How to Use SBA 7(a) Loans to Buy Your First Restaurant

The SBA 7(a) program goes up to $5M, requires 10–15% down from the buyer, and amortizes over 10 years for a business-only acquisition (25 years if real estate is included). For a first-time restaurant buyer that often means putting $150K–$250K down on a $1.5M deal — the bank covers the rest. Rates float around prime + 2.25% to 2.75% depending on loan size.

Underwriting kills most restaurant deals at the financials stage. The bank wants three years of seller tax returns, three years of P&Ls that reconcile to those returns, monthly bank statements, sales tax filings, and a current rent roll. Cash sales that never hit the tax return are the most common dealbreaker — if the seller's "real" revenue is 30% higher than what the IRS sees, the bank can only lend against the documented number. Same with off-the-books staff and informal rent arrangements.

Get pre-qualified before you sign an LOI, not after. A serious lender can issue a pre-qual letter against your personal financials in two weeks; that letter strengthens your offer and gives you a realistic ceiling. Once you are under contract the clock is real: a 7(a) typically takes 60–90 days from complete application to funding, and any document gap restarts a 5–10 day cycle.

Use a Preferred Lender (PLP) bank rather than a bank that submits to SBA centrally. PLPs underwrite in-house with delegated authority, which usually saves three to four weeks. East Coast banks with strong restaurant practices include Live Oak, Newtek, and several community banks in Queens and Manhattan. Ask the lender how many F&B 7(a) deals they closed last year — under 10 is a yellow flag.