What does a build-out or renovation loan pay for?
A build-out or renovation term loan pays for work that becomes part of the space: walls, flooring, plumbing, grease interceptors, electrical service, hood and ductwork, lighting, restrooms, finishes, and soft costs such as design, engineering and permits. It is the usual tool for the parts of a project equipment financing cannot secure.
Typical projects include:
- Taking over a second-generation restaurant space and fixing what the last tenant left behind.
- A commercial kitchen remodel that moves the line or adds a hood.
- Capacity projects such as a pickup window, a drive-thru lane or a new patio.
- Code-driven work like a new hood installation or fire-suppression upgrade.
How is a term loan different from equipment financing?
A term loan is not tied to one piece of equipment, so it can fund installed work and soft costs, while equipment financing is secured by the unit it buys. Because there is no removable collateral, funders lean more heavily on sales history, bank deposits, credit and the remaining term of your lease.
Most kitchen projects use both. A hood project might pair equipment financing for the exhaust fan and makeup air unit with a term loan for ductwork, roof curb, electrical and permits. The split keeps each dollar in the structure that fits it best. If your lease has only a short time left, expect funders to ask about renewal options, since the improvements stay with the landlord's building.
When does a term loan make sense, and when doesn't it?
A term loan makes sense when the scope is defined, bids are in and the whole project starts at once. It is a weaker fit when the scope is still moving, when work will happen in separate phases months apart, or when the project will not add sales, capacity or savings that support the payment.
For phased work, a line of credit lets you draw as each phase starts instead of paying on money that sits idle. If the landlord is contributing an improvement allowance, compare the timing first: allowances are often paid after completion, so the loan may need to bridge the gap. Our guide to TI allowances versus financing covers how owners combine them.
How should you size the request?
Size the request from complete, comparable written bids plus a contingency, not from an early per-square-foot estimate. Add soft costs, permit fees and equipment installation that the contractor excluded, then subtract any landlord allowance you can rely on and the cash you plan to put in yourself.
Owners who come in short usually missed one of these:
- Change orders from conditions found after demolition, such as damaged drain lines.
- Inspection re-visits and punch-list items before the final sign-off.
- Utility company work scheduled on the utility's timeline, not yours.
- Lost sales while the kitchen is closed, which working capital often covers better than a construction loan.
Our build-out cost guide explains why early estimates move so much.
What do funders review for a renovation loan?
Funders typically review monthly sales and deposits, recent bank statements, credit, existing payment obligations, the lease and the contractor's bid. Requirements vary by product and funder, and an established location with steady sales is usually easier to fund than a brand-new concept.
A clean package helps: the signed or near-final bid with inclusions and exclusions listed, a simple project budget, a copy of the lease or landlord consent, and any permit drawings you already have. When that is ready, you can apply online and a funding specialist will walk through which structures fit.
What you’ll typically need
- Short online application
- Recent business bank statements
- Contractor bid with scope, inclusions and exclusions
- Lease copy or landlord consent for the work
- Project budget, including soft costs and contingency
Frequently asked questions
Can a term loan cover permits, design and engineering?
Often, yes. Soft costs like design, engineering, permit fees and inspections are real project costs, and a term loan is one of the few structures that can include them. List them separately in your budget so a funder can see the full project rather than only the construction bid.
Do I need landlord approval before applying?
You can apply before approval arrives, but most renovation work in a leased space needs landlord consent, and funders may ask about it before funds are released. Start that conversation early, especially for roof penetrations, new windows, grease interceptors or anything that changes the building's exterior.
Can equipment and construction be funded in one request?
Sometimes a single request covers both, and sometimes the better answer is two structures: equipment financing for the units and a term loan for installed work. A funding specialist can compare both so you see the trade-offs in payment, term and total cost before choosing.
What if bids come in higher after I'm funded?
Tell your funding contact as soon as the scope changes. Depending on the funder, options may include a revised request, a separate line of credit for overruns, or trimming scope. This is why many owners hold back a contingency from the start rather than funding the exact bid amount.
Is a term loan the same as an SBA loan?
No. An SBA loan is one type of loan partially backed by the U.S. Small Business Administration through participating lenders, usually with more paperwork and a longer process. Many renovation term loans are conventional or alternative products that move faster but may cost more. We can help you compare both routes.
Have bids for your build-out?
Start a short application and compare term loan options against your project budget.
Updated September 14, 2026 · Prime Kitchen Capital Funding Team