Hospitality renovation financing Canada | FF&E & leases

Written by

Alec Whitten

Published on

November 25, 2025

Financing Hospitality Renovations and Furniture Upgrades in Canada: A Practical Guide.

Hospitality businesses in Canada usually finance renovations and furniture upgrades most efficiently by splitting the project into parts: leasing furniture, fixtures and equipment (FF&E), using targeted working capital or project loans for construction and soft costs, and, where it fits, refinancing existing assets to free up cash. The goal is to preserve day-to-day cash and your operating line of credit, while matching payments to your seasonal revenue.

Let’s walk through what that looks like in the real world for restaurants, bars, cafés, hotels and event venues.

What you’re really financing when you “renovate”

Most hospitality renovation projects have three distinct buckets of spend, and each can be financed differently:

FF&E (Furniture, Fixtures & Equipment)
- Chairs, tables, booths, barstools
- Millwork and bar fixtures that can be removed
- Kitchen equipment, refrigeration, dishwashers
- POS terminals, handhelds, back-office IT
These are often ideal for an equipment lease.
Leasehold improvements / construction
- Moving walls, electrical, HVAC changes
- Plumbing for new bar or washrooms
- Flooring, ceilings, permanent lighting
  These are usually financed with a commercial real estate or project loan, or in some cases via working capital if the budget is smaller.
Soft costs and launch costs
- Design fees, permits, architectural drawings
- Temporary closure costs
- Marketing for re-opening
- Extra inventory and staffing for launch
  These often sit better in a working capital loan, line of credit, or merchant cash advance, not in a long-term lease.

Understanding which cost belongs where is the first step to choosing efficient, low-stress funding.

Why smart financing often beats paying cash

Paying cash sounds simple, but for hospitality it’s usually more expensive in the long run:

The accommodation and food services sector invests billions every year in capital and repair spending; Statistics Canada reports capital expenditures in accommodation and food services exceeded $3.6 billion in 2023 alone. (Statistics Canada)
Those dollars have to come from somewhere: cash reserves, retained earnings, or debt.

At the same time, the Bank of Canada’s key interest rate sits at 2.25% as of October 29, 2025 after a series of cuts from higher levels. (Bank of Canada) Debt is cheaper than it was at the peak, but still meaningful – which means how you borrow matters.

Paying a big renovation entirely out of pocket can:

Drain the cash you need for payroll, food and beverage purchases, and marketing.
Trap you if sales dip or a surprise repair shows up.
Force you to use your operating line of credit for something long-term, leaving nothing for daily swings.

A more efficient approach for many operators:

Use equipment financing to cover FF&E and major equipment, preserving cash for operations. A hospitality-focused lessor like Mehmi can structure this around your seasonality via equipment financing solutions.
Use a targeted project or working capital loan for construction and soft costs, rather than stretching your line of credit.
Keep your bank LOC free for short-term swings and emergencies via a dedicated business line of credit.

If you want to see what you can comfortably afford before you start, Mehmi’s online financing calculator is a useful way to rough-in monthly payment ranges.

Leasing furniture, fixtures and equipment for your renovation

Leasing is often the most efficient way for a hospitality business to finance furniture and movable fixtures. You’re paying for the value of the asset while you use it, not all up front.

Standard equipment leases for FF&E

For many restaurants and hotels, a straightforward equipment lease is ideal for:

Dining room furniture and outdoor patio sets
Bar counters and back-bar refrigeration (where separable)
Banquettes and booths
POS terminals, kitchen display systems (KDS), and payment hardware
Ice machines, glasswashers, under-counter refrigeration

Typical terms for hospitality equipment in Canada run 24–84 months, depending on asset type, age, and credit profile. (Equipment Finance Canada) That lets you match payments to the useful life of your furniture and equipment.

Key advantages:

Conserve cash: Up to 100% of the equipment cost is financed, sometimes including install and freight.
Preserve bank capacity: The lease is usually separate from your bank line or mortgage.
Flexible end-of-term options: Depending on structure, you might return, upgrade, or buy the assets for a nominal amount.

If you’re planning a major refresh of FF&E, it’s worth getting a quote on a dedicated equipment lease alongside any bank financing you’re considering.

Rent-try-buy programs for hospitality

For some hospitality businesses, especially new concepts or high-fashion venues, the biggest risk isn’t “Can I pay for these chairs?” but “Will this concept actually resonate with guests?”

A rent-try-buy structure lets you:

Lease key items (furniture, coffee equipment, some kitchen and bar gear).
Run them for a set period while you test the concept.
Decide later whether to return, upgrade, or buy out.

Mehmi’s Rent Try Buy Hospitality program is designed specifically for this scenario: cafés trying new layouts, restaurants refreshing patios, or bars testing upgraded back-bar setups.

Using an equipment line of credit for staged projects

Renovations often happen in phases – maybe you replace the bar now and redo the dining room next year.

Instead of applying for several leases, some operators prefer an equipment line of credit:

A pre-approved limit used as you add equipment over time.
Each draw converts into its own schedule with a known term and payment.
You only pay for what you use.

If you’re planning multi-stage upgrades – say, a gradual refresh across multiple locations – it can be worth discussing an equipment line of credit structure.

Funding construction, décor and “soft costs” of a renovation

Leasing isn’t meant to cover everything. Construction, major leasehold improvements, and soft costs usually sit better in other structures.

Working capital and project loans

For bigger jobs that involve moving walls, new washrooms, or kitchen reconfiguration, many operators:

Work with their commercial mortgage lender or development lender, or
Use a dedicated project or working capital loan.

BDC, for example, highlights that its commercial real estate loans can fund renovations and related project costs, sometimes including a portion of soft costs and contingencies. (BDC.ca)

From a Mehmi perspective, hospitality owners typically use:

A working capital loan for construction and design costs that aren’t tied to specific equipment.
An asset based lending facility if they have significant equipment or inventory to leverage.

Practical tips here:

Separate the budgets: Keep a clear split between “equipment” and “construction/soft costs” in your project spreadsheet.
Add contingency: BDC suggests building contingency into renovation budgets to deal with surprises; 10–15% is common in hospitality fit-outs. (BDC.ca)
Match term to life: Don’t finance paint and décor over 10 years; aim for 3–5. Structural upgrades can justify longer terms.

Merchant cash advances for smaller refreshes

If you’re doing a modest refresh – reupholstering banquettes, adding a few tables and replacing some signage – and you process a lot of card sales, a merchant cash advance can sometimes fill the gap quickly:

You receive a lump sum today.
Repayments happen as a percentage of daily card sales.
There’s no fixed monthly payment; slower months mean slower payback.

This can be expensive money if overused, but for a small, fast-ROI facelift (e.g., upgrading patio furniture right before summer), it can be effective when used carefully.

If you’re exploring this route, make sure you understand the pricing, and consider working with a partner that offers transparent merchant cash advance terms alongside more traditional leasing.

Refinancing existing equipment to fund new upgrades

Another efficient option is to unlock equity in equipment you already own via refinancing or a sale-leaseback:

You sell existing equipment (for accounting purposes) to a funding partner.
They lease it back to you.
You receive cash today that can be used for renovations or furniture upgrades.

This can be particularly useful when:

You’ve paid off a lot of kitchen gear or laundry equipment.
You want to refresh the front-of-house or guest-room furniture without touching your bank line.

Internal credit guidelines for refinancing typically require full equipment specs, registrations where applicable, proof of payment, and recent bank statements to understand the business’ cash flow.

If you’re considering this route, ask your advisor about a dedicated refinancing or sale-leaseback structure so you understand the tax and accounting implications as well.

Structuring payments around seasonal hospitality cash flow

Renovation financing is only “efficient” if the payment schedule matches your revenue pattern.

Hospitality often has:

Busy seasons (patio months, holiday party season, ski season, event months), and
Quiet periods (slow winters, shoulder seasons).

A good funder will work with you to build:

Seasonal or step-up payment structures, where payments are lower in the early ramp-up period and higher once the renovation starts paying off.
Skip-payment options, especially for highly seasonal operators (e.g., a lakeside seasonal restaurant).
Terms that align with typical hospitality equipment norms – many Canadian lessors look at 36–72 months for basic FF&E and up to 84 months for heavy kitchen equipment, aligning with industry practices. (Equipment Finance Canada)

This is one of the biggest advantages of working with a dedicated equipment finance provider instead of trying to fold everything into a bank line.

What lenders look for in hospitality renovation deals

From the lender side, hospitality is a specialized sector. Underwriting usually focuses on:

Concept and location: Type of restaurant or hotel, cuisine, services (delivery/take-out, buffet, à la carte), liquor licence and seating capacity.
Experience: For startups (0–2 years), most lenders want at least two years of relevant industry experience for the owners or key operators, supported by résumés, prior tax returns, or driving/role reports.
Lease terms: The remaining term on your location lease should usually exceed the financing term, and lenders often ask to see the restaurant or hotel lease itself.
Cash flow: Last 3–6 months of bank statements to see how you manage seasonality and obligations; this is specifically highlighted in internal guidelines for hospitality, gyms, and transport businesses.
Project details: Clear budget, vendor quotes, and whether the work is additional capacity (new seats, new rooms) or a replacement of tired décor.

On the vendor side, complete funding packages usually include signed lease documents, vendor invoices with proper tax details, IDs, void cheques and insurance certificates naming the funder as additional insured and loss payee.

You don’t have to memorize this – but knowing that this is how underwriters think helps you present your deal cleanly and get to “yes” faster.

Step-by-step: Planning efficient renovation financing

Here’s a practical playbook you can use before you start ripping out booths.

1. Clarify the business goal

Before you talk to any lender, answer:

Are you adding seats, raising average cheque, driving private-event revenue, or improving RevPAR?
How much additional revenue do you reasonably expect per month or season?

This is the story you’ll use to justify the investment.

2. Build a detailed budget, split by category

In your spreadsheet, separate:

FF&E and equipment (by vendor)
Construction and trades
Permits, professional fees and contingency
Marketing, pre-opening, and inventory

This makes it easy to see what can go into a lease vs. a working capital loan.

3. Decide which costs to lease

Sit down with a leasing advisor (Mehmi or another specialist) and go through your FF&E list:

Anything movable and durable (furniture, refrigeration, dish, POS, IT) is a strong lease candidate.
Some semi-permanent millwork can be considered equipment if it’s separable from the building.
Use Mehmi’s eligible equipment list to sanity-check what can be financed.

You can also explore whether a sale-leaseback on existing gear can help cover part of the project.

4. Protect your operating line of credit

Your bank LOC is your oxygen – it should cover:

Payroll and regular supplier purchases
Seasonal inventory builds (e.g., stocking up for patio or holiday season)
Short-term shocks (equipment failure, weather, labour disruptions)

Where possible, avoid using it for five-year furniture. Instead:

Use equipment leasing for FF&E via a specialist like Mehmi.
Use a separate business line of credit or term facility if you truly need revolving capital for the project.
Keep your operating line available for working capital swings.

Prepare your documentation in one bundle

To speed approvals, pull together:

Last 3–6 months of business bank statements
Most recent year-end financials and interim statements (for larger deals)
Copies of your location leases and liquor licences
Equipment quotes and floor plans
A short narrative on the concept and expected impact on revenue

Internal credit checklists heavily emphasize complete packages – incomplete files slow down funding.

7. Stress-test your payments

Before committing, use a tool like Mehmi’s financing calculator and a simple cash-flow projection:

What happens if sales are 10–15% below your renovation target?
Can you still comfortably cover lease and loan payments, plus rent and payroll?
Do you have backup access to funding (e.g., asset based lending) if the project runs over budget?

If the math is tight, adjust the scope, extend terms moderately, or phase the renovation.

When a traditional business loan or mortgage is the right tool

While this guide leans heavily into leasing, there are cases where a more traditional loan is the better fit:

Buying the building or strata unit instead of just renovating – then a commercial mortgage or real-estate loan is typically the backbone of the project. (BDC.ca)
Major structural expansions that fundamentally change the property (adding floors, building out event space).
Multi-location growth or a franchise rollout where you want a blended capital structure including a franchise loan and equipment leases.

The key is not to force everything into a single bank loan because “that’s how we’ve always done it.” For many Mehmi clients, the sweet spot is:

Bank mortgage or term loan for the shell and structure.
Mehmi leases for FF&E and equipment.
A right-sized working capital loan or secured loan for the softer and squishier costs.

How Mehmi fits into your renovation plans

Mehmi works with hospitality operators across Canada – from quick-service concepts to boutique hotels – to structure practical, story-driven deals that fund real-world renovations.

That can include:

Straightforward FF&E leases
Rent-try-buy hospitality for new concepts
Sale-leaseback on existing assets
Coordinated working capital facilities for soft costs
Vendor programs that let your millwork or kitchen supplier offer financing directly via Mehmi’s vendor program

If you’re considering a renovation or upgrade, you can learn more about us, see other topics on the Mehmi blog, check the FAQ, or connect directly via Contact Us.

Anonymous case study: Mid-size restaurant refresh with leasing and working capital

Background

A 120-seat casual restaurant in a suburban Ontario strip plaza had been open for 8 years. Sales were steady but flat, and online reviews increasingly mentioned “tired décor” and “dated furniture.”

The owner wanted to:

Modernize furniture and lighting
Rework the bar to focus on cocktails
Add a small private-dining nook for events

Total project budget: $280,000 (plus contingency), broken down as:

$145,000 in FF&E (new tables, chairs, booths, bar equipment, glassware storage, POS upgrades)
$105,000 in construction and trades (bar rebuild, lighting, flooring repair)
$30,000 in soft costs (design, marketing, staff training, pre-opening events)

Financing structure

Working with a leasing advisor:

FF&E equipment lease – $155,000
- Included furniture, bar refrigeration, glasswashers, and POS.
- 60-month term, with slightly lower payments in months 1–6 while the reno ramped up.
- Payments structured to fit comfortably within historical cash flow plus expected lift.
Working capital loan – $110,000
- 5-year amortization with 12 months interest-only during construction and first trading months post-reno (mirroring many BDC-style structures). (BDC.ca)
- Used for trades, permits, design, and 10% contingency.
Owner cash – $15,000
- Used mainly for initial marketing and a small buffer.

The owner kept their existing bank line of credit fully available for inventory and payroll.

Results 18 months later

Average cheque increased 11%, led by bar sales and desserts.
Private-event revenue added a steady $6,000–$10,000 per month.
Google rating moved from 3.9 to 4.4 as décor complaints vanished.
Even with lease and loan payments, monthly free cash flow increased by ~15% versus pre-reno.

Looking back, the owner’s biggest comment was: “Splitting the project was key. If I had tried to do this all on my bank line, I’d have had no room left for a bad month.”

FAQ: Hospitality renovation financing in Canada

1. What’s the best way for a restaurant to finance new furniture and décor?
For most restaurants, the most efficient way to finance furniture and décor is an equipment lease that covers chairs, tables, booths, bar stools, some lighting, and POS hardware. That keeps cash in the business and preserves your operating line of credit. For very small spends (under, say, $20,000), a working capital loan or merchant cash advance may be more practical than setting up a full lease – but check the pricing carefully.

2. Can I finance a full restaurant renovation through a single loan?
Yes, you can roll everything into a single loan or mortgage, but it’s not always the most efficient approach. Combining FF&E, construction, and soft costs in one long-term loan often means you’re paying for short-life items (like décor or marketing) over too many years. A more efficient structure for many Canadian operators is: bank loan or project loan for construction, leasing for FF&E, and a smaller working capital facility for soft costs.

3. How do lenders view hospitality renovation risk in Canada?
Hospitality is considered a specialized sector. Lenders pay close attention to your experience, the strength of your concept, and your location. Internal credit guidelines often call for at least two years of relevant industry experience for startups, plus recent bank statements and a review of your restaurant or hotel lease. An existing track record of stable or improving sales helps a lot when you’re asking for money to renovate.

4. Can a hotel or restaurant refinance existing equipment to pay for upgrades?
Yes. Many hospitality businesses use refinancing or sale-leaseback to unlock cash from owned equipment (kitchen gear, laundry equipment, certain FF&E). A funder buys the equipment on paper and leases it back to you, giving you cash today for renovations. You’ll need proof of purchase, full specs, and a clear explanation of how the funds will be used. This works best when the existing equipment is still relatively modern and in good condition.

5. How long should I finance hospitality furniture and fit-out for?
A common range in Canada is 36–72 months for basic FF&E, with some larger kitchen items going up to 84 months. (Equipment Finance Canada) The key is to ensure the term doesn’t exceed the realistic life of the asset or the remaining lease term on your space. Financing chairs for longer than your location lease is usually a red flag. Your advisor can run scenarios so your monthly payments stay affordable without dragging out too long.

6. How can I estimate how much renovation financing I’ll qualify for?
A simple rule of thumb is to start from cash flow, not project cost. Look at your last 12 months: how much free cash flow (after owner draws) did the business generate per month? A conservative approach is to keep total new payments (leases plus loans) under 50–60% of that free cash flow. Then sanity-check the project with an online tool like Mehmi’s calculator and talk with an advisor who understands hospitality. They’ll look at your financials, bank statements, and project plan to give you a realistic range.

Internal links used (list)

External citations used (list)

Statistics Canada, Capital and repair expenditures, accommodation and food services (Table 34-10-0035-01). (Statistics Canada)
Business Development Bank of Canada (BDC), Tourism industry financing & consulting and How to get financing for commercial renovations. (BDC.ca)
Bank of Canada, Policy interest rate and October 29, 2025 rate announcement; RBC explanation of the 2.25% rate environment. (Bank of Canada)
Equipment Finance Canada, Hospitality equipment financing in Toronto – typical term ranges. (Equipment Finance Canada)
TFI Food Equipment Solutions, Restaurant equipment leasing & financing in Canada – examples of flexible leasing terms for kitchen equipment. (TFI Food Equipment Solutions)

(Internal underwriting and funding process comments are additionally informed by Mehmi/SFA internal credit and funding guideline documents. )

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