How to Get a Business Loan For a Restaurant

Published: 20 March 2025

Updated: 24 March 2025

Statistics state that the country's food service industry plans to spend on their local restaurants, and sales across the nation are expected to shoot up to around ₹9 - 10 trillion by 2030.

Hearing this, you might think about that dream you once saw of joining this thriving sector and starting your restaurant. However, financial constraints snapped you back to reality. Little did you know that a business loan for a restaurant can be your go-to solution for the necessary capital to start your venture, all without any hassle and with optimal flexibility.

Metaphorically speaking, opening a restaurant is a recipe for risk, but with the right finances, it can be a dish of success.

Features of a Business Loan for a Restaurant

The following are the features designed for business loans for restaurants:

Flexible Loan Amount: Depending on the size of your restaurant, you can opt for loans ranging from reasonable sums to more significant amounts. You can get funds depending on the scale if you own a cafe or a sizable dine-in restaurant.
Customizable Repayment Terms: Business loan lenders generally offer a variety of payment terms, allowing you to select a duration that matches your projected financial flows.
Competitive Interest Rates: Your business plan and good credit score enable you to access beneficial interest rates, allowing you to handle your loan repayments at a lower cost.
Minimal Collateral Requirements: New entrepreneurs can seek funding from financial institutions that provide unsecured loans without requiring collateral.

Eligibility Criteria for Business Loan for a Restaurant

To be eligible for a business loan, you need to fulfil the following requirements:

Business Registration: Your restaurant should be a registered entity, whether it operates as a sole proprietor, partnership, or private limited company.
Operational History: Startups can more easily get loans if their organisation has an operational history spanning 1-2 years.
Credit Score: Strong personal and business credit scores create better opportunities for attractive interest rates.
Financial Records: Lenders need audited financial records to evaluate your restaurant's economic strength and profitability.

Required Documentation for Business Loan for a Restaurant

Document Type	Details
Identity Proof	Passport, Voter ID, PAN Card, or Aadhaar Card
Address Proof	Utility bills, Rent Agreements, or Property Documents
Business Registration Proof	GST Registration, Trade License, or Certificate of Incorporation
Financial Records	Profit & Loss Statements, Balance Sheets for the last 2-3 years
Bank Statements	Bank account statements for the previous 6-12 months
Tax Returns	Filed Income Tax Returns for the last 2-3 years
Project Plan	Detailed business plan outlining the restaurant's concept, target market, and financial projections

Also read: Reasons Why Your Business Loan Rejected

Types of Business Loan for a Restaurant

Business Loans are like a restaurant’s menu as they offer various types for different financial needs for you to choose from:

Terms Loans: These loans distribute lump sum amounts of capital to businesses needing to invest in properties or undertake large-scale facility renovation projects.
Working Loans: Such loans specifically target the operational needs of businesses during times when they face financial strain.
Equipment Financing: These loans are for acquiring kitchen appliances and necessary equipment. The equipment itself acts as collateral here.
Line of Credit: You can access funds through a Line of Credit system by drawing from a maximum specified amount, which requires interest payment only on the withdrawn funds.

Government Schemes for MSME Loans for a Restaurant

Multiple support programs sponsored by the Indian government support Small and Medium Enterprises (SMEs) within the restaurant industry. These are:

CGTMSE Loans: The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) delivers loans up to ₹1 crore without requiring security. This enables financial institutions to fund novel and active micro and small enterprises.
MUDRA Loans: Microenterprises get MUDRA Loans from the Pradhan Mantri MUDRA Yojana, which has three categories depending on the loan sum. These categories are: Shishu, Kishore and Tarun.
Stand-Up India Scheme: Women and marginalised groups can benefit from this Scheme by receiving loans between ₹10 lakhs to ₹1 crore to establish new business operations.

Interest Rates and Fee Details

You can find the general interest rates and fee details for a business loan for a restaurant in the table below. Remember, rates can differ depending on different lenders.

Loan Amount	Interest Rate (per annum)	Repayment Period	Processing Fee
Up to ₹10 lakhs	10% - 15%	Up to 5 years	1% - 2% of loan amount
₹10 lakhs - ₹50 lakhs	12% - 18%	Up to 7 years	1% - 2% of loan amount
Above ₹50 lakhs	14% - 20%	Up to 10 years	0.5% - 1% of loan amount

Wrapping Up

When opening a restaurant, choosing the right financial assistance can help you achieve your goals and scale your business to new heights.
At My Mudra, we understand aspiring entrepreneurs' passion and unique needs, so we offer tailored business loan solutions to bring your dream to life. Now that you know everything about it, apply loan for a restaurant today and enjoy benefits like flexible terms, competitive interest rates, and minimal documentation!

Also read: Small Business Loan: Quick Funding with Low Interest Rate

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Anjali Singh Assistant Manager

Hey there, I'm Anjali Singh. With over 6 years of experience in finance, I specialize in creating content on banking, loans, and financial planning. My goal is to simplify complex financial topics and help readers make informed decisions through my articles.