Restaurants & the SBA
Restaurants are considered higher-risk by SBA lenders due to historically elevated failure rates and thin operating margins. But the SBA 7(a) is still the dominant restaurant financing tool because no conventional bank will fund a restaurant build-out, equipment, and working capital in a single loan. Lenders that specialize in restaurants (Live Oak, Celtic Bank, Newtek) have dedicated underwriting frameworks that look beyond standard DSCR.
Restaurant Financing Guides
Restaurant SBA Underwriting Reality
Restaurant lenders look at three things first: operator experience, concept track record, and unit economics. A first-time restaurant operator pitching a brand-new concept faces an uphill battle. An experienced multi-unit operator expanding a proven concept to a new location is a clean approval.
Acquisition vs Build-Out vs Franchise
- Acquisition of existing restaurant: The cleanest path. Trailing financials demonstrate viability. SBA 7(a) up to 90% LTV.
- Build-out of new independent concept: Hardest path. Requires significant operator experience and 20-25% injection.
- Franchise build-out: Easier than independent because the brand has proven unit economics. Listed brands (Subway, Marco's, Tropical Smoothie, etc.) get streamlined underwriting through the SBA Franchise Directory.
- Brewery/taproom: Specialty category with equipment-heavy capital stack. Some lenders (Live Oak, Avidia) specialize.
Owning the Real Estate
If you're acquiring both the restaurant business and the building, stack a 504 for the real estate with a 7(a) for the business. This structure is common in suburban free-standing restaurants and can finance up to 85-90% of total project cost.
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