SBA Restaurant Loan | Fast Casual Franchise Build-Out and Expansion

The transaction was a startup franchise location build-out, one of the more difficult structures to finance in the SBA space. The property had no operating history. There was no trailing revenue. The lender had to approve a facility based entirely on the franchise brand's unit economics, the borrower's operating credentials, the market demographics, and a proforma that projected performance from zero. Lender appetite for startup franchise locations had tightened, and the capital requirements were significant: a complete build-out from shell space required tenant improvements, commercial kitchen construction, bar installation, patio build-out, equipment procurement, POS systems, signage, permits, and licensing before a single customer walked through the door.

The borrower's existing restaurant and retail franchise experience established operational credibility, but the feasibility documentation that would translate that experience into a bankable credit package did not exist before Cornovus Capital's engagement. The build-out budget had to be constructed from scratch. The revenue proforma had to model the fast casual concept's unit economics against the specific market demographics of the selected location. The lease had to be reviewed for SBA compliance, including term length, assignability, and renewal options. Every component of the startup capital requirement had to be identified, sized, and presented in a format the lender and SBA could underwrite.

• Startup franchise location with no operating history and no trailing revenue
• Complete build-out from shell space required substantial capital for TI, kitchen, bar, patio, FF&E, POS, signage, permits, and inventory
• Tightening lender appetite for startup franchise locations in the SBA space
• Feasibility, budget, proforma, and assumptions had to be built from scratch before the financing could be submitted
• Lease had to be reviewed and structured for SBA compliance before the loan could proceed

Cornovus Capital built the complete feasibility and capital package before structuring the SBA restaurant loan. The build-out budget was developed line by line: franchise fee, tenant improvements with a 10% construction contingency, commercial kitchen equipment, bar construction, patio dining infrastructure, POS and technology systems, initial food and beverage inventory, signage, permits and licenses, interim interest during the construction period, working capital for staffing, marketing, and the operational ramp, SBA guarantee fee, and closing costs. The revenue proforma modeled the fast casual concept's unit economics, average check size, daily cover projections, bar revenue contribution, and seasonal patterns against the market demographics and competitive landscape of the selected location.

The SBA 7(a) facility was structured with an interest-only period during construction to eliminate principal payments while the restaurant was being built out and had no revenue. The fully amortizing term post-opening produced a debt service obligation the proforma demonstrated the concept could cover at a 3.0x DSCR in Year 1 on conservative assumptions. The borrower's equity injection and the franchisor's participation in the project's capital stack provided additional capital that the SBA facility leveraged. Cornovus Capital reviewed the lease for SBA compliance, coordinated the franchise agreement documentation, and managed the SBA authorization to bring the startup financing to closing.

• Built the complete feasibility study, build-out budget, revenue proforma, and assumptions model from scratch
• SBA 7(a) facility with interest-only during construction and fully amortizing term post-opening
• 10% construction contingency included in the build-out budget
• Working capital for staffing, marketing, and operational ramp funded within the facility
• Projected Year 1 DSCR exceeding 3.0x on conservative assumptions
• Lease reviewed and structured for SBA compliance; franchise documentation coordinated through closing

The SBA restaurant loan closed with the full build-out capital in place, working capital deployed, and the interest-only construction period protecting cash flow through the build-out. The fast casual franchise restaurant was constructed from shell space with a complete commercial kitchen, full bar, indoor dining, and patio seating, opening as a differentiated concept in the fast casual segment.

The transaction demonstrated Cornovus Capital's capability in structuring startup franchise financing where the feasibility, budgeting, and proforma work has to be built before the deal can be submitted. The borrower's multi-unit operating experience provided the operational foundation. The franchise brand's unit economics provided the revenue framework. Cornovus Capital built the financial model that connected the two and delivered the credit package that got the deal approved. The capital structure, with its construction-period interest-only protection, working capital reserves, and long-term amortization, gave the borrower the runway to build out, open, ramp revenue, and stabilize without the cash flow pressure that a poorly structured startup facility creates.

• SBA 7(a) facility closed for a complete fast casual franchise build-out from shell space
• Full commercial kitchen, bar, indoor dining, and patio constructed and equipped
• Interest-only construction period protected cash flow through the build-out
• Working capital, inventory, and pre-opening costs funded within the facility
• Projected Year 1 DSCR exceeding 3.0x on the Cornovus-built proforma
• Experienced multi-unit operator positioned for franchise expansion beyond the prototype location

Additional financing outcomes are available in our Transaction Highlights archive.