The UP, UP, Upside of securing an SBA loan for first-time restaurant buyers

November 2022

SBA loan small business loans are called 7a loans. They are distinguished from other SBA loans because a business is personal, not real property. They are designed for buyers to purchase a business that leases space rather than a business with real property. Because these are loans collateralized by the furniture, fixtures & equipment of the business, the underwriter heavily vets both the business and the buyer. Be sure to check out episode XVII (The Wild Goat Bistro Episode) for more details on SBA loans. For those of you who listened to that episode, I’m sure you noticed I can get a little fired-up about how cumbersome securing an SBA 7a loan can be.  Well in the defense of the 7a loan, when I streamed that episode several of my clients had rather hair raising and unique experience with the SBA process. Honestly, aside from the loans taking time and requiring a lot of information about the restaurant and the buyer, 7a loans are rather…miraculous.

Yes, I said miraculous.  And this just recently hit me as I was talking to a young (mid-twenties) buyer who has a lot of restaurant/barista experience and very little cash to buy a café. I was telling her that she is more apt to be able to afford a profitable café with a high list price then a café that doesn’t have cashflow and is listed very inexpensively. In other words, she might have a better chance of purchasing a café selling for $250,000 rather than a café listed at $65,000. The reason is, if the successful café is listed for more than $150K (and it has been priced properly) the SBA would more than likely loan to her because the combination of her experience and the strong cashflow of the café is the absolute perfect scenario for SBA 7a qualification.

So, to be clear; the SBA 7a loan is perfect under these two conditions:

  1. A buyer with strong industry inexperience
  2. A business with strong cashflow

The buyer doesn’t have to worry about much more than their current debt (the SBA isn’t going to loan to a buyer if the buyer can’t afford to pay the loan back because of too much current personal dept) and their ability to contribute about 20% of the sale price. Not only will the SBA fund the loan more often than not, but the loan may also include the lease security deposit and some substantial working capital. Unfortunately, many buyers won’t look at restaurants with high list prices because they don’t think they can afford them when, with an SBA loan, they may be more apt to afford it.

One very important aspect to the SBA 7a is the buyer will be operating the restaurant as it is: the current name, menu, recipes and for the most part, the same staff because it is these very things that are contributing to the success of the business. This can be a big stumbling block for a first-time restaurant buyer because many of them are looking for location to execute on a concept they’ve been developing for years.


Ryn Longmaid is a restaurant broker and consultant at Santa Rosa Business & Commercial in the San Francisco NorthBay and the host and founder of the Facebook Live Series, Deep Dish: discussions on the business of restaurants for restaurateurs, restaurant buyers and sellers and the restaurant curious.

As well as being a licensed real estate broker, Ryn is a CBB with the California Association of Business Brokers (CABB), a CBI with the IBBA and she holds an MBA in Sustainable Business Management. In addition to being a proficient business broker, Ryn has over 20 years’ experience in the restaurant, hospitality, and food industries. She has served as the executive chef for Amy’s Kitchen, personal chef to actor Don Johnson, she founded and operated a successful and longstanding restaurant. She has also held teaching posts in restaurant management at the Art Institute-San Francisco and The Culinary Institute of America-Greystone.