Restaurant Loans & Financing: 7 Options Compared

Restaurant loans are business loans used to open, buy, renovate, or run a restaurant. The most common are bank term loans, SBA loans, equipment financing, business lines of credit, and merchant cash advances.

The right one depends on what you're paying for: long-life assets belong on long, low-rate loans, while short cash gaps belong on a line of credit.

This guide compares seven restaurant financing options by amount, term, and cost, shows how hard approval really is, and walks you through what lenders check before they say yes.

What is restaurant financing?

Restaurant financing is any outside money used to open, buy, expand, or run a restaurant.

It includes debt you repay with interest, such as bank loans, SBA loans, equipment financing, and lines of credit, plus non-loan funding like merchant cash advances, investor equity, crowdfunding, and grants.

Restaurant loans are the debt part of that mix, and most owners use them for large, planned costs.

Restaurant loan options compared

SBA limits come from the U.S. Small Business Administration; other lenders set their own amounts and terms.

7 Types of restaurant loans

Here's how each option works, who it suits, and what to watch out for.

1. Bank term loans

A bank term loan is a lump sum you repay in fixed monthly installments over several years.

For an established restaurant with clean books, it's typically one of the lowest-cost ways to fund a renovation, a kitchen rebuild, or a second location.

Best for: established restaurants funding a planned, one-time project.

Watch out: banks are selective. Only 37% of business loan applicants got the full amount in the Fed's 2025 Small Business Credit Survey. Small banks fully approved 57% of applicants, compared with 43% at large banks, so start with a community bank you already use.

2. SBA loans

SBA loans are bank loans partially guaranteed by the U.S. Small Business Administration, allowing lenders to offer longer terms and capped rates. You apply through a participating lender, not the SBA.

SBA Express loans go up to $500,000, with faster lender (SBA) credit decisions.

Best for: owners who can wait for approval in exchange for long terms.

Watch out: SBA loans had the lowest full-approval rate in the Fed's 2025 survey: 32%, with 40% of applicants denied. Start-ups also need at least 10% of total project costs in cash (SBA SOP 50 10).

3. Equipment financing

Equipment financing pays for a specific asset, such as a combi oven or a walk-in cooler, and uses that asset as collateral. Because the lender can take it back, auto and equipment loans had the highest full-approval rate in the Fed's 2025 survey: 71%.

If you're switching to a new restaurant POS, add terminals, kiosks, and kitchen screens to the same quote.

Best for: buying or replacing kitchen and front-of-house equipment.

Watch out: match the term to the asset's useful life so you're not still paying for an oven you've replaced. Financed equipment may still qualify for a Section 179 deduction; confirm with your accountant.

4. Business lines of credit

A line of credit is a borrowing limit you can draw on, repay, and reuse, paying interest only on what you use.

It's built for short, repeating gaps, like stocking up before a holiday rush or covering payroll in a slow month, not for long-term assets. In the Fed's 2025 survey, 45% of line-of-credit applicants were fully approved.

Best for: seasonal restaurants managing uneven restaurant cash flow.

Watch out: rates are often variable, and a line that's always maxed out signals an operating problem. Within the SBA program, revolving lines are available only through SBA Express, Export Express, and CAPLines (SBA).

5. Commercial real estate loans

A commercial real estate loan finances buying, building, or substantially renovating your restaurant's property, with the property as collateral.

Owning swaps rent increases for a predictable mortgage payment but requires a large down payment. For owner-occupied property, compare a conventional mortgage with an SBA 504 loan, which offers fixed rates for up to 25 years.

In the Fed's 2025 survey, 55% of mortgage applicants were fully approved.

Best for: established restaurants with a proven location they plan to keep.

Watch out: you tie cash and risk to one address. If the concept fails there, the property is on the line.

6. Online lender loans

Online and other non-bank lenders offer term loans and short-term working capital loans with fast decisions and lighter paperwork. The share of small business loan applicants turning to online lenders rose from 17% in the 2020 survey to 29% in 2025 (Fed).

Best for: urgent payroll, inventory, or repair needs when a bank can't move fast enough.

Watch out: online lenders fully approved 38% of applicants, and 60% of their borrowers said actual costs were higher than expected. Get the APR and total payback in writing before you sign.

7. Merchant cash advances

A merchant cash advance (MCA) isn't a loan. A provider buys part of your future card sales for a lump sum, then collects a fixed amount through daily or weekly deductions from your card deposits.

MCAs are fast, require no collateral, and 48% of applicants were fully approved in the Fed's 2025 survey.

Best for: a short emergency when no other option is available.

Watch out: the cost is set by a factor rate and is usually far higher than a loan's (see the cost comparison below). Never take a second advance to pay off the first, and check how your restaurant payment processing handles repayment before you sign.

How hard is it to get a restaurant loan?

It's less hard than the industry's reputation suggests. In the Fed's 2025 Small Business Credit Survey, 57% of leisure and hospitality firms (the category that includes restaurants) that applied for a loan, line of credit, or cash advance got the full amount.

That's above the 52% average for all small businesses. Three factors move your odds more than your industry does:

• The product: 71% of equipment loan applicants were fully approved, versus 37% for business loans and 32% for SBA loans.
• The lender: small banks fully approved 57% of applicants; online lenders approved 38%.
• Your track record: firms up to five years old were fully approved 48% of the time, versus 63% for firms 21 years or older.

These shares aren't adjusted for credit risk, so treat them as odds, not promises. Before approving you, lenders check five things:

1. Credit: for a new business, mostly your personal credit score.
2. Time in business: with a year or less of revenue, the SBA treats you as a start-up.
3. Revenue and cash flow: bank statements and P&Ls must show you can carry the payment.
4. Collateral and guarantees: 59% of small firms with debt used a personal guarantee to secure it.
5. Equity: how much of your own cash is in the project.

How to get a restaurant loan in 5 steps

1. Put a number on the need. Build it from quotes, not guesses. Start with the cost to open a restaurant, add a cash cushion, then match the product to the expense.
2. Check your credit. Pull your free personal credit reports at AnnualCreditReport.com, the source the SBA points owners to, and fix errors before a lender sees them.
3. Prepare your documents. Expect to show a restaurant business plan with financial projections. If you're already open, the SBA advises including income statements, balance sheets, and cash flow statements for the last three to five years.
4. Line up your equity. SBA lenders expect start-ups to contribute at least 10% of total project costs (SBA SOP 50 10). Other lenders set their own minimums.
5. Compare at least two offers on total cost. Ask each lender for the APR, total payback, fees, and prepayment terms, then check that the payment fits your monthly restaurant budget.

How to compare restaurant loan costs: APR vs. Factor Rate

Compare offers by APR and total payback, not by the headline rate. A factor rate is charged once on the full amount, so the cost doesn't shrink if you repay early, and a shorter repayment period increases the yearly cost. Here's a hypothetical $50,000 example:

The advance costs $4,419 more and gives you the money for a quarter of the time. Also ask about origination fees and prepayment penalties. SBA loans with terms of 15 years or longer, for example, carry a prepayment fee in the first years (SBA).

Financing a restaurant without a loan

You don't have to borrow every dollar. These options can replace or shrink a loan:

• Friends and family: flexible and sometimes interest-free, but put the amount, the repayment schedule, and what happens if the restaurant closes into a signed agreement.
• Investors: you trade a share of ownership or profits for cash and experience. See how to find restaurant investors.
• Crowdfunding and grants: no repayment, but amounts are limited, and competition is high. Our guide on how to open a restaurant with no money covers both.
• Seller financing: if you're buying an existing restaurant, ask whether the seller will finance part of the price.

This guide is for general information, not financial or legal advice. Loan programs change, so confirm current terms with your lender.