- Restaurant Financing Options
- Using the SBA 7(a) Loan for Your Restaurant
- SBA 7(a) Loan Rates
- How to Get an SBA 7(a) Loan for a Restaurant
- Who Offers SBA 7(a) Loans to Restaurants?
- What Are the Eligibility Requirements?
- More Information on the SBA 7a Loan
- Using an SBA 7(a) Loan for Start-Ups
- Finding an SBA 7(a) Lender
- How to Qualify and Apply for an SBA 7(a) Loan
- SBA 7(a) Loan Terms
- Want Personalized Guidance?
- Get Financing
Most banks consider restaurants to be a high-risk industry, meaning that they are far less likely to approve loans for restaurant owners. The bank’s view of risk isn’t misplaced—a 2017 study by Restaurant Startup & Growth magazine concluded that 23% of restaurant start-ups will fail within the first year.
If you can’t get a traditional loan, what other financing options are there? Is there another loan option to start a restaurant or to buy an existing restaurant? We’ve answered those questions for you here, as well as questions about eligibility, finding a lender, and even rates for specific loans.
First, let’s talk about your options.
Restaurant Financing Options
One of the most popular loans for restaurateurs is the SBA 7(a) loan. The SBA 7(a) is a commercial loan and is meant to help small businesses with expenses like real estate, working capital, or equipment. Like all loan programs, there are requisites that restaurants must meet to be considered eligible.
Restaurants in the U.S. that are looking for funding can get the SBA 7(a) loan from a bank, credit union, or other lending institution, and the government guarantees the money up to a certain amount.
The SBA 7(a) isn’t the only option available to restaurant owners; here are a couple of others that might meet your requirements more closely:
SBA 504 Loan – Similar in execution to the SBA 7(a), the 504 loan is a larger loan that usually goes with a commercial loan from a bank or other lending institution. The maturity for real estate and land is also shorter for the 504.
SBA Express Loan – If you need a smaller amount of money than you would with the 504 or SBA 7(a), the Express loan is a good option. The 36-hour turnaround does come with a few drawbacks: higher maximum interest rates, lower SBA guarantees, and greater authority in the hands of the lender.
The straightforward requirements for the SBA 7(a) loan make it a great starting point to get funding for your restaurant. Plus, the low interest rates and relatively fast approval process make it a prime option for restaurant owners.
Using the SBA 7(a) Loan for Your Restaurant
Versatility is a good attribute to seek in a loan program, and the SBA 7(a) is full of it. You can use the loan to buy an existing restaurant, replace or repair equipment, or even cover regular material expenses. Here’s a closer look at what you can use the SBA 7(a) for:
Equipment. This includes big, infrequent purchases like ovens, ranges, fryers, and freezers, as well as smaller, regular expenses like utensils, bar rags, and dish towels. Learn more about How Can You Use the SBA 7(a) Loan for Equipment
Land and real estate. Whether you’re renting space, buying a building, or planning new construction on vacant land, you can use the SBA 7(a) loan to help pay for the physical space your restaurant occupies.
Repairing existing capital. This could include new point-of-sale systems or software upgrades to existing ones, commercial vehicle repairs, or any other operating equipment that needs updating.
Refinancing debt. If it’s beneficial for your business to refinance existing debt, an SBA 7(a) loan may be able to help save you some money.
Buying a business. You can use an SBA 7(a) loan to buy or expand an existing restaurant.
SBA 7(a) Loan Rates
Loan rates for the SBA 7(a) depend on the loan size, the individual borrower, and the lender. Certain terms, like maturity, have a standard maximum or minimum. Take a look at the following chart for specifics of the SBA 7(a) loan rates.
Real estate loans
Working capital or inventory
No more than 25 years
Interest Rates (Maturity Less Than 7 Years)
$25,000 or less
Base rate plus 4.25%
Base rate plus 3.25%
More than $50,000
Base rate plus 2.2%
Interest Rates (Maturity More Than 7 Years)
$25,000 or less
Base rate plus 4.75%
Base rate plus 3.25%
How to Get an SBA 7(a) Loan for a Restaurant
The SBA 7(a) may be the right choice for your restaurant—the eligibility requirements are straightforward, and finding a lender can be a streamlined process. Even if you have bad credit, you may still qualify for an SBA 7(a) loan.
Learn More: How Do I Get an SBA 7(a) Loan with Bad Credit?
Who Offers SBA 7(a) Loans to Restaurants?
Banks, credit unions, savings and loan companies, and specialized lenders can all operate as SBA 7(a) lenders. Some lenders are considered SBA Preferred Lenders, which means they have a reputation for helping business owners get the loan they need in a timely and efficient manner.
What Are the Eligibility Requirements?
A restaurateur must have reasonable equity to invest, like an already-profitable business. If that’s not you, don’t worry: you can offer other equity (like personal property) as collateral.
SBA lenders also require that you’ve sought alternative financial resources before applying for an SBA 7(a) loan. If you have a savings account or are able to get a personal loan, it’s usually required that you pursue these options first.
The owner of the business cannot be on parole.
The business must be operating in the U.S. or one of its territories.
Only for-profit businesses are eligible for the SBA 7(a), which applies to most restaurants.
Individual lenders have some say in the lending process, and one point of control is with borrower credit scores. Most lenders require the owner’s personal credit score to be at least 600, but exact requirements will vary depending on your experience in the industry and your relationship with your lender.
More Information on the SBA 7a 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 restaurant, consider this kind of loan.
Using an SBA 7(a) Loan for Start-Ups
The most common loan guaranteed through the SBA for start-up companies is the SBA 7(a). This loan can be used for real estate, office space, equipment costs, or even working capital; if the expense is for a legitimate business purpose, it’s probably allowed by the loan program. 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.
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 restaurant must operate for profit.
You must have reasonable equity to invest—this could mean that you already have a profitable restaurant, or you could invest your own personal equity like real estate.
The 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’re usually required 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 qualification 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.