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Most lenders decline these. Some do not.
Restaurant, bar and hospitality financing in Indiana. The honest version of why this is hard, and what makes a file that gets done.
Why the answer is usually no.
It is not personal and it is not about your concept. Restaurants fail at a rate lenders have priced into their credit policy, and the collateral behind the loan is weaker than it looks. Knowing which part is the problem tells you which lender to approach.
Leasehold improvements are poor collateral
You can spend a large sum on a build-out, and if the business closes the lender cannot take the hood system, the walk-in and the millwork somewhere else and sell them for what you paid. If you are leasing rather than buying the building, most of your investment secures nothing. This is the single biggest reason a restaurant file gets declined.
Buying the building changes everything
A restaurant that owns its real estate is a fundamentally different credit from one that leases. There is a tangible asset with an alternative use. If the deal can be structured to include the property, it usually should be.
The liquor permit is a real asset in Indiana
Indiana runs a quota system through the Alcohol and Tobacco Commission, so in the counties where permits are capped a transferable permit trades well above the state’s own fee and can be a meaningful part of the purchase price. It is also a transfer that has to be approved, on its own timeline, and lenders will want that sequencing understood before closing. Most lenders will not count the permit as collateral in its own right, or fold it into the property value. Some will treat a transferable permit as part of the business value, which varies by lender and by county.
Franchise or independent
An established franchise brings unit economics a lender can underwrite against, and some brands sit on lender-approved lists that make the file materially easier. An independent concept is underwritten on you and your operating history instead.
If you have already been declined, tell us who declined you.
Knowing which lender said no, and at what stage, saves everyone a couple of weeks. It is usually the fastest way to work out whether the problem was the concept, the collateral, the paperwork, or simply the wrong lender.
What to have ready.
- Whether you are buying the real estate or taking a lease, and the lease terms if leasing
- Personal tax returns for the last three years, all pages
- Business tax returns for the last three years, if the restaurant is operating
- Business bank statements for the last three to six months
- Year-to-date profit and loss, a balance sheet, and a current debt schedule
- Your own operating history in food service, which carries more weight here than in most categories
- The build-out budget, itemized, separating equipment from leasehold improvements
- The liquor permit situation: whether one transfers with the business, and its status
- The franchise agreement, if there is one
- Valid photo identification for each owner, and your entity documents