How to finance a restaurant: freehold, leasehold and fit-out
Most restaurants are leasehold, so the finance looks different from a hotel or pub. This guide sets out how to fund a restaurant, from the freehold mortgage route to the leasehold, fit-out and working-capital stack.
How you finance a restaurant depends on whether you own or lease the premises. A freehold restaurant is funded with a commercial mortgage against the going-concern value, usually with a 30 to 40 percent deposit. Most restaurants, though, are leasehold, so the finance is built around the trade rather than the property: a business loan for the lease premium and working capital, asset finance for the kitchen and fit-out, and a VAT loan where VAT applies. New and refitted sites carry heavy fit-out cost and an early trading ramp, so the funding has to cover the build and the first months of trade. The market is buoyant on price but cost-pressured. We arrange the finance; we do not lend.
At a glance
- FreeholdCommercial mortgage, 30 to 40 percent deposit
- LeaseholdBusiness loan and working capital
- Fit-out and kitchenAsset finance
- VATShort-term VAT loan
- Main challengeFit-out cost plus an early trading ramp
- MarketRestaurant prices up 9.9 percent in 2025 (Christie & Co)
Freehold or leasehold decides everything
The first fork is tenure. A freehold restaurant, where you own the building, is funded like any trading hospitality asset: a commercial mortgage against the going-concern value, with a deposit usually of 30 to 40 percent. Most restaurants, though, operate from leasehold premises, and there is no building to mortgage, so the finance is built around the trade, the lease and the equipment instead. Knowing which you are buying is the difference between a mortgage conversation and a working-capital one. The tenure trade-offs are at /guides/freehold-vs-leasehold-hospitality/, with sector detail at /asset-classes/restaurant-finance/.
The commercial finance we arrange is unregulated business lending, and Hospitality Property Finance is not authorised by the FCA. All rate and deposit figures vary by lender and trading history and are indicative only.
Funding a leasehold restaurant
Because most restaurants are leasehold, the common case is funding a trade rather than a building. That means covering the lease premium, the fit-out, the equipment and enough working capital to trade through the ramp before the site is busy. Lenders look at the covenant, the projections and the operator's experience rather than a property to secure against, so the case rests on the strength of the business plan and the accounts, where an existing site is being bought.
| Need | How it is funded |
|---|---|
| Lease premium | Business loan or acquisition finance |
| Kitchen and equipment | Asset finance |
| Fit-out and refurbishment | Business loan, sometimes asset finance |
| VAT on the purchase | Short-term VAT loan |
| Opening working capital | Business loan or revolving facility |
Fit-out, equipment and the trading ramp
A new or refitted restaurant spends heavily before it earns: kitchen, extraction, cold storage, front of house and the fit-out itself, all before the first cover is served. Then there is a trading ramp while the site builds its covers and reputation. The finance has to cover both, which is why asset finance for the equipment, spreading the cost over its useful life, sits alongside a working-capital facility for the early months. Underfunding the ramp is the classic mistake: a well-built restaurant can still fail if it runs out of cash before the trade matures.
The restaurant market is buoyant on price and pressured on cost. Christie & Co recorded average restaurant sold-price growth of 9.9 percent in 2025, its strongest sector, on keen buyer demand for well-located sites, even as the food-led sector contracted by 2.9 percent over the year on higher employment costs, with British licensed premises down to 98,746 sites by June 2025 (CGA and AlixPartners). Good sites are in demand, but the cost base is real, so the funding has to be sized honestly.
Building the funding stack
- Confirm the tenure: freehold to mortgage, or leasehold to fund on the trade.
- Cost the fit-out and equipment separately from the working capital.
- Fund the equipment with asset finance, spreading the cost over its life.
- Fund the lease premium, fit-out and opening months with a business loan.
- Cover the VAT with a short-term VAT loan so it does not eat the working capital.
- Freehold purchase: commercial mortgage at /services/commercial-mortgages/
- Lease premium and working capital: business loan at /services/business-loans/
- Kitchen, extraction and fit-out equipment: asset finance at /services/asset-finance/
- VAT on a chargeable purchase: VAT loan at /services/vat-loans/
- Multi-site or group expansion: acquisition finance at /services/acquisition-finance/
How we arrange restaurant finance
We size the whole stack, the equipment, the fit-out, the working capital and the property where there is one, so the site is funded through the ramp rather than just to opening day. We place each piece with the lender whose appetite fits, and we are honest about how much working capital the opening really needs. We are an arranger, not a lender, and Matt Lenzie takes every case to market personally.
How to finance a restaurant: freehold, leasehold and fit-out: common questions
How are restaurants financed?
It depends on tenure. A freehold restaurant is financed with a commercial mortgage against the going-concern value. Most restaurants are leasehold, so they are financed on the trade instead: a business loan for the lease premium and working capital, asset finance for the kitchen and fit-out, and a VAT loan where VAT applies. The finance has to cover the fit-out and the early trading ramp, not just opening day.
Can I get a loan to start a restaurant?
Yes. A start-up restaurant is usually funded with a business loan for the fit-out and working capital and asset finance for the equipment, assessed on your business plan, projections and experience rather than a trading record you do not yet have. A first-time operator needs a stronger plan and often more equity, because there are no accounts to lend against.
How much does it cost to open a restaurant?
It varies widely with size, location and specification, but the big costs are the lease premium or property, the kitchen and fit-out, and the working capital to trade through the ramp. The common mistake is funding the build but not the first few months of trade, so size the working capital honestly. We build the stack to cover both, not just opening day.
Do I need a commercial mortgage for a restaurant?
Only if you are buying the freehold. If the restaurant is leasehold, which most are, there is no building to mortgage, so it is funded with a business loan, asset finance and working capital instead. If you own the freehold, a commercial mortgage against the going-concern value is the core of the funding.
What are the 5 C's of finance?
The five C's are character, capacity, capital, collateral and conditions: the borrower's track record, the ability to service the debt, the equity invested, the security available and the terms and wider context. A restaurant lender weighs all five, leaning on capacity and character where a leasehold site offers little collateral. A strong plan and real equity address the ones a new restaurant is weakest on.
How much of the fit-out can I finance?
Much of the kitchen and equipment can be funded with asset finance, spread over its useful life, and the wider fit-out with a business loan, so you do not have to fund it all from cash. The proportion depends on the equipment, the lease length and your covenant. Keeping cash for working capital, rather than sinking it all into the fit-out, is usually the smarter structure.
Ready to take a deal to market?
Send us the scheme and the numbers and we will come back with a view on fundability and likely terms within one working day.