Commercial Loan for a Restaurant, Bar, or Daycare: Financing the Property

If you operate a restaurant, a bar, or a daycare and you want to buy or refinance the building you operate in, this is a real estate loan, not a business loan. It is a mortgage — secured by the property, sized off the property's value, underwritten off the cash flow of the business occupying it. It is not a merchant cash advance, a working capital line, or an SBA note against your receivables. That distinction matters because nearly everything written about "commercial loans for restaurants" is written by people selling working capital. This page is about the building.

The gate is operating history. For restaurant, bar, and daycare properties, the operating business must show three years of continuous operating history before the file is eligible at all. Under three years is not a priced-up deal. It is not eligible. And three years only gets you in the door at reduced leverage — full program leverage starts at five.

Why these three uses get their own rule

These are going-concern properties. The building is built around one use, and the value of the real estate is entangled with whether a business is successfully operating inside it. A vacant restaurant with a hood system and a walk-in is harder to re-tenant than a vacant retail box, and everyone in the transaction knows it. So the program treats these three uses as eligible collateral but conditions eligibility on the operating business having a track record — the rule is about durability of occupancy, not about whether you are personally a good operator.

Two phrases in it are worth money to you.

"whether tenant-operated or owner-occupied." The requirement follows the business, not the borrower. If you are an investor buying a small strip building whose anchor space is a taqueria, the taqueria's operating history is in scope. You do not escape the rule by not being the operator.

"at the subject property or at another current or previous business location." The three years does not have to be at this address. An operator who ran a restaurant for eleven years across town and is now moving into a building they are buying carries that history with them. This is the most misunderstood part of the rule, and it is why relocating operators get told "no" by people who never read the sentence.

Three years gets you eligible. Five years sets your leverage.

The operating history requirement is a floor, not a finish line. Business experience also drives maximum LTV, and for these three uses the ladder is steeper than for a standard owner-occupied business.

A plumbing contractor buying a warehouse reaches full leverage at three years. A restaurant does not — at four years it is capped at 70% LTV; at five years and one month it is at program maximum.

For owner-occupied deals, program maximum LTV is 80% on a purchase for loans with a FICO of 725 or higher, and 75% on a cash-out or rate-and-term refinance. The practical spread between year four and year five on a purchase is ten points of leverage.

Business experience is assessed on ownership, operational, or employment experience in the same business or industry immediately preceding the loan application. Note "employment" — a general manager who ran someone else's kitchen for eight years is not automatically starting from zero. That is a judgment call by underwriting, not a formula, so put the résumé in front of us early.

The purchase restriction on restaurants and bars

This is the rule that surprises people most, and it is specific to bars and restaurants.

Three doors:

Refinance. You already own the building, rate-and-term or cash-out. This is the default path and the one the program is built around.

Additional location. You already operate a restaurant or bar and are buying a building for a second one. Two conditions attach: same ownership and same business model, and within 50 miles of the first location. A taproom operator buying a second taproom eight miles away fits; the same operator buying a fine-dining property 300 miles away does not.

Tenant buying the building. You lease the space, you run the restaurant, the landlord is selling. The text is explicit that this door requires the five-year criteria, not the three-year floor.

A separate Business Expansion section governs the second-location path: the expansion must result in minimal start-up time and must not place an undue burden on the existing location, which serves as the primary source of income for approval. If managing the new location requires significant owner involvement including extensive travel, a property management agreement or an experienced management team must be established. A business closing its current location and relocating, in the same or a different state, may be approved case-by-case where the operational impact is minimal.

The daycare definition carries no equivalent refinance-only language. That restriction is written under Bars/Restaurants.

What counts as a "restaurant" or a "bar"

Restaurants are properties constructed for the preparation and sale of food and/or beverages, including cafeterias, bars, and taverns where the design is of restaurant type. Bars and nightclubs are establishments that may or may not have an alcohol license and may serve some light food. Adult entertainment is not eligible in this category.

Note what is not said: nothing in the guidelines requires you to hold a liquor license, and no distinction is drawn between franchised and independent concepts.

Daycares: eligible, with three specific traps

Day care centers are defined as early childhood, handicapped, adult or senior care, or development centers, including kindergartens, nurseries, and preschools. They have light kitchen facilities, activity rooms and multiple restrooms, and are more residential in character than schools.

Medication. Adult and senior care facilities are ineligible if medication is dispensed on site, and assisted living is separately on the ineligible property type list entirely. A facility that started as adult day care and drifted toward dispensing medications has drifted out of the program.

The school line. Education is an ineligible property type, permitted only as a third-party tenant in a Tier II property when the income generated is 25% or less of total property cash flow — and schools are named among the special use examples. The guidelines draw the line on character: daycares are "more residential style in character than schools." A preschool is a daycare. A K-8 with classrooms, a gym, and an administrative wing reads as a school. If your property sits on that line, the appraisal's description of the improvements decides it.

Zoning. This one hits daycares hardest, because so many operate out of converted houses on residential-zoned parcels under a special use permit.

Separately, the subject property must be commercially zoned. Properties zoned residential or agricultural are prohibited, and we will not lend on a property subject to a zoning change. Legal and legal non-conforming uses are acceptable; illegal uses are not. A daycare in a converted single-family residence has a path — that is an eligible Tier II type, provided it is zoned for commercial use. A daycare in a residential district on a special use permit also has a path, but at half the value.

The appraisal values the building. Nothing else.

For bars and restaurants the guidelines are explicit: valuation will consider the real estate only, with no consideration given to business goodwill, inventory or FF&E.

This is the number one source of disappointment on these files. You built out a $400,000 kitchen. The hood, the walk-in, the bar back, the tables — none of it is in the appraised value that sets your LTV.

The equipment does not leave the transaction; it moves to a different line. Additional collateral includes all personal property of the borrower — furnishings, fixtures and equipment, leases and rental agreements, accounts receivable — secured by a UCC-1. And collateral secured by a UCC-1 is not used as eligible collateral for calculating LTV. It secures the loan. It does not size it.

No build-out holdback. Both the bar/restaurant and daycare definitions say the same thing: no holdback for build out is allowed, the property must be completed. Construction loans are not offered. If your hood system is not installed, you are not ready to close.

Owner-occupied or investor

You are owner-occupied if your business occupies and operates from the property, or the property is leased to a related entity you majority own or control — and you use 50% or more of the property's net rentable area. Underwriting may reclassify to investment property below that threshold.

If at least 50% of effective gross income comes from arm's-length third-party tenants, it is an investor property. A property that otherwise meets the investor definition but includes partial borrower occupancy stays classified as investor, and in that case the standard investor experience requirement does not apply.

Even on an investor file, if a borrower-affiliated business occupies 25% or more of rentable square footage or contributes 25% or more of rental income, we may require a business profit and loss statement and business bank statements to evaluate the operating business.

Appraisers may classify a property as owner occupied based on use, control and economic benefit — particularly where ownership is shared among related parties, the property is operated by a family business, or no arm's-length lease exists. If the building sits in one entity and the restaurant in another with no real lease between them, expect owner-occupied treatment.

How income gets measured

Owner-occupied properties are underwritten on Global Debt Service Coverage: total annual global net operating income divided by 50% of total annual personal, and business, and subject property debt obligations. Investor properties use property DSCR.

If a loan under the complete or bank statement program does not meet the required 1.20x Global DSC, it may be converted to No Doc Streamline and adjusted to that program's guidelines — 700 minimum FICO, 75% maximum LTV on purchase and 70% on refinance, 600 minimum Optic score. A real fallback, and a leverage haircut.

If you are a cash-heavy operator

Restaurants and bars are frequently underwritten under the Bank Statement Program, where twelve consecutive months of business bank statements are used and deposits calculate income. The borrower must be self-employed and owner-occupied and must own both the operating company and the holding company if there is one. The mechanics are stricter than people expect:

• Only the business operating account is used. Personal bank statements and personal digital wallet statements are not acceptable. Only one account determines qualifying income — no combining checking, savings, or lines of credit; the maximum allowed is up to two different accounts for the operating business. If sales deposits land in multiple accounts, we reserve the right to request additional information and/or change the documentation program type.
• Deposits originating from Cash App Business, Venmo Business, or similar payment-processing platforms may be considered business revenue when supported by account statements and documentation sufficient to verify they derive from the business's operations. Personal transfers, gifts, loans, and unsupported deposits are not eligible.
• Statements should show ending balances that are stable or increasing across the twelve months. Decreasing trends require explanation and documentation, and low balances may require additional documentation up to and including full tax returns.
• NSF activity is scrutinized. Overdrawn accounts count as NSF regardless of overdraft protection, and to qualify there cannot be a fee associated with curing the overdraft default.
• Large or atypical deposits must be sourced, with consideration given to whether the activity is consistent with the business's operations, historical trends, and industry norms.

The rest of the box

Gift funds cannot be used to meet post-closing liquidity or P&I reserves; cash-out proceeds may be, if FICO exceeds 700 and they equal or exceed the required six months. Recourse is required, and cash-out proceeds may only be used for business purposes — capital expenditures to the property, business or property related debt, and normal business expenses.

What to have ready

The guidelines say we may request whatever documentation is necessary to verify operating history, without fixing the form. Business licenses, filed returns, health department permits, and dated lease history are all reasonable evidence; bring more than you think you need. Beyond that, expect two years of business profit and loss statements or returns with Schedule C plus year-to-date — or a CPA-prepared statement, or six months of business bank statements — matching the business operations at the subject, plus a debt schedule on the lender's form and two months of asset statements.

What this page does not do

This describes property-secured commercial mortgage financing for restaurant, bar, and daycare real estate under The Fiirm's SBC program guidelines effective 8/3/2026. It is not a quote, an approval, or a commitment.

It does not cover business loans, working capital, equipment financing, or SBA products. If you need money for payroll or a new walk-in rather than for the building, none of the above applies.

It does not price anything. Rate, margin, and maximum LTV come from the current pricing matrix, which is updated periodically; pricing is determined by program, property type, credit score, LTV, amortization term, loan amount, and occupancy status.

It does not tell you which documents will prove your three or five years in your particular case — the guidelines reserve that to case-by-case request rather than fixing a list.

And it does not resolve edge cases. Whether a hybrid bar-and-event-venue, a daycare drifting toward a school, or an adult day program is eligible is a real underwriting question with a real answer — and the answer comes from putting the property in front of someone before you spend money on third-party reports.

Guideline SBC 08/03/2026 · Reviewed August 30, 2026

Published August 31, 2026 · Updated August 31, 2026