Can You Really Buy a Restaurant With an SBA Loan?
Yes — but let’s be honest about it. Restaurants have a reputation in the lending world, and it’s not entirely undeserved. Lenders know that restaurants have higher failure rates than most industries, tighter margins, and more operational complexity.
But here’s what most people get wrong: buying an existing, profitable restaurant is fundamentally different from opening a new one. An established restaurant with consistent revenue, a loyal customer base, and proven operations is a very different risk profile than a startup concept with a dream and a lease.
SBA lenders absolutely finance restaurant acquisitions. They just need to see the right deal, the right buyer, and the right loan package. That’s where most buyers need help — and where we come in.
Why Buying an Existing Restaurant Makes Sense
Despite the industry’s reputation, restaurant acquisitions offer compelling advantages:
- Immediate cash flow: An existing restaurant generates revenue from day one — no months-long buildout and ramp-up period
- Proven concept: The menu, market, and customer base have already been validated
- Established workforce: Cooks, servers, and managers are already trained and in place
- Lower risk than startups: You can underwrite based on actual performance, not projections
- Below-replacement-cost pricing: Many restaurants sell for less than it would cost to build out the same space from scratch
- Favorable valuations: Restaurants typically trade at 2x to 3x SDE — lower multiples than many other industries
Typical restaurant acquisition deal sizes range from $200,000 for a small independent to $3 million+ for established, high-volume locations. Multi-unit restaurant groups and franchise locations can push even higher.
SBA Loan Structure for Restaurant Acquisitions
The SBA 7(a) loan is the primary vehicle for restaurant acquisitions. Here’s what the structure typically looks like:
- Loan amount: Up to $5 million
- Down payment: 10-20% of total project cost
- Term: 10 years for business acquisition; 25 years if real estate is included
- Interest rate: Prime + 1.75% to 2.75%
- Working capital: Lenders typically require 3-6 months of operating expenses as working capital — more than most other industries
Why Lenders Require More Working Capital for Restaurants
Restaurants are operationally intensive. Between food costs, labor, rent, and utilities, your monthly fixed costs are high relative to revenue. Lenders know that even a profitable restaurant can hit a rough patch — a slow month, an equipment failure, a staffing crisis — and they want to see a cash cushion.
Don’t fight this requirement. Adequate working capital is the difference between surviving a bad month and defaulting on your loan.
What SBA Lenders Look For in Restaurant Deals
Restaurant deals get extra scrutiny from SBA lenders. Here’s exactly what they’re evaluating:
Buyer Experience
This is the single biggest factor. Lenders strongly prefer buyers with food service experience. You don’t necessarily need to have owned a restaurant, but you need to demonstrate that you understand restaurant operations.
Acceptable experience includes:
- Restaurant management (general manager, assistant manager, kitchen manager)
- Multi-unit food service management
- Hotel food and beverage management
- Catering company operations
- Franchise food service experience
If you don’t have direct food service experience, you have two options:
- Partner with someone who does — bring on an experienced operator as a minority owner or key employee with an employment agreement
- Retain existing management — if the current GM is staying and you have strong general business management skills, some lenders will consider this
Financial Performance
- Three years of tax returns and P&Ls — lenders want to see consistent or improving performance
- Food cost percentage: Should be 28-35% of revenue depending on concept. Higher than 35% raises concerns
- Labor cost percentage: Typically 25-35% of revenue. Lenders check this against industry benchmarks
- EBITDA margins: Healthy restaurants run 10-15% EBITDA margins. Below 8% is a yellow flag
- Revenue trends: Declining revenue is a deal-killer unless there’s a clear, fixable explanation
Lease Terms
For most restaurant acquisitions, the real estate is leased — and the lease is one of the most critical elements of the deal.
- Remaining term: Lenders want to see a lease term (including renewal options) that exceeds the loan term. For a 10-year SBA loan, you need at least 10-15 years of remaining lease term plus options
- Assignment clause: The lease must be assignable to the new owner. If the landlord won’t assign the lease, the deal is dead
- Rent as percentage of revenue: Should be 6-10% of gross revenue. Above 10% is a concern
- Escalation clauses: Understand how rent increases over time and factor this into projections
- Personal guarantee: Many landlords require personal guarantees from new operators — understand your exposure
Critical Due Diligence for Restaurant Acquisitions
Lease and Location
- Full lease review: Have an attorney review every provision, especially assignment, subletting, use restrictions, and exclusivity clauses
- Landlord relationship: Talk to the landlord directly — are they supportive of the transition?
- Parking and access: Changes in traffic patterns, construction, or neighboring businesses can impact foot traffic
- Zoning and permits: Verify that all permits are current and transferable
Liquor License Transfer
If the restaurant serves alcohol, the liquor license transfer is a critical component of the deal:
- Transferability: In some states, liquor licenses transfer with the business. In others, you must apply for a new license
- Timeline: License transfers can take 30-120 days depending on jurisdiction. Plan accordingly
- License type: Beer/wine vs. full liquor licenses have different values and transfer requirements
- Quota states: Some states limit the number of liquor licenses — in these markets, licenses themselves have significant value ($50,000-$500,000+)
- Interim permits: Some jurisdictions offer temporary permits while your full transfer is processed — this allows uninterrupted alcohol service
Equipment Assessment
- Equipment inventory: Walk-in coolers, ovens, fryers, hood systems, POS systems — document everything
- Age and condition: Commercial kitchen equipment has a 10-15 year useful life. Aging equipment means near-term capital expenditures
- Hood and fire suppression systems: Must be up to code — inspections and maintenance records are essential
- Health department compliance: Review recent inspection reports. Outstanding violations must be resolved before closing
- Owned vs. leased equipment: Some restaurant equipment (ice machines, POS systems, beverage dispensers) may be leased — verify what’s included in the sale
Financial Verification
Restaurants require extra financial scrutiny because cash transactions are common and unreported income is an industry-wide issue:
- POS system reports: Cross-reference POS data with reported revenue — they should align
- Sales tax filings: Compare reported sales tax to P&L revenue
- Bank deposit analysis: Total deposits should roughly match reported revenue
- Third-party delivery revenue: DoorDash, UberEats, Grubhub — verify these revenue streams and their associated fees
- Gift card liabilities: Outstanding gift cards represent a future obligation
Common Pitfalls When Buying a Restaurant
1. Buying a restaurant without food service experience. This is the number one reason SBA loans for restaurants get declined. If you’ve never managed a restaurant, lenders see you as a high-risk borrower. Get experience first, or bring in someone who has it.
2. Ignoring the lease. The restaurant industry is littered with buyers who paid a premium for a business only to lose it when the landlord wouldn’t renew the lease or jacked up the rent at renewal. Your lease is your lifeline — treat it that way.
3. Underestimating renovation costs. That dated dining room and worn-out kitchen floor might be “fine for now,” but deferred maintenance adds up. Budget for improvements in your first 12-18 months.
4. Believing unreported cash revenue. Sellers sometimes claim the business does more revenue “off the books.” If it’s not on the tax returns, it doesn’t exist for SBA loan purposes — and it shouldn’t factor into your purchase price. Only buy based on documented, verifiable income.
5. Not planning for the liquor license timeline. If you can’t serve alcohol for 60 days after closing because your license transfer is still pending, you’re losing significant revenue. Plan the license transfer early and arrange interim permits if available.
6. Changing everything on day one. New restaurant owners often want to overhaul the menu, rebrand, and renovate immediately. This alienates existing customers and staff simultaneously. Make changes gradually — keep what works, improve what doesn’t.
Sample Restaurant Acquisition Deal Structure
Example: $800,000 restaurant acquisition
- Purchase price: $800,000
- Working capital: $100,000
- Renovation budget: $50,000
- Total project cost: $950,000
- Buyer equity injection (15%): $142,500
- SBA 7(a) loan: $807,500
- Term: 10 years
- Estimated monthly payment: ~$9,300
With SDE of $300,000 and a purchase multiple of 2.7x, this deal provides healthy debt service coverage — which is exactly what lenders need to see for a restaurant acquisition.
How GoSBA Helps You Buy a Restaurant
Restaurant acquisitions require a specific approach, and at GoSBA Loans, we know how to present these deals to lenders:
- 50+ lender network: We work with SBA lenders who actively finance restaurants — not every lender will, and we know which ones do
- $320M+ funded in 2025: Our experience includes restaurant deals across fast-casual, full-service, and franchise concepts
- 100% free service: We’re paid by the lender, not by you. Our restaurant acquisition advisory costs you nothing
- Free business plans and financial projections: We prepare SBA-compliant business plans with detailed financial projections — a $2,500-$5,000 value — at no charge. For restaurants, we specifically address food costs, labor ratios, and seasonal patterns
- Experience positioning: We help you present your background in the strongest possible light to lenders — highlighting relevant experience and addressing gaps proactively
- Lease analysis: We review lease terms as part of our deal assessment to identify issues before they become lender objections
Restaurants may be a tougher sell to lenders than some other industries — but with the right deal structure, the right buyer profile, and the right loan package, they get funded every day. We make sure yours does too.
Ready to Buy a Restaurant?
If you’ve found a restaurant you want to acquire, don’t wait until you’ve signed a letter of intent to think about financing. Understanding your borrowing capacity and what lenders require should inform your offer — not the other way around.
Contact GoSBA Loans today for a free, no-obligation consultation. We’ll evaluate your restaurant deal, assess your buyer profile, and build a financing strategy that works.
