How to Buy a Restaurant With an SBA Loan
Buying a restaurant means buying a lease, a set of permits that mostly do not transfer, and a sales history that has to be proven from bank deposits rather than taken from the owner's word.
See if your deal qualifies →SBA FOIA 7(a) loan-level data, NAICS 7225*, FY2021 through FY2026.
What you need to put in
Ten percent of the total project cost is the SBA minimum for buying a business, and the project cost is everything the loan pays for: the purchase price, the closing costs, and the working capital you are borrowing to get through the first months.
Half of that ten percent can be a seller note, which is the structure most buyers are hoping for. The catch since June 2025 is that the note has to be on full standby for the entire life of the SBA loan, meaning no principal and no interest paid to the seller for ten years. A note on two year standby, which used to qualify, no longer counts toward your injection. The other five percent has to be real money, and the lender will trace where it came from.
On rate, an acquisition loan of this size prices near Prime plus 2.75 percent, with Prime plus 3.0 percent the SBA ceiling above $350,000. Ten year term, no balloon, and no prepayment penalty at that maturity. If real estate is part of the purchase the term stretches and the arithmetic changes.
What to diligence in a restaurant
The generic acquisition checklist covers the financials. These are the ones specific to this sector, and they are where deals here actually go wrong.
Prove the sales from the deposits
Restaurant revenue arrives as cash, card settlements, and delivery app payouts that land net of commissions and on a lag. Lenders underwrite from tax returns, so reconcile the POS sales reports to the bank deposits and to the returns, month by month, before you agree on a price. Cash a seller says never made it onto the books is not income you can borrow against, because if it is not on the return the lender will not count it. Pull the delivery platform statements separately: gross sales on the app can look much healthier than what actually reaches the account.
The lease is most of what you are buying
Most restaurants lease, and the location carries much of the value. Read the assignment clause and get the landlord's written consent early, because a landlord who drags their feet can hold up the whole closing. When a meaningful part of the loan or the collateral is leasehold improvements or equipment attached to the space, SBA's rules say the lease, counting renewal options that only you can exercise, should run at least as long as the loan, and it must if the lender cannot get an assignment of the lease and a landlord's waiver. Many lenders look at the remaining lease term on any restaurant deal, so a short term may need a new lease or an extension before closing. Also check the use clause (it can restrict the menu or alcohol), percentage rent, common area charges, and any relocation or demolition rights the landlord has kept.
The liquor license moves on the state's timeline
How a liquor license changes hands depends entirely on the state, and sometimes the city or county as well. In California, for example, a sale is handled as a person-to-person transfer. When money changes hands an escrow is required, and it has to stay open until the regulator approves the buyer and the premises. A temporary permit can be requested in some cases. Other states cap the number of licenses, tie them to the premises, or need a local hearing. If alcohol is a meaningful share of sales, map the transfer process before you set a closing date, because closing without the license changes the numbers the lender approved.
The health permit is yours to earn
Food establishment permits are generally issued to the operator and do not transfer with a sale, so the buyer applies in their own name. Some health departments run a change-of-ownership inspection covering equipment, plumbing, ventilation and finishes, and require corrections before they will issue the new permit. Ask for the last several years of inspection reports and look for repeat findings on the same equipment, the hood, or the grease interceptor. Those are capital costs you will be paying for, so price them in before you sign.
Licensing and regulation in this sector vary by state and change. This is a general description, not advice on your deal, so check anything you are going to rely on against your own state's current rules.
What the lender will ask you about
Beyond the usual credit questions. Have these answered before the file goes in and you save a round trip.
- ·Do the POS reports, the bank deposits and the tax returns agree, month by month?
- ·How long is left on the lease including the buyer's renewal options, and has the landlord agreed to the assignment?
- ·What share of sales is alcohol, and when will the liquor license be in the buyer's name?
- ·Who runs the kitchen after closing, and are they staying?
Who actually lends on restaurants
The Huntington National Bank has approved more loans in this sector than anyone else since FY2021, at an average of $280K. A lender who has done dozens of these already knows what the licence transfer looks like, which is worth more than a slightly better rate.
| # | Lender | Loans | Total Volume | Avg Loan |
|---|---|---|---|---|
| 1 | The Huntington National Bank | 4,397 | $1.2B | $280K |
| 2 | Newtek Bank, National Association | 1,461 | $527.7M | $361K |
| 3 | Manufacturers and Traders Trust Company | 1,033 | $144.3M | $140K |
| 4 | Northeast Bank | 966 | $154.6M | $160K |
| 5 | U.S. Bank, National Association | 842 | $119.1M | $141K |
| 6 | TD Bank, National Association | 687 | $139.0M | $202K |
| 7 | Readycap Lending, LLC | 667 | $357.2M | $536K |
| 8 | KeyBank National Association | 620 | $216.1M | $349K |
Source: SBA FOIA 7(a) loan-level data, NAICS 7225*, FY2021 through FY2026. Lenders with fewer than 3 approved loans in the sector are excluded.
Full restaurants lending data →Busiest states for restaurants
Buying a restaurant: common questions
Can I buy a restaurant with an SBA loan when most of the price is goodwill?
Yes. SBA acquisition loans routinely finance goodwill, and most restaurant sales are mostly goodwill plus used equipment. What the lender needs is cash flow, shown on the tax returns, that comfortably covers the payments. Because the business itself has little to pledge, the loan is often not fully secured, and in that case SBA's rules require the lender to take available equity in the owners' personal real estate as additional collateral.
The seller says the restaurant makes more than the tax returns show. Does that count?
No. Lenders size the loan from what was reported, not what the seller says happened. If the returns do not support the asking price, the price has to move or the seller has to carry more of it. Paying for unreported cash is paying for income you cannot prove and cannot borrow against.
Can I close before the liquor license transfers?
It depends on the state. Some states allow a temporary permit during the transfer and some do not, and operating alcohol service under the seller's license after closing is not something to assume is legal. Get license counsel in your state to set the order of events, and tell your lender early so the closing date reflects it.
Is buying a franchised restaurant different?
Yes. The franchisor has to approve you as the new owner, usually charges a transfer fee, and often requires a remodel or equipment upgrade as a condition. If the brand meets the federal definition of a franchise, it has to be listed on the SBA Franchise Directory before an SBA loan can be made, so confirm that first.
How much does it cost to buy a restaurant?
Across the sector, the average approved SBA 7(a) loan is $496K, taken over 32,893 loans since FY2021. That is the loan, not the purchase price: the loan usually also carries closing costs and working capital, and the buyer puts in at least ten percent on top. Use it as a sense of scale rather than a quote.
How long does an SBA loan to buy a restaurant take?
Sixty to ninety days from a complete file is the honest range for a straightforward acquisition, and it is the FILE that sets the clock rather than the bank. A lender with SBA Preferred Lender status approves in house instead of waiting on SBA review, which takes weeks out. Anything that needs a third party, an appraisal, an environmental report, a licence transfer, runs on its own schedule.
What can the loan actually pay for?
The purchase price of the business, the closing costs, working capital for the transition, and the real estate if you are buying the building too. A 7(a) loan for goodwill is typically a ten year term with no balloon and no prepayment penalty. Add owner-occupied real estate and the term stretches, up to twenty five years where the property is the majority of the project.
Looking at a restaurant?
Send us the numbers and we will tell you whether it carries the debt, and which lender has done this before. Free to borrowers.
Get Pre-Qualified →