Most people searching how to get a loan to open a restaurant picture one loan that covers the whole thing. That loan mostly doesn't exist. A restaurant that hasn't opened has no sales for a lender to underwrite, so a startup gets funded by stacking several pieces — your own cash, an SBA loan, equipment financing, sometimes help from the landlord — around an operator the lender believes in. Here's how that stack actually gets built, and where first-time owners usually come up short. If you already have a restaurant open, the operating-restaurant funding guide is the better read.
Why a restaurant startup is a hard file
Every business loan is ultimately repaid from cash flow. An existing restaurant can show a lender two years of tax returns and twelve months of bank statements. A startup can show a business plan. That's the whole problem in one sentence: the lender is being asked to fund a projection.
On top of that, restaurant build-outs are heavily leasehold improvements — plumbing, hoods, walk-ins, grease traps, finishes bolted into a building you don't own. If the restaurant closes, most of that money can't be repossessed and resold. Lenders know this, and it's why they ask more of restaurant startups than of most other new businesses.
What lenders look at instead of sales history
With no revenue to underwrite, the file stands on five things:
- Operator experience. This is often the deciding factor. Years spent managing a restaurant — ideally with P&L responsibility — reads very differently than a passion for cooking. No experience? A partner or GM with a documented track record can carry that part of the file.
- Your equity injection. How much of your own cash goes in, and whether you can document where it came from.
- Reserves. Money left over after the injection, so the first slow months don't sink the business.
- The lease. Rent as a share of projected sales, and whether the lease term (with options) covers the loan term.
- Projections that survive scrutiny. Covers, average check, food and labor cost percentages that match your concept and market — not a spreadsheet built backward from the loan amount.
Personal credit matters too, but for a startup it's rarely what carries the file. What lenders actually check covers the full list.
The SBA 7(a): the main startup path
The SBA 7(a) program is the most common way restaurant startups borrow meaningful money, because the SBA guarantee lets a bank take a risk it otherwise wouldn't. It can fund build-out, equipment, and working capital in one loan, with longer terms than most conventional business loans. Loans go up to $5 million, though most restaurant openings are far smaller.
What to expect going in:
- An equity injection. SBA rules generally require a startup to put in at least 10% of the total project, and many lenders ask for more on a restaurant — often 20% or higher.
- A personal guarantee from every owner of 20% or more.
- Collateral. Lenders take a lien on business assets, and if those don't cover the loan, they may take a lien on personal real estate — including your home.
- Time. SBA loans commonly take several weeks to a few months from complete application to funding. Plan your lease signing and construction schedule around that, not around optimism.
For smaller openings — a food truck, a coffee counter, a takeout concept — the SBA Microloan program lends up to $50,000 through nonprofit intermediaries, many of which also provide free business coaching.
Equipment financing: the piece that's easiest to get
Kitchen equipment is the one part of a startup that can finance itself, because the equipment is the collateral. Ranges, fryers, refrigeration, and dish machines can often be financed or leased separately from the main loan, which lowers the amount you need the SBA lender to approve. Used equipment is cheaper and sometimes easier to finance than people expect. If your credit is bruised, equipment financing with bad credit walks through the levers that matter.
The landlord is a funding source too
Two moves reduce what you need to borrow before you talk to any lender:
- A tenant improvement (TI) allowance. Landlords sometimes contribute toward your build-out, usually recovered through rent over the lease term. It's negotiable, and it's more likely on a longer lease with a stronger tenant.
- Second-generation space. A former restaurant with an existing hood, grease trap, walk-in, and restrooms can cut build-out costs dramatically compared to converting a retail box. Inspect what's left carefully — "existing hood" and "code-compliant hood" aren't the same thing.
A worked example: a $400,000 opening
Illustrative numbers only — your market, concept, and space will change every line. But the shape is typical:
| Uses of funds | Amount | Sources of funds | Amount |
|---|---|---|---|
| Build-out | $170,000 | Owner equity injection (20%) | $80,000 |
| Kitchen equipment | $110,000 | Landlord TI allowance | $40,000 |
| Furniture, POS, smallwares | $35,000 | Equipment financing | $80,000 |
| Deposits, permits, licenses | $25,000 | SBA 7(a) term loan | $200,000 |
| Pre-opening payroll & inventory | $25,000 | ||
| Working-capital reserve | $35,000 | ||
| Total | $400,000 | Total | $400,000 |
What not to open a restaurant with
- A merchant cash advance. An MCA is an advance against future card sales, underwritten on existing sales history. A restaurant that hasn't opened usually won't qualify — and daily remittances starting before revenue stabilizes squeeze the riskiest months hardest.
- Stacked personal credit cards. High-rate revolving debt on a build-out is a monthly payment with no asset behind it, and it damages the personal credit your future loans depend on.
- Retirement-account rollovers you don't fully understand. Structures that use 401(k) funds to capitalize a business exist, but they carry real compliance requirements and put your retirement directly at risk. Talk to a CPA before, not after.
Consider buying instead of building
An existing restaurant with real sales is a different file entirely: the lender underwrites actual cash flow instead of a projection, and SBA loans can fund acquisitions. You inherit someone else's lease, equipment, and reputation — verify all three — but for a first-time owner, buying is often the more financeable path.
What to have ready
A business plan with month-by-month projections for at least the first year, a résumé showing restaurant management experience, a signed letter of intent or draft lease, contractor bids for the build-out, equipment quotes, personal financial statements, two to three years of personal tax returns, and bank statements proving the source of your injection. The complete file gets a faster answer — including a faster, clearer no if the plan needs work.
Common questions
Can I get a restaurant loan with no experience?
It's much harder. With no sales history, lenders lean on the operator. Owners without restaurant management experience usually add a partner or GM with a track record, inject more cash, or buy an existing restaurant instead.
How much do I need to put down?
SBA rules generally require at least 10% of the project from a startup, and many lenders ask for 20% or more on a restaurant. It must be documented cash, and lenders want reserves left over after it.
Can I use a merchant cash advance to open?
Generally no. MCAs are underwritten on existing card sales, so a pre-opening restaurant usually won't qualify — and remittances before revenue stabilizes squeeze the riskiest months.
What credit score do I need?
There's no single number; lenders set their own floors. A stronger score helps, but for a startup, experience, injection, reserves, the lease, and realistic projections usually matter more.