Finding the Funding to Open a Bar or Club

 Getting SBA 7(a) financing for a bar or club business

Bars and restaurants have a high start-up cost compared to other industries, with an average of $500,000. Operating costs can be high too, and not just initially. In some states, the price of a liquor license can average around $400,000. As a business owner, this might seem daunting, but financing options exist for you.

Funding Options for Bars and Clubs

If you’re unsure of where to start looking for funding, think about what you already have:

  • Self-funding can be a great way to put together some capital without any terms to worry about.

  • If you can find the option, and have the credit and loan history, seller financing is a great path.

  • There are also conventional business loans offered by banks and lending institutions, as well as government-backed loans like the SBA 7(a).

Self-Funding

If you’re in a position to do so, self-funding can be a viable option for starting a bar or club. But the risks of putting your own money into your business are clear and present: if your business isn’t successful, you’re out the money that you put in and the business itself.

Take stock of anything extra you have that could be used for capital. If you have an extra car or house, boats or other recreational vehicles, or land that can be partitioned, you can use the proceeds of the sales to fund your bar or club.

Self-funding means living lean for a while, so pay special attention to your personal and business finances to come out on top.

Seller Financing

Owners of existing bars may choose to finance a buyer when they sell. This is a good option to go for, because the costs to start a bar/club can be very high. In a seller financing situation, a portion of the total cost is financed by the owner, and the buyer seeks other sources of funding for the remaining amount.

Owners who offer financing will usually only do so to buyers with impeccable credit scores, and then only to buyers who can prove that they can make payments.

Conventional Loans

Banks and lending institutions want loan terms that are favorable to them. So, they set the terms themselves—terms that you as a small business borrower will have to follow under a conventional loan. Some lenders also see bars and clubs as high-risk institutions, making them less likely to give loans to borrowers.

To help ensure your success when speaking to a lender, bring along a solid financial plan that includes growth and earning projections. Keep accurate financial records, and bring those too. Banks are more willing to lend to a business owner who can prove that they make money and repay debts.

SBA 7(a) Loan

The SBA 7(a) loan is a government-backed loan that’s offered through traditional lending institutions like banks, credit unions, and lending firms. The loan terms benefit both the lender and borrower, and the eligibility requirements are straightforward.

As a bar or club owner, the SBA 7(a) has several benefits:

  • Appropriate loan amounts of up to $5 million

  • Non-industry-specific eligibility requirements

  • Flexibility of use for real estate and land, operating costs, and working capital

More Information on the SBA 7(a) Loan

The SBA 7(a) is a versatile loan that’s designed to get you the capital needed for your small business. If you’ve been looking for a way to fund your bar or club, consider this kind of loan.

Using an SBA 7(a) Loan for Bars and Clubs

The SBA 7(a) can be used for real estate or land, like buying an existing bar or building a new one. Equipment costs can also be covered by the SBA 7(a)—kitchens need ovens, fryers, and a grease trap; clubs need A/V gear and more. Even working capital is covered by the SBA 7(a); if the expense is for a legitimate business purpose, it’s probably allowed by the loan program.

Learn MoreSBA 7(a) Loans for Bars and Clubs

For more information about how the SBA 7(a) loan can be used for start-ups, see our page on the subject.

Finding an SBA 7(a) Lender

Though the SBA shares a wealth of valuable information on starting and growing your small business, it isn’t in the business of lending money. The SBA 7(a) loan is offered through banks, credit unions, and other lending institutions, and the SBA guarantees the loan up to a certain amount.

Certain banks are considered SBA Preferred Lenders, and have proven track records of providing small businesses with SBA-backed loans. There are other factors that could improve your chances when speaking with a lender. For more information, contact us for a free consultation.

How to Qualify and Apply for an SBA 7(a) Loan

Good bookkeeping, understanding your creditworthiness, and a solid business plan can all help you when applying for your loan. But, as with any loan, a borrower must meet certain standards to qualify:

  • Your business must operate for profit.

  • You must have reasonable equity to invest—this could mean that you already have a profitable bar or restaurant, or you could invest your own personal equity like real estate.

  • The business owner cannot be on parole.

  • You must be doing business in the U.S. or its territories.

  • You must have first used other financial resources. So, if you have savings accounts or are able to get a personal loan, you have to try these methods before you can qualify for an SBA 7(a) loan.

For more details on how to apply for an SBA 7(a) loan, and information on eligibility, check out our qualifications page.

SBA 7(a) Loan Terms

Terms for real estate and land loans run up to 25 years. The maximum loan amount is $5 million, and there’s no minimum loan amount.

The SBA guarantees up to 85% for loans of up to $150,000. For loans greater than $150,000, the SBA guarantees 75%. For more details about interest rates, fees, and other terms, head over to our Loan Terms page.

Want Personalized Guidance?

At SBA7a.Loans, we live and breathe the SBA 7(a) loan process. We match business owners like you with the best lender for your situation, even if it means that we have to look outside of the SBA 7(a) platform. We serve our customers by 1) offering a free educational portal, and 2) leveraging our lender-matching service to help you on your way to success. We have a deep love of American small businesses, and we believe it shows in our customer-first attitude. Contact us today for a free consultation.



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