Restaurant Loans


What is a restaurant loan?

Restaurants reside in the hospitality category of commercial properties and, thus, restaurant loans are subject to the same constraints as other hospitality loans. Lenders offer mortgages for an array of restaurant scenarios, including start-ups, opening and financing a restaurant, cafés, fast-food franchises, bakeries, specialty restaurants, franchised or branded restaurants, chains and independents.

Banks, credit unions and non-bank lenders offer restaurant financing and restaurant business owners can get a mortgage for a restaurant building on land they own, or land they will buy. While down payments are not as low as many residential mortgages, purchase financing for restaurants can be found for as low as 30% down. Other types of common restaurant business loans include:

  • Refinancing – Borrowers can refinance restaurant loans to get a better rate or term.
  • Cash-out refinancing – This type of loan is intended for borrowers that need cash for major remodeling, or other improvements.
  • Construction loans are also available for borrowers planning to build a new restaurant.
  • Loans for a restaurant startup – This mortgage can finance the purchase and provide funds to begin operation.
  • Rehab and/or remodel – This mortgage can be used to improve the property and thereby stabilize its income.

What are some common types of restaurant financing?

  • Commercial 5-year term with 25-year amortization
  • Conventional purchase mortgage with 15% down payment
  • No prepayment penalty
  • Small business loans for restaurants – SBA 504 up to 85% LTV, SBA 7(a)
  • Hard money
  • USDA B & I up to 85% LTV
  • Cash-out refinance
  • Bridge loan
  • No cash flow
  • 70% LTV for purchase or refinance
  • Rates starting at 6.5%
  • No doc, stated income
  • Loan size starting at $50,000
  • Bank financing up to 70% LTV for purchase, refinance or start-up
  • Rate & term refinance
  • No up-front fees
  • Full documentation up to 150% LTV
  • Loan size up to $10,000,000
  • Loans to start a restaurant
  • Construction loan
  • Partner buyout
  • Fast closing in 7 days
  • Construction take-out loan
  • 25-year amortization
  • 3 to 18-month term, $500,000 to $5,000,000

How do I get a loan to open a restaurant?

Borrowers can apply for a mortgage with a private lender, bank, credit union or hard money lender. To obtain the lowest interest rate, applications typically require full documentation of the property and borrower(s), as well as an appraisal. Borrowers that need loans quickly should consider no- or low-documentation loans based on the equity they have in the property, at LTVs around 55-65% and closings in less than two weeks. Mortgage financing often takes the first position lien, but some lenders offer second mortgages, providing an avenue to acquire funds that can be used to improve the property through remodels, expansion, landscaping and more.

If you’re an owner or manager of a restaurant you might want to find a commercial mortgage broker to assist you. All of the lenders on this site will work with mortgage brokers to fund their clients’ restaurant mortgage.

What is a restaurant hard money loan?

Borrowers can apply for hard money loans for restaurants from private lenders or non-banks. Hard money loans provide several benefits, such as fast funding, within a couple of weeks, at lower LTVs, and they require less documentation from the borrower than a bank would need. Bank statements can be used instead of tax returns, and borrowers with FICO scores as low as 500 can obtain hard money loans. However, there are concerns for borrowers, including short-term loan repayment and higher interest rates than conventional loans such as 12% with 3-4 points too. Hard money loans are equity based, meaning that it’s common to see LTVs of 50% to 65%.

Which lenders offer financing for restaurants?

Dozens of banks, private lenders and non-banks that offer mortgage loans on restaurants. Use Lender Search to identify which lenders in our database can fund your unique loan request.

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