10 Things to Know Before Applying for a Restaurant SBA Loan

By Cynthia Chellappa

Loans for restaurant owners are the SBA’s largest type of approved business loan. They are more than willing to provide financing for you to start your business. You just need to have all your affairs in order to make it easy for them to want to invest in you. Bring all your important documents with you. Know your key selling points and what makes your restaurant unique. Most importantly, be prepared to talk, talk, talk and answer any and all questions that come up.

Here are something to know about the process:

1.) Prepare Your Financial Documents
Have all pertinent financial documents in order and ready to present.

2.) Make Sure You Have Relevant Business Experience 
The SBA Program requires you to have some business know-how directly related to your industry. If you don’t have directly relevant business experience, consider postponing your plans for a few years.

3.) Check Your Credit History 
In general, your credit score should be above 650. Your spouse’s credit history will also be checked. To avoid surprises, get a credit report before you get started – this is the main, free site.

4.) Have Cash On Hand 
Banks will want you to have 20-30% of the loan amount already in cash. (This can go as high as 50% in cases of larger loans.) The more cash you put up, the greater the loan amount you’re eligible to get. Don’t have that handy? Foodstart.com, a community funding site, can help you raise the capital you need to help qualify you for an SBA loan.

5.) Be Prepared to Take Out a Home Mortgage 
It’s not ideal, but a lot of banks will require you to take out a second mortgage on your home. All the more reason to consider using a community funding platform like foodstart.com.

6.) Have a Stellar Business Plan
Your business plan is the most important element of your proposal. Even if it takes a few months longer to open your restaurant, invest the time in making your business plan as comprehensive as it can be.

7.) Be Honest 
The amount of paperwork required for applying for an SBA loan is phenomenal. It can be easy to skim and just check off boxes systematically- don’t do this! Read everything carefully. You’ll also be asked about your criminal history – If it’s just a misdemeanor or traffic offense, you’ll have the chance to explain it in your interview.

8.) Make a List of Your Preferred Banks
Even though the SBA is ultimately guaranteeing the loan, it’s the banks that are putting up the money. Do your research and find banks with a history of granting loans to restaurants – no need to waste your time approaching bank that don’t lend do restaurant loans. You can also contact your local SBA Office for a listing of banks in your area that do restaurant loans.

9.) Back to Basics
When you’re appearing for a loan appraisal meeting, presentation is EVERYTHING. Be on time and look professional.

10.) Line Up Local Funding First
Banks will be impressed if you’ve already lined up some funding from within your community. Use foodstart.com to raise capital from friends, family, and future customers. See below to learn how community-funded finance works.