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Guide · Borrowing

How much can a restaurant borrow, and from whom?

An open restaurant's limit usually comes from its earnings and the debt it already carries. Thin margins make that limit tight, so who you borrow from matters as much as how much. Here's how to work out your number.

Checked November 6, 2026

What similar restaurants actually borrow

One SBA loan broker's review of SBA records, from October 2023 to June 2026, found a median 7(a) loan of $251,000 for full-service restaurants and $330,000 for limited-service. A quarter of loans ran above about $640,000 and $600,000. The same review found middle-half rates of roughly 9.25% to 11%.

That shows what's common, not your limit. The 7(a) maximum is $5 million. Your own limit comes from your numbers.

The main limit: debt service coverage

Debt service coverage is your yearly earnings divided by your yearly debt payments, principal and interest together. Lenders usually start from EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted for one-time items.

One broker guide says lenders apply 1.15x to 1.25x on most restaurant deals. A private summary of SBA's rules lists floors of 1.15x for most 7(a) loans above $350,000 and 1.10x at or below that. Your lender can ask for more, so plan on 1.25x.

Margins are why this bites. The National Restaurant Association reports median income before taxes of 2.8% of sales at full-service restaurants and 4.0% at limited-service in 2024. EBITDA runs higher than that, because it adds back interest and depreciation.

Here's an example. The restaurant is made up: $1.5 million of sales. At 2.8%, its pre-tax income would be $42,000. We've assumed adjusted EBITDA of $120,000 (8% of sales), so use your own figure.

EBITDA $120,000 Divide by 1.25x $96,000 a year Existing payments −$18,000 a year Room for new payments $78,000 a year ($6,500 a month)

At an example 10% over 10 years, $6,500 a month would repay about $490,000. That's a ceiling from one test, not a likely offer. The how much can I borrow calculator runs this with your numbers.

Only reported earnings count

This is where restaurants often lose borrowing power. Lenders go by reported income, not what you say you really made. One consultancy that writes SBA feasibility studies says POS reports get matched to bank deposits and tax returns, and unreported cash sales are never accepted as add-backs. One broker adds that steady deposits matter more than any single peak month.

Check your slow months yourself

A passing year can hide a short month. Say the example restaurant's earnings fall unevenly, and it borrowed up to the limit:

9 busy months at $12,000 $108,000 3 slow months at $4,000 $12,000 Total EBITDA $120,000 Debt payments a month $8,000 Slow month: $4,000 − $8,000 −$4,000 Over 3 slow months −$12,000

That's before taxes and owner's pay. You'd need that cash saved from the busy months. The 13-week cash flow template shows how deep your slow stretch goes.

Who lends to restaurants

A line of credit based on receivables rarely fits. Guests pay at the table, so you have few invoices to borrow against.

Equipment and leases

Kitchen equipment is weak collateral. The same consultancy says used restaurant equipment brings 10 to 30 cents on the dollar at auction, and 50 to 70 cents in a private sale. So $200,000 of equipment might fetch $20,000 to $60,000 at auction. That's why these are cash-flow loans first.

Equipment payments also use up your room. Financing $150,000 at an example 9% over five years:

Payment $3,114 a month $37,365 a year Room left $40,635 a year

Check your lease early. One guide says the term, including renewal options, must exceed the loan term. Another reading of SBA's rules applies this where leasehold improvements or collateral on the premises reach $500,000 or 30% of the loan. Ask your lender which applies. Either way, three years left and no options is a problem to fix before you apply.

Opening a new restaurant

This is the hardest case. One broker says an unopened restaurant can't be underwritten on projections alone, and 7(a) and 504 loans typically want 2+ years of history. Another guide says startups can qualify, but lenders usually want three or more years of restaurant management or ownership. Under the private summary, startups under two years old put in at least 15% equity, and 20% if special-purpose property is also involved. Lenders can ask for more.

If the loan is to buy a restaurant

From October 1, 2026, the same summary says a first-time acquisition under SBA's rules needs 1.25x coverage on historical earnings and 10% equity that can't be waived. The consultancy says projections can't cure a shortfall, and a manager's wage comes off the earnings, about $76,000 with costs. It also cites BizBuySell figures of 2.18x seller's discretionary earnings (SDE: profit plus the owner's pay and perks) as a typical price.

An example with $250,000 of SDE and no other debt:

SDE $250,000 Less manager's wage −$76,000 Cash for debt $174,000 Price at 2.18x $545,000 Loan at 90% $490,500 Payments (10%, 10 years) $77,784 a year Coverage 2.24x

This one passes easily, so the 10% equity ($54,500) and the seller's numbers are the real hurdles. Fees and working capital would add to the project. Watch the liquor license too. Transfer rules vary by state, and the consultancy reports Texas permits don't transfer at all, so the buyer applies fresh. Settle this before you close.

SBA loans in short

Be careful with merchant cash advances

An advance isn't priced as a rate. You get a sum, repay it times a factor, and a share of card sales goes to the funder daily. Published ranges are factors of 1.15 to 1.49 and 10% to 25% of daily card sales, from a restaurant software company that doesn't sell advances. A lender that sells alternatives estimates effective APRs of 60% to 200%. These are their own estimates.

Here's what one does to the example restaurant, assuming $3,000 a day of card sales:

Advance $50,000 Factor 1.40: you repay $70,000 Taken at 15% of sales $450 a day Time to repay about 5 months Daily EBITDA ($120,000/365) $329 a day

The daily take is larger than the restaurant's daily earnings. That gap comes out of your cash for rent, payroll and suppliers. Taking a second advance makes it worse: that lender says combined holdbacks can reach 30% to 50% of daily deposits. Get a real payment schedule before you sign, and compare it with a term loan.

How to borrow more

  1. Report all your sales. Unreported cash doesn't count, and it weakens your deposits.
  2. Pay off short-term debt. Refinancing into a longer term frees up coverage, if your lender allows it.
  3. Lengthen your lease. Get renewal options that reach past the loan term.
  4. Clean up your books. Separate personal spending and one-time costs, so your adjusted earnings hold up.
  5. Watch labor. The National Restaurant Association reports full-service labor at a median 34.2% of sales among profitable restaurants and 42.9% among those with a loss.

This guide is general information, not financial or legal advice. Rates and lender rules change, so confirm them with your lender.

See your real number, from your books.

Tilo reads your QuickBooks or Xero books, works out earnings with add-backs, shows your coverage and the largest loan at 1.25x, and builds the package a lender asks for. 7-day free trial, then $799 a month.

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Sources

All checked November 6, 2026. Several are lender, broker or software company pages, so treat their figures as a guide.