Today’s interest rates for all SBA loans
Check Today's Rates →
Finding the Funding to Open a Bar or Club
Bars and restaurants have a high start-up cost compared to other industries, with an average of $500,000. As a business owner, this might seem daunting, but financing options exist for you.
- Funding Options for Bars and Clubs
- Self-Funding
- Seller Financing
- Conventional Loans
- SBA 7(a) Loan
- More Information on the SBA 7(a) Loan
- Using an SBA 7(a) Loan for Bars and Clubs
- Finding an SBA 7(a) Lender
- How to Qualify and Apply for an SBA 7(a) Loan
- SBA 7(a) Loan Terms
- Case Study: Serving Up Martinis in Ann Arbor
- Want Personalized Guidance?
- Related Questions
- Get Financing
Bars and restaurants have high startup costs compared to other industries, with an average of $500,000. Operating costs can be high too, and not just initially. In some states, the price of a liquor license can average around $400,000. As a business owner, this might seem daunting, but financing options exist for you.
Funding Options for Bars and Clubs
If you’re unsure of where to start looking for funding, think about what you already have:
Self-funding can be a great way to put together some capital without any terms to worry about.
If you can find the option, and have the credit and loan history, seller financing is a great path.
There are also conventional business loans offered by banks and lending institutions, as well as government-backed loans like the SBA 7(a).
Self-Funding
If you’re in a position to do so, self-funding can be a viable option for starting a bar or club. But the risks of putting your own money into your business are clear and present: if your business isn’t successful, you’re out the money that you put in and the business itself.
Take stock of anything extra you have that could be used for capital. If you have an extra car or house, boats or other recreational vehicles, or land that can be partitioned, you can use the proceeds of the sales to fund your bar or club.
Self-funding means living lean for a while, so pay special attention to your personal and business finances to come out on top.
Seller Financing
Owners of existing bars may choose to finance a buyer when they sell. This is a good option to go for, because the costs to start a bar/club can be very high. In a seller financing situation, a portion of the total cost is financed by the owner, and the buyer seeks other sources of funding for the remaining amount.
Owners who offer financing will usually only do so to buyers with impeccable credit scores, and then only to buyers who can prove that they can make payments.
Conventional Loans
Banks and lending institutions want loan terms that are favorable to them. So, they set the terms themselves—terms that you as a small business borrower will have to follow under a conventional loan. Some lenders also see bars and clubs as high-risk institutions, making them less likely to give loans to borrowers.
To help ensure your success when speaking to a lender, bring along a solid financial plan that includes growth and earning projections. Keep accurate financial records, and bring those too. Banks are more willing to lend to a business owner who can prove that they make money and repay debts.
SBA 7(a) Loan
The SBA 7(a) loan is a government-backed loan that’s offered through traditional lending institutions like banks, credit unions, and lending firms. The loan terms benefit both the lender and borrower, and the eligibility requirements are straightforward.
As a bar or club owner, the SBA 7(a) has several benefits:
Appropriate loan amounts of up to $5 million
Non-industry-specific eligibility requirements
Flexibility of use for real estate and land, operating costs, and working capital
Your business must operate for profit.
You must have reasonable equity to invest—this could mean that you already have a profitable bar or restaurant, or you could invest your own personal equity like real estate.
The business owner cannot be on parole.
You must be doing business in the U.S. or its territories.
You must have first used other financial resources. So, if you have savings accounts or are able to get a personal loan, you have to try these methods before you can qualify for an SBA 7(a) loan.
What are the best financing options for opening a bar or club?
The best financing options for opening a bar or club are self-funding, seller financing, and government-backed loans like the SBA 7(a). Self-funding is a great way to put together some capital without any terms to worry about. Seller financing is a great path if you can find the option and have the credit and loan history. The SBA 7(a) is a government-backed loan that can be used to finance a bar or club. It offers low interest rates and long repayment terms, making it a great option for businesses that need to borrow money.
For more information on the SBA 7(a) loan, visit www.sba7a.loans.
What are the requirements for an SBA loan for a bar or club?
The SBA 7(a) loan is a government-backed loan that’s offered through traditional lending institutions like banks, credit unions, and lending firms. The loan terms benefit both the lender and borrower, and the eligibility requirements are straightforward.
In order to be eligible for an SBA 7(a) loan, you must meet the following criteria:
- Be a for-profit business
- Be located in the United States
- Have a good credit history
- Have sufficient cash flow to repay the loan
- Be able to provide collateral
You must also be able to demonstrate that you have the ability to repay the loan and that the loan will help your business grow. Additionally, you must be able to provide a business plan that outlines how you plan to use the loan proceeds.
What are the advantages and disadvantages of using a business line of credit to open a bar or club?
The advantages of using a business line of credit to open a bar or club include the ability to access funds quickly, the flexibility to borrow only what you need, and the ability to pay back the loan over time. The disadvantages include the need to have a good credit score, the potential for high interest rates, and the need to make regular payments.
A business line of credit is a type of loan that allows you to borrow up to a certain amount of money and then pay it back over time. It is a great option for businesses that need access to funds quickly and don't want to take out a large loan. The interest rate on a business line of credit is usually lower than other types of loans, but it can still be high depending on your credit score.
The main disadvantage of using a business line of credit to open a bar or club is that you need to have a good credit score in order to qualify. If your credit score is not good, you may not be able to get the loan or you may have to pay a higher interest rate. Additionally, you will need to make regular payments on the loan, which can be difficult if your business is not doing well.
What are the most important factors to consider when applying for a loan to open a bar or club?
When applying for a loan to open a bar or club, the most important factors to consider are your credit and loan history, a solid financial plan with growth and earning projections, and accurate financial records. Banks and lending institutions are more likely to lend to a business owner who can prove that they make money and repay debts. Additionally, government-backed loans like the SBA 7(a) may be an option.
What are the best ways to secure financing for a bar or club?
The best ways to secure financing for a bar or club are seller financing and conventional loans. Seller financing is when the owner of an existing bar finances a portion of the total cost when they sell. This is a good option to go for, because the costs to start a bar/club can be very high. To be eligible for seller financing, buyers must have impeccable credit scores and be able to prove that they can make payments.
Conventional loans are offered by banks and lending institutions. To be eligible for a conventional loan, borrowers must bring a solid financial plan that includes growth and earning projections, as well as accurate financial records. Banks are more willing to lend to a business owner who can prove that they make money and repay debts.
More Information on the SBA 7(a) Loan
The SBA 7(a) is a versatile loan that’s designed to get you the capital needed for your small business. If you’ve been looking for a way to fund your bar or club, consider this kind of loan.
Using an SBA 7(a) Loan for Bars and Clubs
The SBA 7(a) can be used for real estate or land, like buying an existing bar or building a new one. Equipment costs can also be covered by the SBA 7(a)—kitchens need ovens, fryers, and a grease trap; clubs need A/V gear and more. Even working capital is covered by the SBA 7(a); if the expense is for a legitimate business purpose, it’s probably allowed by the loan program.
Learn More: SBA 7(a) Loans for Bars and Clubs
For more information about how the SBA 7(a) loan can be used for startups, see our page on the subject.
Finding an SBA 7(a) Lender
Though the SBA shares a wealth of valuable information on starting and growing your small business, it isn’t in the business of lending money. The SBA 7(a) loan is offered through banks, credit unions, and other lending institutions, and the SBA guarantees the loan up to a certain amount.
Certain banks are considered SBA Preferred Lenders, and have proven track records of providing small businesses with SBA-backed loans. There are other factors that could improve your chances when speaking with a lender. For more information, contact us for a free consultation.
How to Qualify and Apply for an SBA 7(a) Loan
Good bookkeeping, understanding your creditworthiness, and a solid business plan can all help you when applying for your loan. But, as with any loan, a borrower must meet certain standards to qualify:
For more details on how to apply for an SBA 7(a) loan, and information on eligibility, check out our qualifications page.
SBA 7(a) Loan Terms
Terms for real estate and land loans run up to 25 years. The maximum loan amount is $5 million, and there’s no minimum loan amount.
The SBA guarantees up to 85% for loans of up to $150,000. For loans greater than $150,000, the SBA guarantees 75%. For more details about interest rates, fees, and other terms, head over to our Loan Terms page.
Case Study: Serving Up Martinis in Ann Arbor
Tim, an ambitious entrepreneur in Ann Arbor, Michigan, had always dreamed of owning his own martini bar. He envisioned a sophisticated and upscale establishment where people could unwind and enjoy unique, handcrafted martinis in a relaxing atmosphere. After conducting extensive market research and identifying the perfect location, Tim was ready to turn his dream into a reality. However, he needed financing to make it happen.
Tim approached a local credit union to secure a business loan of $250,000. This amount would cover his leasing costs, renovations, and the purchase of inventory and equipment for his business.
However, his loan application was denied, as the credit union deemed bars to be high-risk businesses. They expressed concerns about the possibility of failure and were unwilling to provide the necessary financing. Disappointed but undeterred, Tim sought alternative financing options and learned about the SBA 7(a) loan program.
Realizing the potential benefits of an SBA 7(a) loan, Tim worked closely with an SBA loan specialist to craft a thorough and convincing business plan. The plan highlighted the unique aspects of his martini bar, his experience in the hospitality industry, and his commitment to creating a successful business. Additionally, Tim provided detailed financial projections to demonstrate his ability to repay the loan.
Tim's hard work paid off when his SBA 7(a) loan application was approved. With the necessary financing secured, he was able to lease a prime location, renovate the space to match his vision, and purchase the necessary inventory and equipment to open his martini bar.
The grand opening of Tim's martini bar was a resounding success, and the establishment quickly became a popular destination in Ann Arbor. Tim's perseverance and the SBA 7(a) loan program allowed him to overcome the initial financing challenges and turn his dream into a thriving business.
This is a fictional case study provided for illustrative purposes.
Want Personalized Guidance?
At SBA 7(a) Loans, we live and breathe the SBA 7(a) loan process. Every day, we match business owners like you with the best lender for your situation — even if it means we have to look outside of the SBA 7(a) platform.
Complete the form below, and we'll be in touch with a free quote to level up your business.