Money to open restaurant

I'm opening my restaurant in the next two years and I have some strategies on how to get capital to get it started but I want to hear about you? what is the best way to go about; loans? partners? investors?

thanks

PS: keep it realistic so do not mention SBA loans.

[panini]

I'm not following the SBA thing. There are downfalls to all types of loans.
From my experience, the most important thing to address in all partnerships, investors, etc. is to have a fully intact plan to disolve the agreement.

Thank you for your response; however that information is irrelevant to me at this moment, what I am asking is how would you proceed in order to get funding to open a restaurant, would you go out and search for investors? would you go into a partnership? or would you give business loans a chance?

As of the SBA loans there is a little dirty secret that I learned as I've already apply twice: They do not give money to start-ups, you must have an up and running business that shows good promise to them and at least a year of operation. they'll give you money to expand not to open, it is too risky for them.

[Peachcreek]

PS: keep it realistic so do not mention SBA loans.

Going through the SBA loan process can be a good experience for anyone who is starting a small business. We did a financial and business assessment for our expansion project through our local economic development corp (who is also associated with the SBA). They helped take a fairly rough idea and give us an organized look at what our plans will more realistically look like. And if you are going to ANYONE for money they will want to see the information for the project laid out in a similar way. And since they are helping you with your financial plan, they can ask the hard questions first, before you are in front of a potential lender or partner and don't have the answer.
Restaurants have a high financial risk for the investor or owner. So having you plan shot full of holes in front of someone at the SBA is better than being humiliated in front your family, friends, or bankers. Or worse, they give you the money and the business fails.
Once you have a well defined business plan you start working on "The three C's of getting Capital"- cash, collateral and credit. As one person told us, if you have 2 of the 3, getting a loan from anyone in doable. Good luck.

[panini]

Sorry you thought that was irrelivent,BUT, having gone through all of your suggestions, That is the most important thing, if you don't have the capital yourself.
If you provide more info as to what you've done or are planning to do it might be easier to input.
If you haven't yet. Find a good CPA with business start-up as a specialty and buy an hour or two of their time.
good luck to you
jeff

Maybe I haven't explained myself right, so I'm going to ask in a diferent way.

if you were to start a restaurant business today and did not have any capital to work with, what would be your best strategy?

[kuan]

You need SOME capital. You'd be amazed what 30% down of some pretty cheap restaurant is these days. You can purchase a business for under 50k. That said, nobody is going to dump money into an unproven non-existent business. You need to show that you have cash at stake to show that you're at least semi serious.

Back to the question.

You can offer up shares of stock in the restaurant.

The following are ways some small business people have been known to raise money.

You can borrow money from friends and family and repay them in kind (food). Sell a car. Get a second mortgage on your house. Borrow on your credit card. Establish credit with suppliers. (this is essentially a loan) Get a sweat equity partner.

So start saving. Many entrepreneurs finance their startups by working a part time job. It's not easy. Rewards are great.

[RitaFajita]

Listen to what Panini said. I don't think you failed to communicate your question. Listen to what you are being told here! Don't just wait for the answer you want to hear. That's what your mom is for .

I've never been a fan of the SBA, but Peachcreek makes a good point. They are going to let you know if you don't know what you are doing. Maybe that's a good thing. It's certainly educational.

How many pages long is your business plan so far? Are you developing a formal business plan?

RF

[RitaFajita]

BTW,
I like most of what Kuan says, but I don't recommend borrowing on credit card. It's really easy to do something like that in the beginning, when you are so sure it's all going to work out. It can become a large debt very fast, though, and if things don't turn out as planned (which they often don't, even for smart and creative people), you can end up with a big debt with high interest rates.

RF

[RitaFajita]

Okay, I don't mean to dwell, but....
Print out Panini's first reply to your initial post, pay no attention to it now if you don't care to, put it in an envelope, label it "to be opened upon sale or dissolution of business", open it if/when that happens, then laugh your a** of about thinking it was ever irrelevant. Seriously, you'll appreciate it eventually

I'm not trying to insult you. Please don't take it that way. Business is just a certan kind of animal you never fully understand until you meet it face to face. I did it. In hindsight, I wish I had obtained and respected more advise before diving in (although I have few regrets).

You'll see

Good luck
RF

[kuan]

Rita, you missing your baby Rita? You could always consult on startups

[panini]

Crepemaker,
Iwasn't being short. It's very hard to give some ideas to someone if you don't have backgrounds or financials.
I still say seek out a good CPA and they will evaluate you current financial situation and probably have some advice on which way to go.
Unfortunately, now a days, experience,equipment,co-signers,etc. have very little value to lenders.
Would you consider a pre exsisting business? Is you current life ready and supportive of the undertaking? Do you have any capital or credit currently?
On the credit side, I would be leary of the cards. Many persons use them. The most important thing about the cards is that they should be in the businesses name to avoid an accounting nightmare. Jeeez I could go on!
Legally protect yourself. You can do that now with your plan.
Kuan probably has the easiest of solutions without capital.
Again, buy yourself an hour with a CPA and an Lawyer qand have all your info ready to go,financials,business plan"this can be generic at this time".
Most of all, If you have your business education in place, great, if not, I would start locally at any institution, business and accounting courses.
These are just my thoughts.
Don't be discouraged though. It's tough to get info mainly because I am asked this question 3 or 4 times a week.
The best thing you have going for you right now is living here in the US where this is a choice you can make.
PS I personally don't like the CC thing, not wanting to dissagree with anyone, but a line of credit is really a better way to go. You can start building credit with a lender now with a line agreed upon in the future.They are a little more flexible as far as %. Those silly cards will jack you up as soon as a payment doesn't arrive on time.
for now
Jeff

[Peachcreek]

I think people get the wrong idea about the SBA. The SBA won't give you money. They merely guarantee a certain amount of the loan for repayment, the loan has to come from a lending agency. The SBA also give grant money, however I have not known anyone personally who has set up a restaurant that way. Getting back to borrowing capital- NOBODY will loan on "uncollateralized debt"- meaning that if you can't repay the money they want something tangible and easy to sell; like real estate. So borrowing to cover operating costs is difficult, but necessary. And although they will loan to cover such costs, they still want it secured and sometimes with a value of up to 125% of the borrowed amount... Borrowing for equipment is also not fully collateralized either; they will only loan a percentage of the value of new equipment and used actually has less depreciation than buying new. Leasehold improvements are also not collateralizable since the property owner will own them, not you. So start working on your capital right now. The lender, private or public is going to want to see YOU foot the risk, not them. If you think an investor is going to just walk into your life and hand you a chunk of cash and say "great idea", good luck.
Heres' an idea. If you are serious, try vending, personal chef work or other venues that can get you started without a huge amount of investment. Starting out selling burritos (or crepes) at a craft fair might be a way to go...

[panini]

Check to see if there is a SCORE chapter in your area. This is a group of retired exec's who will consult with you for free.

[RitaFajita]

It wasn't a baby, Kuan, it was a business. It's job was to make money, and when it stopped doing so, I closed it. And, no, I don't miss it. Working 14 hours a day primarily to bring in money to pay out to someone else got old after a few years.

Starting out with too much debt is a sure fire way to make the 14 hour a day for nothing a reality for someone else. I hope the OP is able to find ways to avoid this trap.

RF