I've been looking to purchase a restaurant. What types of programs are available?Do arms-length transactions make a difference? Are better terms available for owner-operated restaurants?
Most businesses under $5M are funded via Small Business Administration (SBA) loans. There are two loan types that are normally used:
7a - can be used for all parts of the transaction. Terms are Prime + 2%, 10 year term. 504 - For bricks & mortar only. Prime -2%, 25 year term. Both require a 10% down payment.
Some lenders will offer a blend of the two with something like a 14 year term.
If a lender asks for more, they're imposing additional restrictions over and above what SBA requires. That's usually because they're not selling their loan on the secondary market. The same goes if they're requiring the seller to hold a note. In either case, I'd look for another lender.
If you're going to buy a restaurant, SBA will require a resume with meaningful restaurant experience. Lenders are most picky about restaurants because they are really easy to kill.
The lender doesn't require the restaurant to be owner-operated, but they'll need proof that your management staff has a robust resume in the field as well.
I'm not sure what you mean by an "arm's length" transaction.