Key Takeaways
- Match your financing option to your project size: bank loans and SBA programs work for major expansions, while equipment financing and lines of credit fit smaller upgrades.
- Understand the trade-offs between debt and equity—loans let you keep full ownership but require repayment regardless of performance, while investors share risk but also share control.
- Get your financial house in order before approaching any lender or investor, including clean P&L statements, balance sheets, tax returns, and realistic projections.
- Don’t overlook niche options like PO financing for catering operations or local restaurant grants that don’t require repayment.
- Work with a restaurant-specialized CPA who understands industry metrics and can present your financials in the context that lenders and investors expect.
You’ve got big plans.
Maybe it’s finally opening that second location you’ve been eyeing for two years. Maybe it’s a full kitchen renovation that’ll let you expand your menu and increase ticket averages. Or maybe you’re staring at a lease for your dream space and wondering how to turn that vision into reality.
Whatever the goal, you’ve hit the same wall every ambitious restaurant owner faces: figuring out how to pay for it.
Here’s the good news—restaurant financing options exist, and there are more of them than most owners realize. The challenge isn’t finding money; it’s finding the right money for your specific situation.
I’m going to walk you through the full menu of restaurant financing options—and what you need to have in place before you ask anyone for money.
Tips To Get Financing For Your Restaurant
Not all restaurant finance options are created equal.
It’s important to understand the type of growth or expansion project you’re eyeing, so you make the right call.
Generally, these fall into two buckets.
Restaurant Financing Options for Large-Scale Projects
When you’re talking about opening a new restaurant, expanding into additional locations, or undertaking major renovations, you’re typically looking at six-figure investments at minimum. These are the projects that require serious capital and longer repayment timelines.
Loans
The first big category of funding is loans. Here’s what is likely available.
Bank Loans
A traditional bank loan is exactly what it sounds like—you borrow a lump sum from a bank, then repay it over time with interest. For restaurant owners with established businesses and strong credit profiles, this remains one of the most straightforward paths to significant capital.
The pros are compelling: bank loans typically offer lower interest rates than alternative lenders, and you’re working with established institutions that have clear processes. You’ll maintain full ownership of your business, and the predictable monthly payments make budgeting easier.
The cons, however, are real. Banks are notoriously cautious about restaurant lending. You’ll need strong personal credit (typically 680+), solid business financials, and often collateral. The application process can take weeks or months, which doesn’t help if you’re trying to move quickly on an opportunity.
To get a bank loan start with the bank where you already have a business relationship and:
- Gather at least two years of tax returns
- Current financial statements
- Clear business plan showing how you’ll use the funds.
Be prepared to personally guarantee the loan if need be.
Small Business Administration (SBA) Loans
SBA loans aren’t actually loans from the government—they’re loans from approved lenders that the Small Business Administration partially guarantees. This guarantee reduces the lender’s risk, which means they’re more willing to lend to businesses (like restaurants) that might otherwise get rejected.
The SBA 7(a) loan program is the most common, offering up to $5 million for various business purposes, including real estate, equipment, and working capital. Interest rates are competitive, and repayment terms can extend up to 25 years for real estate purchases.
The downside? SBA loans involve significant paperwork and longer processing times—sometimes 60 to 90 days from application to funding.
To pursue an SBA loan, find an SBA-preferred lender in your area (the SBA website has a lender matching tool). These lenders process SBA loans regularly and can guide you through the requirements.
Honorable mention: Don’t overlook restaurant grants in your local area or community. While competitive, grants from economic development organizations, minority business programs, or restaurant-specific foundations provide capital you don’t have to repay. A quick search for “[your city] small business grants” or “restaurant grants [your state]” is worth the ten minutes.
Commercial Real Estate Loans
If you’re purchasing the building where your restaurant operates—or buying property for a new location—a commercial real estate loan is purpose-built for that scenario. These loans use the property itself as collateral, which often means better terms than unsecured lending.
Commercial real estate loans typically require 10-30% down and offer repayment terms of 5 to 20 years. Interest rates vary based on the property, your financials, and market conditions.
The major advantage is building equity in real estate rather than paying rent indefinitely. For restaurant owners thinking long-term, property ownership can be a significant wealth-building strategy.
The challenge is the substantial down payment and the fact that you’re now responsible for property maintenance, taxes, and insurance on top of running your restaurant.
Credit
But loans aren’t your only option. Depending on your credit history and health, you may be able to consider a line of credit.
Business Line of Credit
A business line of credit works differently from a loan. Instead of receiving a lump sum, you get access to a pool of funds you can draw from as needed—and you only pay interest on what you actually use.
The pros are significant: flexibility in how and when you use funds, lower interest costs when you don’t need the full amount immediately, and an ongoing resource you can tap for future opportunities without reapplying.
The cons include variable interest rates (which can increase over time), the temptation to overborrow because the money is “just there,” and the fact that lenders can reduce or freeze your credit line if your business financials deteriorate. Lines of credit also typically have lower limits than term loans for equivalent borrowers.
Investors
Sometimes debt isn’t the right answer. When you’re looking at significant capital needs—or when your credit profile makes borrowing difficult—bringing in investors might be the smarter path.
Crowdfunding
Crowdfunding lets you raise money from a large number of people, typically through online platforms. For restaurants, this can work two ways:
- Rewards-based crowdfunding (where backers get perks like free meals or branded merchandise)
- Equity crowdfunding (where investors receive actual ownership stakes in your business).
Crowdfunding validates your concept with real customers before you open, builds a community of invested supporters who’ll spread the word, and doesn’t require traditional creditworthiness. A successful campaign doubles as marketing.
But crowdfunding campaigns require significant upfront effort—you’re essentially running a marketing campaign while planning your restaurant. Most platforms take 5-10% of funds raised, and failed campaigns can damage your reputation before you even open. Equity crowdfunding also means giving up ownership and dealing with dozens or hundreds of small investors.
Venture Capital and Private Equity
VC and PE investors provide substantial capital in exchange for equity ownership in your business.
For restaurants, this typically means concepts with multi-unit potential. A single neighborhood bistro won’t attract VC interest. A fast-casual concept with a repeatable model, strong unit economics, and a plan to open 20 locations in five years? That’s a different conversation.
The pros include access to significant capital (often millions of dollars), strategic guidance from investors who’ve scaled restaurant brands before, and connections that can accelerate growth. You’re not just getting money—you’re getting expertise and networks.
The cons are substantial. You’re giving up meaningful ownership, often 20-40% or more. You’ll have investors with board seats and real influence over business decisions. And VC/PE investors expect exits—they want to sell their stake eventually, which means you’re committing to a path that might include selling your company down the road.
To attract institutional investors, you need a proven concept with at least one or two profitable locations, clear unit economics, a defensible competitive advantage, and a compelling growth story. Start by networking at restaurant industry conferences and connecting with investors who specifically focus on food and beverage through platforms like RestaurantOwner.com or industry groups.
Friends, Family, and Community
The oldest form of business financing is also the most personal. Raising money from people who know and believe in you can be faster and more flexible than any institutional option.
The pros are obvious: people who know you may invest based on trust rather than spreadsheets, terms can be negotiated flexibly, and the process moves as fast as you can have conversations. Community investors often become your most loyal customers and advocates.
The cons are equally obvious—and potentially painful. Mixing money with personal relationships creates risk. If the business struggles, you’re not just losing money; you’re potentially losing relationships. Thanksgiving dinner gets awkward when you owe Uncle Mike $50,000 and missed last quarter’s payment.
Restaurant Financing Options for Small- to Mid-Scale Projects
Not every project requires a six-figure capital raise. Sometimes you need $30,000 for a new oven, $15,000 to upgrade your POS system, or $50,000 for a modest refresh of your dining room. For these smaller-scale projects, different financing tools make more sense—options that are faster to secure, more targeted to specific purchases, and often easier to qualify for.
Item-Specific Financing
Financing options aren’t just trendy for personal purchases; they can also make a lot of sense for your restaurant when applied appropriately. Here are some options to consider.
Equipment Financing
Equipment financing is exactly what it sounds like: a loan or lease specifically for purchasing equipment. The equipment itself serves as collateral, which means lenders face less risk—and that translates to easier approval and better terms for you.
For restaurants, equipment financing covers everything from commercial refrigerators and ovens to dishwashers, HVAC systems, furniture, and technology like POS terminals. If it’s a physical asset with a defined useful life, it probably qualifies.
The pros make this option appealing for targeted purchases. Approval is typically faster and easier than general business loans because the equipment secures the debt. You can often finance up to 100% of the equipment cost with no down payment required. Terms usually match the expected life of the equipment, so you’re not paying off a pizza oven long after it’s been replaced. And your cash reserves stay intact for operating expenses.
The cons are worth noting. You’re limited to equipment purchases—you can’t use this financing for renovations, working capital, or other needs. Interest rates vary widely depending on your credit profile and the lender, with rates from some online equipment lenders running higher than traditional bank loans. If you default, you lose the equipment.
Purchase Order (PO) Financing
PO financing is a more specialized tool that helps when you’ve landed a large order but don’t have the cash to fulfill it. A lender advances you the funds to pay your suppliers, you deliver the goods or services to your customer, and you repay the lender when your customer pays you.
For restaurants, this most commonly applies to catering operations or wholesale production. Say you land a contract to cater a 500-person corporate event, but you need $20,000 upfront for food, rentals, and staffing. PO financing bridges that gap.
The pros work well for specific situations. You can take on larger orders than your cash flow would otherwise allow, you don’t give up equity, and approval is based more on your customer’s creditworthiness than yours. It’s a way to grow revenue without turning down business.
The cons limit its usefulness. PO financing only works for specific order-based situations—it’s not general working capital. Fees can be high, often 1.5-6% of the order value per month until repayment. And lenders will scrutinize your customer’s ability to pay, so this works better for corporate clients than private events.
Personal Savings
Sometimes the simplest path is funding it yourself. Using personal savings eliminates lenders, investors, interest payments, and applications.
The pros are straightforward: no debt, no interest, no applications, no approval process, and no one else has a claim on your business. You move at your own speed and answer only to yourself.
The cons are equally straightforward—and serious. You’re putting personal financial security at risk. Money used for business can’t be used for personal emergencies, retirement, or other goals. And if the project doesn’t generate the returns you expected, you’ve lost savings that took years to build.
What’s The Right Funding Option For You?
With all these options on the table, how do you decide which path makes sense for your situation?
Start by asking yourself these questions:
- How much capital do you need? Smaller amounts (under $50,000) often make sense for equipment financing, lines of credit, or personal savings. Larger amounts typically require term loans, SBA financing, or investor capital.
- How quickly do you need the money? Traditional bank loans and SBA loans take weeks or months. Online lenders and equipment financing can fund within days. Investor conversations can take anywhere from weeks to years depending on the relationship.
- What’s the money for? Specific asset purchases point toward equipment financing. Real estate purchases need commercial real estate loans. General expansion and working capital needs open up more options including term loans, lines of credit, and investors.
- What does your credit profile look like? Strong personal and business credit opens doors to traditional bank loans with favorable rates. Weaker credit profiles push you toward alternative lenders, equipment financing (where the asset provides security), or equity investors who care more about the business opportunity than your credit score.
- How much control are you willing to give up? Debt lets you maintain full ownership but requires repayment regardless of business performance. Equity investors share both the risk and the reward—but they also share decision-making power.
- What’s your risk tolerance? Using personal savings puts your own money on the line. Taking on debt creates fixed obligations that persist even if revenue drops. Investor capital shares risk but means sharing success too.
For most restaurant owners pursuing growth, a combination of financing sources often makes the most sense. You might use an SBA loan for a major buildout, equipment financing for kitchen upgrades, and a line of credit as an operating cushion. The key is matching each funding need to the option best suited for that specific purpose.
What You Need To Do Before You Ask For Money
Whether you’re walking into a bank, pitching an investor, or sitting down with a family member who’s offered to help, the conversation goes better when you come prepared.
Get Your Finances Together
Before anyone writes you a check, they want to know where you stand today. That means having clean, accurate, up-to-date financial statements ready to share.
At minimum, you’ll need your:
- Profit and loss statement (ideally for the past two to three years if you have that history),
- Balance sheet showing assets and liabilities
- Cash flow statement
- Recent bank statements.
If you’re an existing restaurant, lenders will want to see tax returns as well.
This is where working with an accountant who understands restaurants pays off.
If your books are a mess, fix that first. Applying for financing with disorganized financials wastes everyone’s time and tanks your credibility. Invest the time (or hire the help) to get your financial house in order before you start the conversation.
Create A Real Plan
“I want to open a second location” isn’t a plan. Lenders and investors want to see that you’ve thought through the details: where, when, how much, and why it makes sense.
Your plan should include a clear description of the project (what you’re doing and why), the total capital required and how you’ll use it, the timeline from funding to completion, and how this investment will impact revenue and profitability. For a new location, that means site selection rationale, buildout costs, staffing plans, and a realistic ramp-up timeline.
Build Realistic Projections
Projections show what you expect to happen financially after you deploy the capital. For a new location, that means projected revenue, expenses, and profitability over the first one to three years. For a renovation, it might mean projected sales increases or cost savings that justify the investment.
The keyword is realistic. Lenders and experienced investors have seen thousands of projections, and they can spot fantasy numbers instantly. If you’re projecting 30% profit margins when the industry average runs 3-9%, you’ve lost credibility. If your revenue projections assume you’re packed every night from day one, you’re not being honest with yourself or your potential funders.
Build projections grounded in actual performance data—yours if you have it, industry benchmarks if you don’t. Show multiple scenarios: what happens if things go well, what happens if they go as expected, and what happens if they underperform. Demonstrating that you’ve stress-tested your assumptions builds confidence that you’ll manage the capital responsibly.
Your Next Step Toward Better Restaurant Financing
Financing your restaurant’s growth isn’t about finding money—it’s about finding the right money for your specific situation.
Bank loans, SBA programs, lines of credit, equipment financing, investors, and personal capital all have their place. The key is matching your project, timeline, and financial profile to the option that fits best.
Before you start any application, get your finances organized, build a clear plan, and develop projections that prove you’ve done your homework. The better prepared you are, the more options you’ll have—and the better terms you’ll secure.
Ready to get your financial foundation in place for growth? Apply for your custom match with The Restaurant CPAs and connect with accounting partners who specialize in helping restaurants like yours access the capital they need.
