Securing funding for a restaurant business can be challenging, but with the Small Business Administration’s (SBA) assistance, the process becomes more accessible. SBA loans for restaurants offer favorable terms, including rates between 5% to 10% and repayment terms extending up to 25 years. Here are four essential steps to successfully obtain an SBA loan for restaurants.
1. Determine Your Eligibility:
Before applying for an SBA loan, ensure you meet both SBA and lender qualification requirements.
While specific criteria may vary, generally, a restaurant needs to be operational for at least two years, with a credit score of 650 or higher.
2. Time in Business:
The business should have a track record of two or more years, although startups may still qualify. Startup entrepreneurs can check specific qualification details to explore eligibility options.
3. Personal Credit Score:
A credit score of 650 or higher is essential for eligibility, though some lenders may require a score of at least 700. Consider joining a credit repair program if your score needs improvement.
4. Collateral and Down Payment:
While SBA loans don’t mandate full collateralization, most lenders may require some form of collateral. Additionally, a 10% down payment is required, although startup restaurants or those without collateral may face higher down payment percentages.
Meeting these criteria, alongside other basic SBA requirements, such as being a US-based business, sets the stage for a successful SBA loan application for your restaurant. With funding options of up to five million dollars, favorable rates, and a streamlined online application process, SBA loans for restaurants can provide the financial boost needed for growth and success in the industry.