Small business loans for restaurants
Wednesday 10th September 2025
Last updated: 26th February 2026
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Cash flow challenge: Restaurant owners often face high upfront costs and unpredictable cash flow, especially during seasonal slowdowns or early trading periods.
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Perfect for: New or established restaurant owners, café operators and hospitality businesses seeking funding for startup costs, refurbishment, expansion or working capital.
How much does it cost to open a restaurant in the UK?
Startup costs vary significantly depending on size and location, but many independent restaurants require:
- £50,000 to £150,000 for a small site
- £150,000 to £500,000+ for larger or prime-location venues
Costs typically include:
- Lease deposit and legal fees
- Kitchen equipment and refrigeration
- Furniture and fit-out
- Licensing and compliance
- Initial stock
- Marketing and branding
- Staff wages before profitability
Because revenue builds gradually, many new restaurant owners require funding to bridge the early months of trading.
Types of small business loans for restaurants
1. Start Up Loans (Government-backed)
The UK government offers Start Up Loans of:
- £500 to £25,000 per director
- Fixed 6% interest rate
- Repayment terms up to 5 years
These are unsecured personal loans for business use and are commonly used by first-time restaurant owners.
2. Secured business loans
Secured loans may use property or assets as collateral and typically offer:
- Larger borrowing amounts
- Lower interest rates
- Longer repayment terms
These are often used for:
- Purchasing premises
- Major refurbishments
- Expansion into additional sites
3. Unsecured business loans
Unsecured loans do not require property security but may involve:
- Higher interest rates
- Shorter terms
- Personal guarantees
These can be commonly used for equipment, refurbishments, marketing campaigns and cash flow management and support.
4. Merchant cash advances
Restaurants with strong card turnover may qualify for a merchant cash advance.
Repayments are linked to card sales, which means:
- You repay more during busy periods
- Repayments reduce during quieter months
This structure can be attractive for seasonal hospitality businesses.
5. Equipment finance
Equipment finance is best used for kitchen equipment, refrigeration units and POS systems can often be financed separately.
This preserves working capital and spreads cost over time.
6. Working capital loans
- Supplier payments
- VAT bills
- Payroll
- Seasonal dips
Working capital loans are typically repaid over 3–18 months.
How small business loans for restaurants work
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Determine how much funding you need for startup costs, refurbishment, equipment or working capital.
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Submit financial information, such as bank statements, VAT returns or a business plan (for startups).
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Lenders assess affordability, reviewing turnover, projections and credit profile.
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Receive a funding offer outlining loan amount, term, rate and any security requirements.
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Repay the loan through fixed monthly payments or, in some cases, a percentage of card sales.
Example of restaurant funding structure
Scenario:
Startup restaurant cost: £120,000
Funding structure:
£20,000 personal contribution
£25,000 Start Up Loan
£50,000 unsecured business loan
£25,000 equipment finance
By layering funding sources, restaurant owners can spread risk and preserve liquidity.
Can you get a restaurant loan with bad credit?
In short, yes you can still acquire funding however the options maybe limited.
Where credit history is weaker:
- Higher rates may apply
- Security becomes more important
- Merchant cash advances may be more accessible
- Government Start Up Loans may still be considered
Being transparent about your credit profile helps structure the right solution.
How Novuna Business Cash Flow can help
Novuna supports hospitality businesses with structured business loans, working capital solutions and sector-aware funding options designed to reflect real trading patterns.
Get in touch with our experts today and we will find a great fit for your situation.