Published 29 September 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty
An Ontario restaurant purchase is typically financed with a mix of your own cash, a bank loan and sometimes seller financing. The federal Canada Small Business Financing Program is the main government-backed route: for businesses with gross revenues up to $10 million, it covers term loans up to $1,000,000, of which no more than $500,000 can be for equipment and leasehold improvements and, within that, no more than $150,000 for intangible assets such as goodwill and franchise fees plus working capital. Terms run up to 15 years, floating rates are capped at the lender’s prime plus 3 percent, and there is a 2 percent registration fee. It can finance a going-concern asset purchase but not a purchase of shares. Lenders decide how much of the cost they will lend, can take unsecured personal guarantees up to the loan amount, and will want verified numbers.
Where the money usually comes from
A restaurant purchase is usually funded from three places: your own equity, a lender, and sometimes the seller. Expect a lender to look hard at a restaurant: it will want real cash from you, verified numbers from the seller and a lease that outlasts the loan.
Start with the price. A loan that fits a well-bought restaurant can sink an overpriced one. See how much to pay for a restaurant for the arithmetic.
The Canada Small Business Financing Program: the real limits
| CSBFP rule | Published limit |
|---|---|
| Eligible business | Gross annual revenues not over $10 million |
| Total term loans | Up to $1,000,000 |
| Equipment and leasehold improvements | Up to $500,000 combined |
| Intangible assets and working capital | Up to $150,000, inside the $500,000 |
| Line of credit | Up to $150,000, on top of the $1,000,000 |
| Maximum term | 15 years |
| Floating rate cap | Lender’s prime + 3% (includes a 1.25% administration fee) |
| Fixed rate cap | Lender’s residential mortgage rate + 3% |
| Registration fee | 2% of the term loan |
| Share purchases | Not eligible |
Source: ISED, Canada Small Business Financing Program guidelines. You apply through a participating bank or credit union, not the government. The lender decides whether to lend and how much of the cost to cover; the program does not set a percentage.
What the program will finance in a restaurant purchase
The program can finance a going-concern purchase, which ISED defines as a business that carried on operations at some time in the 60 days before the purchase. Eligible uses include equipment, leasehold improvements and, as intangible assets, goodwill that is part of a going-concern purchase, franchise fees, and permits and licences used in operating eligible assets.
Two limits matter. Intangibles and working capital share a $150,000 cap, so on a restaurant where most of the price is goodwill, the program may cover only part of it. And ISED says the acquisition of shares is not eligible, because the loan would go to a shareholder rather than the business. That is one reason buyers who need this program prefer an asset purchase; see asset vs share purchase.
Guarantees and what the lender will ask for
Under the program, a lender can take unsecured personal guarantees up to the original amount of the loan disbursed. Sole proprietors and partners are personally liable for the whole loan. Outside the program, a lender’s terms are its own.
Expect a lender to ask for:
- the seller’s financial statements and HST returns, and your projection;
- the purchase agreement and the allocation of price between equipment, leaseholds and goodwill;
- the lease, and evidence it will be assigned to you, with enough term to cover the loan;
- your résumé and restaurant experience;
- your personal net worth statement and the source of your down payment.
Build the lender’s review into your offer’s financing condition.
Seller financing and holdbacks
A seller can take part of the price later, as a vendor take-back loan secured against the business. For a buyer it lowers the cash needed at closing and keeps the seller interested in a smooth handover. Your bank will want to know about it and may require it to rank behind its own loan. A holdback, where part of the price is paid only after an event such as the landlord’s consent or a period of trading, works the same way.
Every term is negotiable and should be written by your lawyer. No public source publishes typical vendor financing terms for Ontario restaurants, so ignore anyone who tells you what is “standard”.
A worked example
Round illustrative numbers, not an offer or a quote. A buyer agrees to a $500,000 going-concern asset purchase: $250,000 allocated to equipment and leaseholds, $250,000 to goodwill.
| Source | Amount (illustrative) |
|---|---|
| CSBFP loan, equipment and leaseholds | $250,000 |
| CSBFP loan, goodwill (intangible cap) | $150,000 |
| Seller take-back | $50,000 |
| Buyer’s cash toward price | $50,000 |
| Total price | $500,000 |
My arithmetic. The 2 percent registration fee on $400,000 of program loans adds $8,000; ISED lists registration fees among the costs the program can finance. This assumes the lender agrees to cover all of the eligible equipment cost and uses the whole $150,000 intangible cap on goodwill, leaving nothing for working capital, which a lender may not accept. The buyer also needs cash for closing costs, HST if no election applies, inventory and working capital. It shows how quickly the $150,000 cap binds when goodwill is a large share of the price.
Equipment leases and other costs to fund
Check whether the seller’s dishwasher, POS, coffee equipment or kitchen items are leased. Leased equipment belongs to the leasing company and will show up in a PPSA search ($8 online); you either take over the lease with the lessor’s consent or replace the item. Then list the other cash you need on day one: the AGCO transfer fee ($1,000), a Toronto eating or drinking establishment licence ($536.64), legal and accounting fees, opening inventory, and several months of working capital.
Test the price and the cash needs together with the tool below.
The AI restaurant valuation tool below gives you a price range from the numbers a seller should be able to show you, so you can test an asking price before you make an offer.
Where I fit
I help buyers across Toronto and the GTA shape offers that a lender can finance: realistic prices, clean allocations, lease terms that cover the loan and conditions with enough time for approval. For the full process read buying a restaurant step by step, and for the seller’s perspective how to sell a restaurant in Ontario. Then book a call or phone 833-330-1925.
Free tool — AI restaurant valuation
Restaurant valuation
What is your restaurant
actually worth?
Restaurants don’t sell on revenue — they sell on what the owner takes home, multiplied by how easy the business is to hand over. Your lease and your rent do more damage or more good than anything on the menu. This weighs all of it in about two minutes.
Reading comparable restaurant sales…
Indicative business value
—
$0$0
Most likely sale price $0 · Implied multiple 0×
Where I’d list it
$0
Comparable restaurants sell for about 85% of asking. Price to that, not to hope.
How the number is built
Your owner earnings, multiplied by what buyers pay for a business like yours — then adjusted line by line.
What the market pays
Benchmarks from completed restaurant sales.
What a buyer will ask for
- Three years of financials — statements and tax returns, not just POS reports.
- The lease, with the assignment clause and every option in writing.
- Proof of your add-backs. Lenders reject the ones you cannot document, and that is the single biggest reason deals reprice.
- Equipment list showing what is owned outright and what is leased or financed.
- Licences — AGCO, food premises, patio, and whether each one transfers.
- WSIB, HST and payroll accounts in good standing.
Want the number a buyer
would actually sign?
Send me three years of financials and your lease and I will price it properly — normalised earnings, real comparables, a defensible asking price and a confidential marketing plan that never tips off your staff or your landlord.
Frequently asked questions
How much can I borrow under the Canada Small Business Financing Program?
Up to $1,000,000 in term loans, with no more than $500,000 for equipment and leasehold improvements, of which no more than $150,000 can be for intangible assets and working capital, plus a separate line of credit of up to $150,000. The business’s gross annual revenues must not exceed $10 million.
Can I use a government loan to buy an existing restaurant?
Yes, if it is a going-concern asset purchase: ISED defines a going concern as a business that operated within the 60 days before the purchase. Goodwill and franchise fees count as intangible assets, within the $150,000 cap. A purchase of shares is not eligible.
What interest rate applies to a CSBFP loan?
The lender sets the rate within the program’s caps: for a floating-rate term loan, the lender’s prime rate plus 3 percent, which includes a 1.25 percent annual administration fee; for a fixed rate, the lender’s residential mortgage rate plus 3 percent. There is also a one-time registration fee of 2 percent of the loan.
How much down payment do I need to buy a restaurant?
No public rule sets it. Under the CSBFP the lender decides what percentage of eligible costs to finance, based on its policies and your risk. Expect to fund part of the price, closing costs, inventory and working capital yourself.
Do I have to personally guarantee a restaurant loan?
Often, yes. Under the CSBFP a lender can take unsecured personal guarantees up to the original amount of the loan disbursed, and sole proprietors and partners are personally liable for the full loan. Outside the program the lender sets its own terms.
Can the seller finance part of the restaurant purchase?
Yes, if the seller agrees. A vendor take-back loan or a holdback reduces the cash you need at closing. Your lender will want to know about it and may require it to rank behind its own security. Have your lawyer draft it.
Sources
- ISED — Canada Small Business Financing Program guidelines — $1,000,000 limit; shares not eligible
- Government of Ontario — Register a security interest or search for a lien — PPSA search, $8
- AGCO — Liquor licensing fees — transfer $1,000; share transfer $1,000; new licence from $925
- City of Toronto — Eating or drinking establishment licence — $536.64 new; zoning review rule for takeovers
- CRA — GST/HST Memorandum 14.4, Sale of a business or part of a business — section 167 election
Related reading
- How much to pay for a restaurant
- Asset vs share purchase for buyers
- Buying a franchise restaurant resale
- Buying a restaurant step by step
- How to sell a restaurant in Ontario (seller's view)
- Restaurant valuation in Ontario
About the author — Jatin Dua, Toronto and GTA real estate broker
I am Jatin Dua, Broker of Record and co-founder of RE/MAX Quantum Realty Inc., Brokerage, Unit 101, 799 The Queensway, Toronto. I work with buyers and sellers across Toronto and the GTA and have helped more than 100 families sell. Four-plus years of active GTA transactions and over $100 million in sales volume. Every figure here comes from a published table, regulator or statute linked in the sources, so you can check all of it without asking me.
Reach me at connect@jatindua.com or 833-330-1925, or book a call.