At a Glance

• Food service equipment is durable and the recovery on it is terrible: installed hoods, walk-ins, and dish machines come out of a closed restaurant at scrap-adjacent values. Advance rates built on the invoice are really unsecured exposure wearing a UCC-1.
• The operator type is the credit. Multi-unit QSR franchisees under a development agreement and second-year independent bistros are different asset classes, and programs pricing them off one grid subsidize the risk they least understand.
• The SBA 7(a) program is not the enemy of a dealer program — it’s the takeout desk for the deals a 48-month EFA shouldn’t hold. Dealers route flow to funders who can play both sides of that line.
• The dealer’s parts, service, and water-filtration ledger is a live feed on operator health that arrives months before the financials do. Almost nobody asks for it.

The Collateral Is Durable. The Recovery Isn’t.

Walk a food service dealer’s showroom and the equipment argues for itself: a $28,000 combi oven built to run fifteen years, a $40,000 hood and fire-suppression package, a walk-in cooler that will outlive the building’s next three tenants. Then walk the auction results for a closed restaurant. The combi brings 20 cents on the dollar if it’s a desirable brand and someone pays to de-install it cleanly. The hood system is effectively a leasehold improvement — cutting it out of the ceiling costs more than it fetches. The walk-in is a disassembly project. Between de-installation labor, the landlord asserting rights over anything bolted down, and a used market that knows exactly why this equipment is available, net recoveries on a defaulted food service package routinely land between 10 and 20 cents after costs.

That arithmetic is the honest foundation of program design. A funder advancing 100% of invoice plus install on a $60,000 package is holding what amounts to unsecured small-business exposure with a filing fee attached, and should underwrite and price it that way: personal guarantees on every deal without exception, terms held at 48 to 60 months rather than stretched to soften payments, and no residual assumptions doing quiet work in the pricing model. The programs that get hurt in food service aren’t the ones that knew the collateral was thin — they’re the ones whose credit grid still carried an industrial-equipment recovery assumption because nobody had updated it since the program launched.