How To Buy A Restaurant With No Money

Perhaps one of the biggest challenges an aspiring restaurant owner has to go through is securing funding for their dream business. If you’ve found a restaurant that you think is a good fit for you, the question now is how to buy a restaurant with no money in your pocket. Is it actually possible? You’ll be surprised how many options out there you can explore with no cent on you.

How to Buy A Restaurant With No Money: Equity Crowdfunding

Equity crowdfunding is like Kickstarter or Indiegogo for equity and securities. If you are willing to give up some degree of control over the restaurant, this can be a valuable fundraising avenue for you.

Dedicated platforms for equity crowdfunding connect you to a network of investors who are willing to provide funding in exchange for some ownership of your restaurant, becoming brand ambassadors of sorts.

Equity crowdfunding is an excellent fundraising solution if your credit score isn’t good enough to get you a traditional bank loan. Plus, with an existing client base from the restaurant you are buying, you can even convert a customer into an investor. Keep in mind that your chosen equity crowdfunding website may charge you a monthly fee or take a percentage of the funds raised.

And as always, investors will need to see that the investment will pay dividends so make sure to have a solid business plan and a pitch that they can’t say no to.

How to Buy A Restaurant With No Money: Alternative Lenders

If you need the cash fast, lenders can advance a lump of money in a matter of days. The application process can be completed in just a few hours with the loan in your hands a couple of days later. What’s even greater about this financing option is that credit history that typically won’t get you anywhere in a bank loan won’t hurt your chances! The catch is that the interest will be way, way higher owing to the speedy processing.

How to Buy A Restaurant With No Money: Friends and Family


Do you have friends and family who will happily lend you the money you need to kickstart your dream? Working with people you know could take a lot of the stress of fundraising than getting strangers from banks and lending companies on your side. And these people might be more comfortable doing business with you too.

However, you still have to set their expectations to avoid surprises and bad blood. It can get pretty messy when you mix family and business, so make it a point to explain the risks involved to make sure they know what they are getting into.

How to Buy A Restaurant With No Money: Angel Investor

An angel investor is a wealthy accredited investor with a high net worth and a greater willingness to invest in what may be considered riskier ventures by traditional sources. An angel investor uses his or her own money to fund a business venture and in exchange gains a certain level of control over the business.

While profit is a priority, many angel investors have a genuine interest in helping aspiring restaurant owners get the boost they need. And with their understanding and expertise, they can offer valuable insight and guidance to help you make informed business decisions.

How to Buy A Restaurant With No Money: Rollover Business Startups (ROBS)

You can also use your 401(k) retirement savings to buy a restaurant. Tax penalties won’t be an issue, but you’ll be asked to pay monthly administration fees, which should be much cheaper anyway.

However, this option comes with a huge risk. If not handled properly, you might not get the return of investment you’re hoping for and ultimately lose your retirement savings. Be sure to devise a foolproof plan for success or come up with a Plan B if things don’t go your way.

How to Buy A Restaurant With No Money: SBA Loan

Small Business Administration loans can go up to $5 million with much lower interest rates and longer repayment terms compared to conventional channels. This is because these loans are partially guaranteed by the government.

If you are buying into a franchise restaurant, there are two types of SBA loans you can apply for as a franchisee: SBA 7(a), which can cover all the costs of the franchise, and SBA CDC/504, which is designed for the costs related to real estate and heavy equipment. The latter can be paid off in a span of 25 years and usually doesn’t need collateral because the assets you are loaning for are considered as such. To be considered for either one, your credit score should be 680 and above and you should be able to cash out a 10-20% down payment.

First-time business owners typically hit a wall in the application process when they are asked to show industry experience. Luckily for newcomers, you can increase your chances by partnering with an established franchisor that banks have processed for in the past.

Lenders are more likely to approve someone set to work with a company that boasts a proven track record of success and clear financial stability, excellent training and support, reasonable costs charged, and noticeable growth over the years.

SBA loan approval typically can take longer than a month, but you can shorten that by working with established franchisors listed in The Franchise Registry. There are currently 2,500+ franchises included on the list, all of which pre-assessed and pre-approved by SBA.

How to Buy A Restaurant With No Money: Franchisor Financing

If you are franchising, you’ll be happy to know that a franchisor can pull some strings to ensure you can make the investment because this also helps them expand and grow their own business.

Some restaurants partner with lenders and companies to ease the lending process, private equity financing, and equipment leasing. Their existing relationship with these sources will give you better chances of getting your required funding.

Franchisors might also shoulder or waive portions of the startup costs such as the franchise fee, equipment, or operational costs.

How to Buy A Restaurant With No Money: Franchise Financing Company

Several companies specialize in franchise funding by matching borrowers with lenders or lending directly. These companies have a better understanding of your financial needs and will be able to connect you to the right lender. Some of the most popular and reliable are SmartBiz, Lendio, and OnDeck. Credit scores starting at 500 will be considered. Some won’t even require business experience.

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