Bakery equipment financing

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Page written by Chris Godfrey. Last reviewed on October 19, 2024. Next review due January 1, 2026.

No matter if you’re making fancy wedding cakes, artisan bread or thousands of sliced loaves, you need bakery equipment to get the job done right. However, when a commercial oven can cost anywhere from €3,000 to €6,000 equipping a bakery business to perform at its best can require a lot of dough.

Fortunately, there’s an alternative: Bakery equipment financing is designed to reduce the financial strain of equipping bakeries with machinery and tools. Keep your working capital for other needs. Buy or lease your new equipment over time instead of paying all at once.

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What is bakery equipment financing and leasing?

Bakery equipment financing and leasing refers to specialist business loans that help organisations buy the bakery equipment they need. This type of financing is more readily provided by online lenders than traditional banks and credit unions and it can be used to buy new or used bakery tools and machinery.

Why should I finance or lease my bakery equipment?

Firstly, financing or leasing may be a more tax efficient way to obtain the bakery equipment you need. Secondly, because you’ll only need to make a down payment on the equipment, instead of covering the whole cost upfront, you may be able to buy or lease better, more expensive and up to date equipment than you could afford with cash.

What options for bakery equipment financing are available?

If you can’t or don’t want to buy your bakery equipment with cash, you can obtain the machines, tools and other items you need with a business loan or an equipment lease.

Let’s compare these options:

Buy the equipment with a business loan

All business loans for the purchase of bakery equipment work with the same basic format: You borrow a sum of cash and then repay it over time. Interest charges and fees are added to the principal amount you borrow. The lender may retain a lien on the equipment during the term of the loan. At contract end you’ve paid the loan back and you own the equipment outright.

Advantages of business loans for bakery equipment

Regular repayments can improve your financial planning.
You own the equipment at contract end.
May allow you to buy better and more expensive bakery equipment than buying with cash.

Disadvantages of business loans for bakery equipment

Some loans may require added collateral or a personal guarantee.
Interest rates on some business loans can be high.
At contract end the equipment may still need replacing or upgrading

Lease the equipment with a finance or operating lease

Leasing works differently from business loans. With a lease, you’re not buying the bakery equipment, you’re taking out a long-term rental. Depending on the type of lease you choose, you may have the option to buy the equipment at contract end for a pre-agreed sum, (which could be as low as €1 but is usually the residual value of the equipment – which means what it’s worth in used condition).

Because you are not repaying the whole cost of the equipment, leasing usually requires lower monthly payments than business loans. You may also pay a smaller down payment – perhaps equal to one or two month’s repayment instalments.

If you choose not to buy the equipment at the end of the lease, (or you have chosen an operating lease that forbids it), the machinery and tools go back to the lender. You would then need to take out a new lease and obtain replacement equipment. (Which could allow you to buy more modern and up to date machinery).

Some lessors (lenders) may give you the option to extend the lease if you prefer to keep the equipment but do not wish to pay the residual.

Advantages of leasing for bakery equipment

Pay a lower monthly sum.
May pay a lower down payment.
Could allow you to obtain better and more expensive bakery equipment than a business loan.
No added collateral required.
May have the option to buy the equipment at contract end.

Disadvantages of leasing for bakery equipment

May not own the equipment at contract end.
There may be restrictions on the types of equipment you can lease.
Reduced selection in bakery equipment – you may be limited to certain brands.

Types of financing for bakery equipment

Business loans to buy bakery equipment:

Equipment financing

The most common way to buy bakery equipment, equipment loans are ‘self-collateralising’ – like auto loans – you use the equipment as you pay for it, while the lender maintains a lien on the machinery. Once you pay the loan back, the lender releases the lien, and you own the equipment outright. No added collateral is required.

Business term loan

The standard type of business loan. You receive a single, lump-sum cash injection and then pay it back in regular instalments, plus interest and any fees, over a fixed period of up to 25 years. Collateral may be required.

Business line of credit

This is a business loan that functions like a high-value credit card but comes with lower interest rates and fees. Withdraw as much as you want when you want from a loan facility up to the limit of your borrowing. You only pay interest on the sums you withdraw, not the whole line. This can significantly reduce your borrowing costs. Collateral may be required.

Invoice financing

Also known as account receivables financing, this type of loan allows you to borrow against the value of your unpaid invoices and is best for B2B organisations. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised. Your invoices act as security for the loan, no added collateral is required.

Merchant cash advance

Available for bakeries that accept customer payments by credit and debit card. You borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.

Business credit cards

If you have good credit, it may be possible to secure a business credit card with a high limit to buy your bakery equipment. The application process is usually online, fast, streamlined and does away with the need for piles of paperwork – in many cases you won’t even need a formal business structure to apply. Be aware that business credit card interest rates are typically much higher than for many other types of business loan. Collateral is usually not required.

Leasing bakery equipment:

Finance lease

A finance lease gives the lessee (you) the option to buy the equipment at contract end. You provide a down payment and then pay a monthly rental sum to use the equipment during the contract period. At the end of the lease you can either pay the residual sum and keep the equipment, extend the lease and continue to rent, or give the equipment back to the lessor. A finance lease may or may not include maintenance and servicing of the equipment. You will usually be responsible for the equipment insurance.

Operating lease

An operating lease is a simple long-term rental agreement. There is no option to buy the bakery equipment at contract end. You provide a down payment and then pay a monthly rental sum to use the equipment. When the lease expires, the equipment returns to the lessor. The lessor provides equipment maintenance and servicing, but you will usually be responsible for equipment insurance. An operating lease often comes with lower monthly payments than a finance lease.

How to decide between business loans and leasing

The key question to ask yourself is, ‘do I want to own the equipment at contract end?’ If your answer is yes, you may be better off buying the machinery with a business loan or taking out a finance lease.

Leasing can be a good option for new bakeries or those with limited cash to hand or who do not have deep experience of the industry. Leasing gives you the equipment you need with less upfront expense and often with smaller monthly payments. You can also learn more about the bakery equipment you need and can easily dispose of the equipment at contract end – giving you the opportunity to switch to different equipment or upgrade to more efficient machinery. Leasing may also give you inclusive equipment maintenance and servicing.

What tools and equipment are needed to start a bakery?

After your premises, bakery equipment is the most essential requirement for your business. Key items you’ll need include:

Dough preparation – commercial mixers, work stations, dough dividers, dough sheeters and dough scales. You may also need dough proofing cabinets, holding cabinets, refrigerators and retarder/proofer combos.
Storage – your bakery will require shelving and storage racks. If you’re working with bulky bags of flour and sugar, you should invest in trucks, dollies, and carts to move large bags around your kitchen.
Baking equipment – convection ovens provide dry heat and bake evenly. If you’re preparing a lot of artisan bread, you may want to choose a deck oven to give your products a crispy base. Wholesale bakeries may want high-output ovens, such as roll-in rack ovens or revolving ovens.
Display and sales equipment – choosing the right display cases for your baked goods can help boost your sales. You can choose self-service or full-service cases, and there are refrigerated and unrefrigerated options. In addition to your display cases, be sure to also choose stylish boxes and packaging for your baked goods.
Cleaning and equipment washing supplies – a three-compartment sink is necessary for any cleaning station. You will also need hand washing stations, disposable gloves, cleaning chemicals, sponges, scrubbers, etc.
Bakery smallwares – in addition to your large equipment, you must stock your bakery with items such as mixing bowls, storage boxes, whisks, knives, and aprons.
Business necessities – operating a bakery isn’t just about making bread and cakes, you’ll also need equipment to keep the business running. This includes computers, filing systems, phone systems, cash register, EPOS system, etc.
Safety equipment – don’t forget burglar and fire alarms, fire extinguishers and sprinkler systems, plus first-aid kits and sanitary ware such as plastic gloves, paper hats, disposable aprons etc.
Furniture – if you’re running a retail bakery that offers a café style experience, you’ll require customer chairs and tables. You may also need office furniture and chairs for your staff breakroom.

How much does commercial bakery equipment cost?

The cost and complexity of modern bakery equipment varies enormously, and large-scale commercial bakeries will typically need a lot more equipment than a small, retail or café style bakery business. Costs to equip a new bakery can therefore vary from a few thousand dollars for a home bakery up to €60,000 or more for a standard retail operation and €200,000 or more for an industrialised commercial bakery business.

How to apply for bakery equipment loan

Interest rates and fees for bakery equipment financing can vary significantly, so it makes sense to shop around before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of bakery equipment loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a business loan before.

Get started with Swoop's business funding platform

No matter if you’re launching a brand-new bakery, or you’re an established business, chances are you need finance to make the operation grow. Funding is where Swoop can really help. Many types of business loans are suitable for bakeries, but working with finance experts can make all the difference when applying for funding. Contact us to discuss your borrowing needs, get help with loan applications and to compare high-quality equipment financing from a choice of lenders. Make your bakery the toast of the town. Register with Swoop today.

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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