Using the SBA 7(a) Loan for a Restaurant
New and existing restaurants can benefit from an SBA loan. Find the funding you need, whether it's for real estate, equipment, working capital, or a variety of other uses.
New and existing restaurants can both benefit from an SBA loan. We specialize in helping food service businesses find the funding they need for real estate, equipment, working capital, and more.
When you work with us, we connect you with the SBA lender most likely to approve your loan request — regardless of how long you’ve been in business or what your credit history looks like.
Ways to Use an SBA 7(a) Loan for a Restaurant
Here are just a few ways you can use an SBA 7(a) loan to grow your restaurant business:
Open a New Location
An SBA 7(a) loan can be used to get a business mortgage on a new restaurant building.
Do you have plans to build a restaurant from the ground up? The SBA 7(a) loan funds construction projects of up to $5 million, and some other SBA products allow up to $20 million.
Turn an undesirable loan obligation into a better one using an SBA 7(a) loan. If you have a mountain (or even a small hill) of debt with less-than-optimal interest rates or other financing terms, an SBA 7(a) loan can consolidate your existing loans.
Read more: Using the SBA 7(a) Loan for Equipment
Case Study: Jacqueline's Farm-to-Table Refi
Jacqueline, a passionate restaurateur in Des Moines, Iowa, had successfully operated her unique farm-to-table restaurant, The Wholesome Table, for three years. The restaurant had become a local favorite thanks to its strong relationships with local farmers and producers, ensuring the freshest, high-quality ingredients for its menu.
However, the financial burden of multiple loans and lines of credit over the past few years began to strain her business's cash flow. Jacqueline had initially taken out several loans to cover expenses such as equipment purchases, renovations, and working capital, but the varying interest rates and repayment terms made it challenging to manage her debt effectively.
Realizing that she needed a more manageable solution to alleviate her debt, Jacqueline started researching debt consolidation options. She discovered the SBA 7(a) loan program, which offered the opportunity to refinance and consolidate her existing debts at a low, fixed rate, potentially easing her financial burden.
Jacqueline approached a bank experienced in SBA lending and presented her case, along with detailed financial records, a solid business plan, and a strong credit history. Impressed by her thorough preparation and the restaurant's outlook, the bank approved an SBA 7(a) loan for $450,000 to refinance and consolidate her outstanding debts.
With the SBA 7(a) loan, Jacqueline was able to streamline her debt payments into a single, manageable monthly payment with a lower interest rate. This financial relief allowed her to focus on growing her restaurant business and attracting new customers, without the constant worry of juggling multiple loans. Jacqueline's restaurant continued to thrive, and she was grateful for the support and flexibility provided by the SBA 7(a) loan program.
This is a fictional case study provided for illustrative purposes.
Although it’s our name, we don’t deal exclusively in SBA 7(a) loans. We help borrowers with a wide variety of other loan products whenever a different type will be more beneficial. Get a leg up in your quest for financing by leveraging our two decades of capital markets experience.
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What are the requirements for an SBA 7(a) loan for a restaurant?
In order to be eligible for an SBA 7(a) loan for a restaurant, you must have reasonable equity to invest, like an already-profitable business. If that’s not the case, you can offer other equity (like personal property) as collateral. Additionally, you must have sought alternative financial resources before applying for the loan. The owner of the business cannot be on parole, and 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.
What are the advantages of using an SBA 7(a) loan for a restaurant?
The SBA 7(a) loan is a great option for restaurant owners because it has straightforward requirements, low interest rates, and a relatively fast approval process. Additionally, the government guarantees the loan up to a certain amount, making it a secure option for restaurant owners.
For more information, please visit www.sba7a.loans/sba-7a-loans-small-business-blog/sba-7a-loan-for-a-restaurant.
What are the disadvantages of using an SBA 7(a) loan for a restaurant?
The disadvantages of using an SBA 7(a) loan for a restaurant include:
- Lengthy approval times (for standard SBA 7(a) loans)
- Lots of documentation
- Collateral is often required
- High credit scores are typically required (typically 680+)
- May be restrictions on supplemental/additional financing
What are the eligibility criteria for an SBA 7(a) loan for a restaurant?
To be eligible for an SBA 7(a) loan for a restaurant, you must have reasonable equity to invest, like an already-profitable business. If that’s not you, you can offer other equity (like personal property) as collateral. You must also have sought alternative financial resources before applying for an SBA 7(a) loan. The owner of the business cannot be on parole, the business must be operating in the U.S. or one of its territories, and it must be a for-profit business. 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.