Your Guide to Restaurant Loans

By Sarah Brooks · May 22, 2024 · 14 minute read

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Your Guide to Restaurant Loans

Preparing to open a new restaurant, renovating an existing one, or expanding and opening additional locations all require significant capital. That’s where restaurant loans come in.

With restaurant financing, you’ll be prepared to tackle big projects, major repairs, and purchase necessary equipment to keep your restaurant business thriving, even during seasonal or economic changes.

There are a number of different small business loans, so we’re here to walk you through the essentials of:

•  What restaurant loans are

•  Typical loan terms, rates, and amounts

•  Different types of restaurant loans

•  Applying for a restaurant business loan

What Are Restaurant Loans?

Restaurant loans are financing designed to meet the specific needs of starting, renovating, or expanding a restaurant business. With necessary capital in the form of short- or long-term business loans, restaurant owners can confidently pursue their business and financial goals.

Restaurant business loans are offered in a variety of forms, including traditional business loans at a bank, peer-to-peer (P2P) business lending, and short-term business loan options like merchant cash advances and business lines of credit.

Recommended: Loans for Business Expansion

Common Reasons for Restaurant Financing

The restaurant industry is competitive and requires innovation, creativity, and an entrepreneurial spirit to maintain growth — and of course, capital to support you every step of the way. Here are a few of the primary reasons business owners seek out restaurant loans:

•  Starting a new restaurant: Includes lease, furniture, equipment, payroll, marketing, and any other expenses associated with starting a business.

•  Restaurant repairs: Kitchen equipment must be serviced and repaired frequently, particularly appliances in high demand like dishwashers, refrigerators, ice makers, and stoves.

•  Opening new locations: Like starting a new restaurant, you’ll need restaurant financing to pay for everything from equipment to payroll.

•  Expanding or remodeling an existing location: Costs associated with construction, design, permitting, and to supplement cash flow during construction.

•  Updating restaurant equipment: Financing to replace old equipment.

•  Rebranding: As your business grows and changes, you’ll likely need to rebrand to stay relevant to customers. This may include design costs, website build/updates, interior design, marketing materials, and advertising.

•  Working capital expenses: Any costs associated with typical business operations and maintaining cash flow during slow seasons.

•  Emergency expenses: May include repairs, equipment purchases, or costs associated with the restaurant being closed for any amount of time.

•  Hiring additional staff or third parties to assist with business operations: During times of increased business, you may need to hire more staff to help with managing aspects of your business, like daily operation, finances, taxes, design, or construction.

•  Technology investments: This may include building a new website or updating an existing one, purchasing software to help manage business operations, or implementing a new point-of-sale (POS) system.

Now that you have an idea of what you can use restaurant funding for, let’s take a look at common rates and terms for restaurant financing.

Restaurant Business Loan Amounts, Rates, & Terms

Since restaurant loans are used for so many different reasons, it can be challenging to predict what the rates and terms will be.

To make it simple, we’ll go over some typical rates, terms, and amounts for the following common restaurant loan categories:

•  Restaurant loans for start-ups and expansion

•  Working capital loans

•  Equipment or inventory purchases

Restaurant Loans for Start-ups and Expansion

Starting or expanding any type of business will likely require a combination of personal funds and loans, and restaurants are no exception. Investing in a new restaurant start-up and helping it grow takes significant capital, which may include long-term business loans and shorter-term financing for cash flow.

If you’ve created a solid business plan, have a good credit rating, and have positive financial history, particularly in the restaurant industry, a traditional bank will likely offer the most competitive rates and terms.

Another great option for qualified borrowers is an SBA loan for a restaurant start-up or other significant restaurant investment. As a government-backed loan option, SBA loans offer some of the most competitive interest rates and terms, with loan amounts up to $5 million on their standard SBA 7(a) loan program. Established restaurateurs can also benefit from an SBA loan.

Common terms for long-term restaurant loans for startups are:

Rates: Depends on the type of loan and lender

Terms: Up to 25 years

Loan amount: Up to $5 million for SBA; each lender will vary, but banks could offer up to a few million depending on eligibility

Loan requirements: Stringent requirements for banks and SBA loans; alternative lenders may have fewer requirements, but offer less financing

Recommended: Secured Business Line of Credit

Restaurant Loans for Working Capital

Working capital includes many of the smaller, everyday expenses associated with running a business. This may include monthly bills, rent, payroll, repairs, inventory, and any other expenses associated with daily business operations.

Many business owners receive working capital loans to maintain cash flow during seasonal fluctuations, economic changes, or any time business slows down.

Working capital loans can be obtained through a variety of lending sources, including banks, online lenders, and credit card companies. A business line of credit is one of the most common forms of working capital loans, as business owners can access cash quickly up to an approved amount. If it’s a revolving line of credit, restaurant owners can continue withdrawing up to their limit on an ongoing basis. If the balance is paid in full each month, there’s no interest added.

Other forms of working capital loans include inventory financing, merchant cash advances, and invoice factoring.

Rates and terms vary greatly depending on the type of working capital restaurant loan, but here are some general terms to be aware of:

Rates: Depends on the type of loan and lender

Terms: Generally, less than 3 years

Loan amounts: Up to $500,000, depending on the lender

Loan requirements: Varies depending on lender, but typically a good credit rating and some business financial history will help you obtain a working capital loan more easily.

Restaurant Equipment Loans

Whether you’re opening a new restaurant or managing an existing one, equipment will always be an important part of your restaurant business. And due to the frequent use of many appliances in the kitchen, upgrading and repairing equipment may happen frequently.

Equipment loans are a great choice when you need restaurant financing specifically for equipment like ovens, refrigerators, stoves, and other large appliances. Many lenders offer business loans for equipment with fixed payments and interest, paid over a set amount of time.

The equipment you purchase often acts as collateral for the loan, meaning you don’t have to provide additional collateral, which may be an advantage for business owners who don’t have valuable assets to offer.

When searching for lenders and equipment loans, rates and terms will vary, but you can expect to find the following ranges:

Rates: Depends on the type of loan and lender

Terms: Up to 5 years

Loan amount: Varies depending on type of equipment and lender

Loan requirements: Strict for banks and SBA loans; may be more lenient for alternative lenders

Types of Restaurant Loans

Now that you know more about what you can use restaurant loans for, let’s break down the different loan options, who they might be good for, and what to be aware of when choosing certain types of restaurant funding.

Online Loans From Alternative Lenders

What is it: Short- and long-term restaurant business loans that are offered by online lenders as opposed to traditional banks or credit unions.

Why choose it: If you need quick funding for restaurant repairs, working capital, or new equipment, online and alternative lenders typically have a quick application and approval process, and may have fewer eligibility requirements than a bank.

Keep in mind: Restaurant loans from alternative lenders are convenient and typically have less strict qualification requirements than traditional lenders. In turn, interest rates tend to be higher.

Business Line of Credit

What is it: A restaurant business line of credit is a common form of restaurant financing that can help manage cash flow, cover restaurant repairs, or purchase restaurant equipment. Borrowers can withdraw up to a certain limit assigned by the lender. Interest is typically applied to balances that aren’t paid off each month. Restaurant lines of credit can be revolving or terminated when the balance is paid in full.

Why choose it: Restaurants who experience seasonal fluctuations, cyclical sales, or have emergency expenses might find a business line of credit helpful. Business lines of credit may be easier to get because loan amounts are smaller and credit score requirements are frequently more lenient.

Keep in mind: Opening a business line of credit can come with additional fees and costs that may contribute to the overall cost of the loan. If you need a larger sum of cash for restaurant renovations or expansion, a business line of credit likely won’t offer adequate funding.

Equipment Loan

What is it: An equipment loan is financing for the purchase of necessary restaurant equipment. This can include everything from basic kitchen equipment to dining room furniture. They are often short-term loans to be paid off within a few years, or the life of the equipment.

Why choose it: Restaurant equipment loans are helpful when you need valuable equipment but don’t want to use up cash reserves. The equipment you purchase acts as a form of collateral, which may help you secure a better interest rate.

Keep in mind: If you don’t have a strong credit score, lenders may also require a personal guarantee on the equipment loan. A personal guarantee gives a lender permission to seize a business owner’s personal assets in the event that they default on the equipment loan.

Peer-to-Peer Loan

What is it: Peer-to-peer (P2P) business lending facilitates the lending process between business owners and private lenders, eliminating the need for a financial institution to act as a middleman. Restaurant owners and lenders can quickly connect using online platforms that allow for faster turnaround on funding.

Why choose it: Borrowers who cannot get financing from traditional lenders may be able to secure cash quickly to cover a variety of restaurant-related expenses.

Keep in mind: Loan amounts are typically smaller and interest rates higher, compared to a traditional bank loan.

Recommended: Loans for Business Acquisition

SBA Loan

What is it: SBA loans are offered through approved SBA lenders, including banks, credit unions, and online lenders for nearly any business-related expense. The SBA 7(a) loan program offers restaurant owners the ability to secure up to $5 million in financing at lower interest rates. These SBA loans give small business owners flexibility to use funds for a variety of working capital expenses.
For restaurant owners who need faster funding, the SBA Express program offers a faster turnaround time for review, with responses coming within 36 hours, and a maximum loan amount of $500,000.

Why choose it: Offers access to low-interest, fixed-rate restaurant loans, which can help cover short- or long-term expenses. Small loans of $25,000 or less do not require collateral.

Keep in mind: Typically, SBA loans are more difficult to qualify for so it’s important to have strong credit, proof of revenue, and a business plan for your restaurant that you can show to potential lenders.

Traditional Bank Loan

What is it: A traditional bank loan is one obtained from a traditional lender, such as a bank or credit union, rather than online or other alternative sources. They are called “traditional” because bank loans are considered one of the original sources for business financing.

Why choose it: If you are a restaurant owner with a high credit rating, a solid business plan, significant business history, and proven revenue, you may be a good candidate for a restaurant loan from a bank. Banks typically offer lower interest rates and higher loan amounts to qualified borrowers.

Keep in mind: Traditional lenders typically have stringent eligibility requirements, including minimum annual revenue, high credit score, and more than a year of business history.

Working Capital Loan

What is it: A working capital loan is any type of restaurant loan that covers operational expenses like payroll, monthly bills, and repairs. Restaurant businesses may rely on working capital to manage cash flow fluctuations due to seasonality and other factors.

Why choose it: For restaurants with unpredictable cash flow, working capital loans can help pay for small expenses related to repairs, equipment, payroll, or supplies.

Keep in mind: There are unsecured and secured (collateral required) working capital loans, but unsecured may require higher credit rating and may have higher interest rates.

Commercial Real Estate Loan

What is it: Commercial real estate loans (CREs) are used by business owners for the purchase, refinance, or renovation of a commercial property, like a restaurant.

Why choose it: CRE loans can provide long-term restaurant financing for qualified restaurant owners who need significant funds for purchasing or renovating property associated with their business.

Keep in mind: Eligibility requirements are typically stringent for CREs because of the higher loan amounts. Lenders may require a high credit rating, significant business history, and a debt service coverage ratio of 1.25 or greater.

Recommended: Loans for Veterans

Franchise Loan

What is it: Franchising loans are used to purchase rights to a franchise name, brand, or specific product(s) from a franchisor. In addition to typical business startup costs, franchise loans can help cover costs unique to franchises, such as training and marketing.

Why choose it: Useful for business owners who are looking to open a restaurant franchise to pay for typical start-up costs and working capital. Some franchises may already have relationships with lenders, potentially making the loan application process easier for borrowers.

Keep in mind: Lenders may require a high credit rating and a down payment to secure the loan. Some may also require collateral, while others may consider the equipment and location as collateral.

Merchant Cash Advance

What is it: A merchant cash advance offers restaurant businesses money up front in return for repayment that’s taken as a percentage of the borrower’s future credit card sales. Automatic withdrawals are often set up to directly debit the borrower’s bank account on a daily or weekly basis.

Why choose it: If you have bad credit or a newly established restaurant and few loan options, merchant cash advances may help with covering short-term, small expenses.

Keep in mind: Merchant cash advances tend to be some of the most expensive funding options available, with APRs in the triple digits. Merchant cash advance companies also operate in an under-regulated space, meaning borrowers need to be extra vigilant about who they work with to ensure a fair partnership.

Recommended: Emergency Business Loans

Applying for a Restaurant Loan

Whether you’re seeking a loan from a bank or an alternative small business loan, you can follow these common steps to prepare and apply.

1. Determine how much funding you need, for what, and when
The amount of restaurant funding you need, what for, and when play a role in the type of restaurant loan you apply for.

For example, if you simply need quick funding to cover a repair or emergency expense, you may consider applying for a business line of credit. In contrast, if you need a loan to purchase an existing restaurant or to renovate, you may consider a long-term loan from a traditional bank or a commercial real estate loan.

2. Determine your qualifications as a borrower

Lenders have their own eligibility requirements, which vary depending on the type of restaurant loan you apply for. Before choosing a lender and applying, check eligibility requirements and make sure your business meets them.

The following factors may contribute to your eligibility:

•  Your personal and business credit scores

•  Amount of time in business

•  Business finances/revenue

•  Debt-to-income ratio

•  Business bank accounts

•  Collateral offered

•  Down payment

Recommended: How to Check Your Credit Score

3. Choose the restaurant loan that meets your needs

Deciding on the type of loan comes down to a few factors, such as the desired loan term, qualifications, loan amount, and business needs. Common restaurant financing options include:

•  Business line of credit

•  Equipment loans

•  P2P lending

•  SBA loans

•  Traditional bank loan

•  Franchise loans

•  Merchant cash advance

4. Compare restaurant financing companies

Each lender will offer different loan terms, rates, and loan programs, so it’s important to choose the one that aligns with your needs and eligibility. For example, if you have limited business history and poor credit, you will likely find yourself looking into financing through an alternative lender or short-term loan program.

Some factors to consider when comparing business lenders are:

•  Do you need to offer collateral?

•  How long is the loan application and approval process?

•  What is the APR?

•  What is the payment schedule?

•  What is the lender’s reputation?

5. Prepare documentation

Before completing an application for restaurant financing, gather the necessary documentation. This may include:

•  Business financial records

•  Personal and business credit reports

•  Cash flow projections

•  Business plan

•  Identifying information, which may include citizenship

•  Business legal documents

•  Business and personal tax returns

6. Submit application
After you’ve chosen a restaurant lender and gathered documents, follow the lender’s instructions to apply.

Alternatives to Restaurant Loans

As a restaurant owner, you may need additional short- or long-term funding options. The following types of loans may be useful:


Microloans are those for smaller loan amounts, typically under $50,000. Business owners may turn to microloans when they cannot access funding from other sources. They are generally offered by nonprofits, government agencies, or individual lenders and can be used for a variety of restaurant related expenses.

Personal Business Loans

A personal business loan is one which can be used for personal or business expenses. If you don’t qualify for another type of restaurant loan, some personal loans can give you the flexibility to use funds in any way that you need.

Recommended: Business Loan vs. Personal Loan: Which Is Right for You?

Inventory Financing

Inventory financing is a short-term loan or line of credit that allows for the purchase of inventory at a later time. Inventory is paid for up-front and acts as collateral for the loan.

Find a Restaurant Loan

Owning and managing a restaurant is a challenging, yet exciting opportunity. There are a number of factors to consider when choosing restaurant financing and SoFi marketplace is ready to help you find the right loan for your business.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

With SoFi’s marketplace, it’s fast and easy to search for your small business financing options.

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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