search for other caterers among the reviewers since their experiences may be especially valuable references for your own needs.


A top-notch lender will assign you a representative who has clearly spent time reviewing your application, getting to know your company, and learning about the world of catering. Your representative should be regularly reachable via phone or email.


Your loan will almost certainly include repayment fees and interest fees, but it should have few other fees. If you see excessive additional fees, consider a different lender. You should also confirm that all fees are due before your loan’s funding and during your loan’s lifetime.


Your loan’s transparency should expand beyond its fees. You should see a clearly stated APR and interest rate, or else you might be dealing with a lender uninterested in outlining other key loan provisions.

The SBA 504 loan program

Small businesses, including catering companies, can apply for the SBA 504 loan program to fund expansion or modernization projects. SBA 504 loans can cover the costs of opening new locations, upgrading your equipment, or hiring new employees.

SBA 504 loans can cut back on modernization or expansion costs if your catering company meets the public policy goals of your local community development corporation (CDC). If so, your SBA 504 loan can cover as much as 50% of your project costs and your CDC can cover as much as 40%. This means that your immediate out-of-pocket costs could be as low as 10%.

The SBA microloan program

If your catering business is a very small business (a.k.a. microbusiness) according to the SBA definition, you can apply for the SBA Microloan Program. If you are approved, you will receive an SBA microloan of at most $50,000. Your loan proceeds can go toward all business costs besides debt payments and commercial real estate purchases.

Non-SBA loans and other funding options

Although SBA loans are ideal for small businesses, you have other options if you don’t qualify. These alternatives may have larger payments, higher rates, and shorter terms. They include:

Bank term loans

Typically, bank term loans provide funding as quickly as SBA loans, but they usually do so with shorter terms, higher rates and prepayment penalties, and lower amounts. You can use them for working capital and debt refinancing.

Business lines of credit

Business lines of credit are revolving credit lines of a maximum amount proportional to your credit score, though typically lower than standard bank term loan amounts. Business credit lines also differ from bank term loans in their funding structure: They do not require you to use all your funds, and they only charge interest on funds you ultimately use.

You can tap into your business line of credit as often as needed until you exhaust it, and you often won’t need to put up collateral to be approved for a business credit line. Learn more via the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.

Business lines of credit have extensive overlap with business credit cards, but they also have two key differences. The first is that, once business credit line funding runs out, you cannot reaccess your credit line. The second is that only business credit cards sometimes have spending rewards. Learn more via the SmartBiz Loans blog Finding the Right Credit Card for Your Small Business.

Merchant cash advances

If your company takes card payments, you may qualify for merchant cash advances (MCAs), which card providers issue to small business owners. To repay your MCA, you’ll either set aside a small portion of all your card transactions for your lender or agree to a traditional installment-based plan.

MCAs can make loan repayment more convenient, but they also have extremely high APRs. Learn everything you should know about MCAs via the SmartBiz Loans blog What You Need to Know About an MCA.

Catering Business Funding Success Story

Danielle Rozier is the owner of Savory Gourmet Catering, a catering and event services company in Washington, D.C. Danielle came to SmartBiz Loans when she needed low-cost small business funding to afford additional vendors and staff to meet her company’s rising demand. “Thanks to the loan, I can purchase software that will help with event logistics and venue layout,” Danielle says. “The cost for both is over $2,000. I didn’t have the cash flow available for that expense until now.” Danielle also used her funds to further expedite her catering operations, thereby leaving her more time to pursue new business.

Why Choose SmartBiz Loans?

Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing.  About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.

 *The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.

**We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.