A restaurant renovation loan is usually a term loan or an SBA 7(a) loan. A term loan funds within days and repays over up to 60 months. SBA takes 30 to 90 days but allows longer terms. A breakfast spot remodeling or opening a second location often pairs one with equipment financing for the kitchen.
The breakfast spot in question has been open twelve years in a busy suburb and does about $1.4 million a year, with a line out the door on weekends. The dining room hasn't been touched since it opened, the kitchen layout slows down the line, and the owner has two goals: a $260,000 remodel this winter, and a second location in a neighboring town within two years. Both need money she doesn't want to pull out of operating cash.
What are the options for a restaurant renovation loan?
Most remodels and second locations are financed with some combination of four products.
| Product | Range through Sagamore | Time to fund | Fits |
|---|---|---|---|
| Term loan | $10K to $2M | Decision in 24 to 48 hours; funds within 48 hours of approval | Remodels on a tight timeline; projects under a few hundred thousand |
| SBA 7(a) loan | $50K to $5M | 30 to 90 days | Large remodels and second locations where a longer term keeps payments down |
| Equipment financing | $10K to $5M | 1 to 3 business days after accepting | The kitchen equipment portion of any project |
| Line of credit | $5K to $500K | Decision in about 24 hours | Contingencies, change orders, and cash during closed weeks |
The choice between a term loan and SBA usually comes down to size and timing. A $150,000 refresh with a contractor ready to start next month is a term loan. A $900,000 second location with a lease signing in four months has time for SBA, and the longer term matters more at that size. Our comparison of SBA 7(a) vs. 504 loans covers when the 504 program fits, mainly when real estate is involved.
How much should a restaurant renovation budget include?
More than the contractor's bid. For the breakfast spot's $260,000 remodel, a realistic budget looks like this:
| Line | Amount |
|---|---|
| Construction contract | $175,000 |
| Kitchen equipment | $45,000 |
| Design, permits, and inspections | $16,000 |
| Furniture, fixtures, and signage | $24,000 |
| Contingency (about 10%) | $26,000 |
| Lost sales and fixed costs during a 3-week closure | $45,000 |
| Total | $331,000 |
The last two lines are the ones owners leave out. Construction runs over, especially in older buildings where walls get opened up. And three closed weeks still bring rent, insurance, loan payments, and the managers you want to keep, while sales drop to zero.
A sensible structure for that budget: equipment financing for the $45,000 of equipment, a term loan for the build and soft costs, and a line of credit held for overruns and the closed weeks. Our guide to restaurant equipment financing covers the equipment side.
How do lenders evaluate a remodel?
They lend against the restaurant you already run, not the one you're about to have. The questions are whether current cash flow covers the new payment, and whether the remodel is likely to hold or grow sales.
Sagamore's lending partners require:
- A credit score of 600 or higher
- At least one year in business
- At least $400,000 in annual revenue
For a remodel, expect to provide:
- 3 to 6 months of business bank statements, and card processing statements
- Business tax returns, typically two years for larger amounts
- The contractor's bid and the scope of work
- Your lease, showing enough years remaining to justify the investment
The lease is the item owners forget. Lenders hesitate to fund a $300,000 build-out in a space with 18 months left on the lease. Negotiate the renewal first, and ask for a tenant improvement allowance while you're at it.
How does financing a second restaurant location work?
A second location is underwritten mostly on the first one. The new site has no sales history, so lenders look at how well the existing restaurant covers both its own debt and the new loan's payments during the months the new site ramps up.
Expect lenders to ask for:
- Two to three years of financial statements or tax returns for the existing restaurant
- A signed letter of intent or lease for the new site
- A project budget: build-out, equipment, pre-opening payroll, opening inventory, and working capital
- A simple projection for the new location's first year, based on the first location's real numbers
- Your management plan, since you can't be in two kitchens at once
SBA or conventional for a second location?
SBA 7(a) is common here because the projects are larger and the longer term keeps payments manageable while the new location ramps. SBA lenders typically look for more history and stronger credit than Sagamore's general minimums, and SBA has its own rules on personal guarantees and collateral. Our guide to SBA loan requirements covers them for 2026.
A conventional term loan fits a smaller second location, or when the lease and opening date can't wait for an SBA timeline.
Could a food truck come before a second location?
For some concepts, yes. A truck or trailer for catering and events can test a neighboring market before you commit to a second lease and a full build-out. Equipment financing covers the truck or trailer and its kitchen build, new or used, with the vehicle as collateral, and a line of credit handles event fees and food costs while the truck finds its routes. Our guide to food truck financing covers what lenders want for one.
Should you buy the building?
If the right building is for sale, it's worth pricing. SBA 504 and commercial mortgages both finance owner-occupied real estate on long terms, and owning protects you from the rent increases and non-renewals that end many successful restaurants. It also adds a closing process and a larger down payment to the project.
What mistakes do restaurant owners make with renovation financing?
Borrowing for the bid only. The overrun gets paid with a fast, expensive advance in week four.
Starting work before funding closes. A contractor's start date isn't a reason to sign anything before the loan is approved.
Remodeling on a short lease. You're improving the landlord's building. Make sure you'll be there long enough to earn it back.
Opening a second location to fix the first. If the first restaurant is struggling, a second one splits your attention and doubles your fixed costs.
How do you get started?
Get the contractor's bid, add the soft costs and closed-week costs, and check your lease term. Then decide whether the timeline points to a term loan or leaves room for SBA. Our restaurant financing page covers the other needs restaurants finance, from kitchen equipment to working capital through slow seasons. If you're thinking about acquiring an existing restaurant rather than building a second one, our guide to business acquisition financing walks through that route.
Sagamore is a broker, not a lender, and one application reaches lenders across term loans, SBA, and equipment financing. When you have a number, start an application. The first review is a soft credit pull.
