The Best SBA Loans For Your Restaurant (Plus, Other Funding Options For A Restaurant)

SBA loans for restaurant businesses help small business owners obtain restaurant funding without the high fees or rapid repayment plans that can come with other restaurant loans. SBA restaurant loans are an ideal form of funding for a restaurant, thanks to SBA loans’ low-interest rates and extended term lengths.

Read on to learn about your best SBA restaurant loan options.

Is The SBA Restaurant Revitalization Fund Still Available?

The SBA Restaurant Revitalization Fund awarded grants to 100,000+ restaurants in 2021 to help offset COVID-related losses. The Fund closed in July 2021, but in August 2022 the SBA stated it will distribute $180 million in unspent funding. The SBA has not yet said how it will distribute the funds.

The Best SBA Loans Available Now For Restaurants

Though COVID relief for restaurants is not currently available through the SBA, the Small Business Administration still provides small business loans for restaurant businesses (and other business types) via SBA loans. Here are some of the best SBA loans for restaurant businesses you can still access:

• SBA 7(a) Loans: The most common and versatile type of SBA loan, with a maximum borrowing amount of $5 million.
• SBA 504 Loans: Commercial real estate loans to purchase or construct business property, with a $5 million cap.
• SBA Express Loans: Accelerated SBA 7(a) loans with a smaller borrowing cap of $350,000.
• SBA Microloans: Small loans with a maximum borrowing amount of $50,000.

SBA 7(a) Loans

SBA 7(a) loans (read our complete guide to rates and eligibility) are a popular, general-purpose business loan offered by the SBA. SBA 7(a) loans can be used to purchase business real estate or other business assets such as equipment, furniture, and supplies. You can also use a SBA 7(a) loan for working capital, to refinance business debt, or most other business purposes.

Some other things to know about SBA 7(a) loans are they have term lengths ranging from 10 – 25 years, and have a typical time-to-funding of about one to three months from the time you apply. Current SBA interest rates for 7(a) loans range from 5.50% – 9.75%.

SBA 504 Loans

SBA 504 loans (read our guide) are real estate loans that small businesses such as restaurants can use to buy or build commercial property. These loans have large borrowing amounts and long repayment terms, making them ideal for long-term real estate financing. SBA 504 loans are intended to support job creation so the business must create at least one job per $65,000 received in SBA financing.

Term lengths for 504 loans can be as long as 25 years, and current interest rates are only about 4.73%. You’ll have to wait a little longer for this type of loan–approval can take as long as 6 months.

SBA Express Loans

SBA Express loans (read our guide) are a type of smaller, faster SBA 7(a) loan. A small restaurant business can use an Express loan for a variety of purposes, from working capital, to real estate, to debt refinancing. SBA Express loans have term lengths ranging from 10 – 25 years, depending on the purpose of the loan. Because the SBA only guarantees up to 50% of an SBA Express loan (compared to 75%– 85% of a traditional SBA 7(a) loan), interest rates trend slightly higher and are currently approximately 7.75% – 9.75%.

The main advantage of an SBA Express loan is they are faster than regular 7(a) loans. Approval time is typically about 36 hours—though the money could still take up to 1 – 2 months to show up in your account, depending on the lender. Learn more about SBA loan approval time.

SBA Microloans

SBA Microloans are very small loans intended to help startups and underserved businesses obtain small amounts of capital to start or fund their business. You can use an SBA Microloan for startup capital or working capital, or to purchase inventory, equipment, or other business supplies.

Interest rates for SBA Microloans are set by intermediary lenders, not the SBA, so they can vary. However, they tend to be between 8 – 13%.  Microloans can have term lengths of up to 6 years, and can take 1 – 3 months for the funds to arrive, since the loan needs to be approved by the intermediary lender and the SBA.

Learn more about SBA loans for startups, types, terms, and how to apply.

Why Are SBA Restaurant Loans Hard To Get?

Restaurant loans are sometimes hard to get because restaurants are seen as high-risk businesses due to their high failure rate. In some ways, SBA restaurant loans are easier to get than traditional loans, as they are intended for businesses that have been rejected for traditional loans. However, SBA loans do have strict requirements in terms of creditworthiness, industry experience, and collateral; you also have to meet SBA size requirements and your net worth and net income cannot exceed certain limits.

How To Improve Your Chances Of Being Approved For An SBA Restaurant Loan

Alternative Business Funding Options For A Restaurant

If you decide a standard SBA loan isn’t right for your restaurant, there are other alternative ways you can obtain funding for a restaurant:

• Small Business Grants: Business grants are essentially free money, though they can be difficult to obtain. Underserved communities may have an easier time qualifying for SMB grants—for example, there are grants for minority-owned businesses.
• Crowdfunding: There are several types of business crowdfunding your restaurant may be able to use to raise money, including rewards, donation, equity, and debt crowdfunding.
• SBA Loans For Veterans: These include SBA loans that only veteran business owners will qualify for: the Veterans Advantage Guaranteed Loan Program and the Military Reservist Economic Injury Disaster Loan Program (MREIDL).
• Equipment Financing: If you only need to purchase restaurant equipment, EF is a special type of loan you can get to finance these purchases.
• Business Credit Cards: Business credit cards can be good for paying operating expenses and vendors on an ongoing basis, while also earning perks and rewards.
• Business Line of Credit: LOCs function similarly to credit cards in that you can use them to access capital on an as-needed basis, and are useful for borrowing larger amounts at a time. There is also an SBA line of credit called CAPLines.
• Short-Term Loans: With an STL, you can get a large sum of money quickly, often even with bad credit, which can be useful for financing a short-term investment such as inventory. The downside is these loans tend to have high fees and short repayment timelines.
• Rollover For Business Startups (ROBS): A ROBS plan lets you leverage your retirement account to fund your business, without incurring the usual tax penalties for early withdrawal.

Final Thoughts: Which SBA Restaurant Loan Is Right For Your Small Business?

SBA loans for restaurant businesses can help business owners obtain funding for a restaurant–including funds to start a restaurant, expand or purchase a restaurant, or obtain working capital to keep a restaurant going. Choosing the best SBA restaurant loan depends on your specific business needs, but a good place to start your research is by looking into SBA 7(a) loans, which are the most common and versatile type of SBA loan.

If you realize an SBA loan won’t meet your needs or you won’t qualify, there are also alternative small business loans for restaurant businesses you can apply for, such as short-term loans, business credit cards, and equipment financing.

Ready to find an SBA lender for your restaurant loan? Explore the top SBA 7(a) approved banks & lenders.

FAQs: Getting An SBA Loan For Your Restaurant