November 2, 2022 By Max Freedman

There are plenty of good reasons to consider renovating your restaurant. Maybe you’ve been in operation a while and your building could use some sprucing up. Or maybe you’ve grown in popularity and need extra space to accommodate your customers. Regardless of what’s behind it, a remodel will generally be a serious investment, typically costing around $200 to $250 per square foot.

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Even profitable restaurants may have trouble meeting those high costs. Fortunately, many financial institutions provide restaurant loans for renovation to help owners offset the expense. There are generally many loan plans you can use to renovate your restaurant, and each offers unique benefits and drawbacks. Read on to find out more information to help you consider the loan that’s best for your financial situation.

7 restaurant loans for renovation

Below is a list of several loan options from traditional and non-traditional lenders. The loan that’s best for your restaurant renovation often depends on the project's scope.

1. SBA 7(a) loans

SBA loans are some of the most highly sought-after small business loans available. Notably, the agency in their name, the Small Business Administration (SBA), doesn’t directly offer capital to borrowers. Instead, the SBA guarantees up to 85% of the loan, protecting the lender if the borrower can’t repay it. As a result, SBA-backed financial institutions generally take on less risk to offer loans with low interest rates and long terms.

Given their borrower-friendly terms and rates, SBA 7(a) loans are often harder to qualify for overall. The prerequisites vary from lender to lender, but they typically look something like this:

  • Loan amount: $30,000 to $350,000
  • Repayment period: 10 years
  • Repayment schedule: Monthly payments
  • How long you'll wait for funding: The SBA states its turnaround time is generally five to 10 business days. However, you’ll typically need to wait at least a month for your funds due to processing.

2. Bank term loans

Bank term loans generally offer a more traditional borrowing experience. They’re similar to SBA loans in that their terms are highly favorable, but the financial institution takes on the lending risk - the funds have no SBA backing.

That said, traditional bank loans still provide some of the best terms of any financing option. Their application processing times can be shorter than SBA loans, plus their repayment terms can be flexible. Below are some common terms and conditions for bank term loans obtained through the SmartBiz® network.

  • Loan amount: $30,000 to $300,000
  • Repayment period: Two to five years
  • Repayment schedule: Monthly payments
  • How long you'll wait for funding: Varies based on the institution

3. Equipment loans

Borrowers can use capital from bank loans and SBA loans for many business-related purposes, including renovation. In contrast, funds from equipment loans are typically more limited in use, but in ways that often make them appealing for restaurant renovation. As their name implies, equipment loans are primarily used for equipment purchases, which can be great if you’re updating your machinery rather than your eating area.

Equipment loans are generally relatively easy to qualify for because anything you purchase with the added funds becomes your collateral. If you fail to repay your debt, the lender can repossess what you bought to recoup their losses. Below are some common equipment loan terms and conditions.

  • Loan amount: 80% to 100% of expected equipment costs
  • Repayment period: Three to 10 years
  • Repayment schedule: May be daily, weekly, monthly, or some combination thereof
  • How long you'll wait for funding: Generally seven days or less

4. Business lines of credit

A business line of credit may be a more suitable loan product for smaller, more focused restaurant renovation projects. A credit line is a revolving, not installment, loan - like a credit card - you can draw on as needed to make purchases. The loan amount varies depending on the lender, but you’ll generally only pay interest and fees on the money you use.

A business line of credit is often easier to qualify for than installment loans, with most lenders looking for borrowers with credit scores around 550 and 6 months of business experience. If you’re eligible for the loan, funds often become available reasonably quickly.

  • Loan amount: $2,000 to $1 million
  • Repayment period: Six months to four years
  • Repayment schedule: Flexible, but the longer you delay repayment, the more fees you’ll likely have to pay
  • How long you'll wait for funding: Varies by lender, though often fast

5. Business credit cards

Business credit cards are similar to lines of credit in that they’re revolving loans. However, they differ in a few key areas. For one, credit cards often have lower spending limits than lines of credit, making them more suitable for smaller, everyday purchases. Additionally, they may earn you cashback rewards impossible with business credit lines. You can funnel those cashback rewards toward whatever your restaurant might need, including renovations.

  • Loan amount: $2,000 to $250,000
  • Repayment period: There’s no due date for repayment – once you have a credit card, you have it
  • Repayment schedule: Flexible, though a line of credit, the more your fees can increase if you delay repayment
  • How long you'll wait for funding: Business credit cards typically arrive by mail within seven to 10 business days.
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6. Merchant cash advances (MCAs)

Merchant cash advances don’t work quite the same way as traditional loan options. If you sign up for an MCA, a financing company will provide a lump sum payment. After that, the company will take a portion of your credit and debit card sales (with additional fees) until the debt is paid off. The main benefits of an MCA are the easy application process, hands-off repayment model, and quick turnaround time.

However, MCAs have one major catch. Their high factor rates (which replace typical interest rates) can quickly lead to APRs as high as 300%. No other loan comes anywhere close to that high of an APR.

  • Loan amount: $2,500 to $500,000
  • Repayment period: Three months to three years
  • Repayment schedule: Typically daily
  • How long you'll wait for funding: Generally one to seven days

7. SBA microloans

While SBA 7(a) loans are highly valuable, their loan amounts may be unnecessary for smaller restaurants. That’s where SBA microloans, another common type of SBA loan, can come in handy. Microloans are functionally the same as SBA 7(a) loans, except on a smaller scale. They’re geared toward helping smaller, newer businesses cover less expensive purchases. Beyond this distinction, you’ll likely still receive a generous loan offer with a low interest rate and a long repayment period.

  • Loan amount: $500 - $50,000
  • Repayment period: Up to six years
  • Repayment schedule: Monthly payment
  • How long you'll wait for funding: One to three months

What does restaurant renovation include?

A renovation can mean many things depending on your restaurant's condition. Typically, restaurants remodel due to long-term wear and tear or the need for extra space to meet increased demand. Here are some changes commonly included in restaurant renovations.

  • New flooring. Any public-facing business’s floors are bound to get warped and damaged over time given all the foot traffic. Restaurant flooring is particularly at risk due to the possibility of dropping food or liquids and attracting pests. Generally, replacing your flooring every three years is a good idea.
  • Updating booths or seating. Uncomfortable seating might not stop customers from dining in your restaurant, but it might keep them from coming back. Also, tears in the seat covers and caked-on stains aren’t very appealing to customers trying to eat, so replacing them should generally be a priority. Additionally, you should consider getting more seating when customer demand outpaces the space in your restaurant.
  • Bathroom upgrades. It’s easy to overlook your bathroom beyond cleaning it, but a remodel may do it some good. Restaurant bathrooms typically see heavy use, which means they’re prone to get worn down just as quickly as the main floor. Updating fixtures and adding new amenities may help keep your restrooms working correctly.
  • New light fixtures. Lighting plays a considerable part in how much customers enjoy their meals and their overall restaurant experience. Well-placed lights can help set your restaurant’s ambiance while making your customers’ food look more appealing. Light fixtures are often one of the most critical considerations when expanding your restaurant to meet demand.
  • Painting the interior or exterior. Paint tends to chip and crack over time, having a tendency to make your restaurant's decor seem particularly unappealing. It’s another thing that might not stop people from eating there but might make them think twice about coming back. Getting your interior and exterior walls painted may help draw more customers into your restaurant and help keep your revenue flowing.

Find restaurant loans for renovation with SmartBiz

With so many loan options, finding one that fits your financial situation – and that you qualify for – may be complicated. The search for the right lender can be time-consuming, but SmartBiz can help to save you time. You’ll only have to enter your business information into one online application, and SmartBiz will automatically check whether you pre-qualify* for restaurant loans for renovation. This may help you find the funds you need to upgrade your restaurant before you know it.


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