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Your Comprehensive Guide to Financing Options for Restaurants

Opening, owning, and operating a restaurant is undoubtedly one of the most demanding and challenging jobs available. The average restaurant business plan in New York requires at least $281,000 in initial costs and an extra $1 million in yearly expenses Ipass in 1 hour. High rent, construction, and other unforeseen beginning costs, such as food and alcohol permits, HVAC fixtures, and more, are among these prices.

It’s no surprise that 60 percent of restaurants fail in their first year, and 80 percent fail within five years, given strict legislation and hefty operating costs. However, with the correct financing choices, restaurants may be able to weather the storm and keep their doors open following a bad stretch.

Administration for Small Businesses (SBA)

The Small Business Administration (SBA), a branch of the US government entrusted with aiding small businesses, does not lend its own money. Instead, it collaborates with private lenders, securing a significant share of the cash with their own guarantee, reducing the risk to private lenders in the event of a default by entrepreneurs.

Though the SBA offers a wide range of loan options, restaurant proprietors should focus on the SBA Express and CDC/504 programs.

SBA Express 

The SBA Express program allows for quicker approvals. Obtaining a standard bank company loan can take weeks, if not months, regardless of the state of the economy.

The difference in approval times might greatly influence a company’s bottom line. 

The restaurant business is particularly vulnerable to unforeseen conditions such as power outages and equipment malfunctions because of its fixed assets, extremely perishable inventory, and high expenditures. An HVAC unit breaking down after a lengthy period of usage, a gas stove breaking down, or water leaks destroying a full week’s worth of food are all time-sensitive costs. Restaurants will undoubtedly face pressing, costly demands that may harm the business if not met soon.

As a result, faster-turnaround loans are particularly vital to restaurateurs, and the SBA Express program is one of the best.

Loans from the CDC/504

Though the CDC/504 program is less popular than the SBA’s traditional 7(a) loan program, it is ideal for restaurants in many respects. 

According to the SBA, loans backed by the 504 program are generally for the purchase and rehabilitation of big, fixed assets that fall under the categories of real estate and equipment. 

And, as restaurateurs are well aware, fixed expenses are a significant and diverse component of a restaurant’s costs: equipment such as burners, gas ranges, cutlery, and culinary equipment are all highly costly.

Even better, 504 loans can be utilized for upgrades or expansions, making them excellent for restaurant owners looking to expand. The CDC/504 program does have one drawback: it cannot be used for working capital or inventory purchases. For example, suppose your restaurant is strongly reliant on seasonal business (say, a crab cake stand on a beach boardwalk). In that case, you won’t be able to use your 504 loan to pay rent during the off-season or to purchase a load of fresh seafood during the busy season.

Nonetheless, given the intense, asset-heavy nature of the restaurant industry, all restaurant operators should be aware of the 504 loan program.

Lines of Credit or Short-Term Loans

When your restaurant requires funds quickly but does not qualify for the SBA Express program, a short-term loan or line of credit from an internet lender is a viable choice. These loans are simple to apply for (some only require a few months of bank statements), and you can get the money immediately if approved.

These shorter-term products have fewer credit requirements, but the downside is that they can be highly expensive. Some will even have daily or weekly payments rather than the conventional monthly installments, putting a burden on your financial flow.

If you’re thinking about getting a loan like this, make sure your company can afford it and that you have a strategy in place to repay the loan. Also, inquire with your lender about what happens if you pay off your loan early, as some short-term lenders will not forgive some or all of your interest if you do so.


As a restaurateur, you’ll undoubtedly want a large amount of capital—and quickly—to address both immediate and long-term issues (such as equipment malfunction) (such as opening more branches of your restaurant).

Fortunately, there are a variety of suitable restaurant loan choices available, ranging from the highly specialized CDC/504 program, which is designed specifically for asset-heavy enterprises like restaurants, to alternative lenders that provide quick and easy access to lines of credit.