Restaurant - Lounge - Bar

Mortgages for Restaurant, Bar and Lounge Financing Loans

Do you want to apply for Bar / Restaurant financing loans for purchasing or refinancing a business? It’s a tough industry. The failure rate is high. If you’re a successful restaurateur, congratulations on your management prowess. If you are looking to start your own business, read on.

Are you are presently a restaurant or bar owner? If so, you know bar restaurant financing loans are hard to qualify for. Banks and commercial lenders decline as many as 90% of these applications. To be approved for bar and restaurant loans and financing, most commercial lenders require you to have been in business at least a few years and require you to have assets to secure to get working capital. This is know as recourse.

If you’ve never owned your own business, don’t despair. There are many options to explore when attempting to obtain new loans or financing for a new restaurant or bar. Factors such as your experience in the industry as a manager, the size of your current or projected business and the amount of loans needed determines what type of program is most appropriate for you. Whether you’re starting up your first bar restaurant operation, remodeling your facility, moving into a better or larger facility or even adding a new facility, you’ll need funding. Unless you’re cash rich, you’ll need to seek out others to help finance your project. Funding mortgages and financing loans on restaurants and bars can be challenging. Commercial lenders are nervous about the high failure rate. Be prepared to prove to the lender that you’re a good risk..
hotel financing

Let’s get started

You should explore some different options. Factors such as your experience, the size of your business and the amount of funds needed determine what type of financing loans for your restaurant or bar is most appropriate for your specific request. Here are some options to look at.

  • Seller Assisted or Seller Carry Back: If you’re buying an existing business, one option is to ask the seller to finance all or part the sales price after your down payment. There are two main benefits to seller assisted financing.
    A.) It’s a good choice when other sources are unavailable or unwilling.
    B.) If the seller is willing to finance the buyer, it shows the seller has faith in the past and continued success of the business.

  • Commercial lenders or banks. First-time restaurateurs will usually find it difficult to get a commercial bank loan, but it is still be worth a try if you have strong experience in managing restaurant / bar businesses. Mortgage financing loans depend on the lender and your ability to prove that you’re qualified. The banks closely scrutinizes restaurant applications. Their responsibility is to protect the assets of the lending institution and to strive to meet the needs of clients. If the applicant is not convincing that he or she can make a success of the business, they have no choice but to reject the application. Don’t quit just because one lender says no. It doesn’t mean another lender won’t say yes.

    If for whatever reason, you’re not able to get a commercial lender loan by yourself, an option is to get another individual with the qualifications to guaranty it. In exchange, you may want to compensate them with equity in your business or a percentage of the monthly profits.

hotel financing
  • Small Business Administration – SBA.  An alternate method of getting a commercial lender loan is to obtain an SBA business loan. This is where the SBA guarantees  the loan to the lender. The most popular SBA program is the 7(a) Loan Guaranty Program. Through this program the private sector commercial lenders grant funding, and the SBA guaranties that up to 85 percent of the principal balance will be paid back to the lender. About 5,000 U.S. lenders grant SBA programs. In fact, the same bank that turns down a restaurant – bar for a traditional loan may be able to approve an SBA loan.

    A 7(a) loan can be used for most businesses. It is offered at market interest rates and usually is financed over seven or eight years but amortized over a longer period. The extended financing means lower monthly payments, however, you will pay more interest over time. In order to qualify for a 7(a) loan, you must first be rejected for a traditional program, and you must operate your small business. Individual franchisees of large corporations also may be considered. The SBA also looks for evidence that you’ll be able to repay the loan as agreed.

We at MFI are committed to providing loans for financing restaurants – bars at fair rates and terms for all applicants.
Scroll to Top