attempting to open a coffee shop

[deadtree]

Hello,

So I am attempting to open a coffee shop in South Jersey. I have the location... new construction with 250 high end apartments in a small town.

I have done the leg work. I have down the research. my question is about financing. I am not a wealthy man an will need outside financing.

before i go to a bank with my business plan and ask for money... what should i expect. what is a normal interest rate? has anyone gone through a bank for a small business loan?

just hoping to get some more knowledge and understand more

david

 

[almico]

Hi David. I'm opening a coffee bar in a few weeks.

I'm a bit jaded on the whole financing thing. I worked through my local county college's small biz dev center. I met with each of their counselors one by one. Wrote a very detailed business plan, including very conservative projections. My coffee bar is being located in a new, high profile indoor public market in New Hope, PA., and I had a signed lease. They are paying for the entire build out of the booth including plumbing and electrical. All I had to supply was the equipment. It is a sweetheart deal all the way.

I had already invested 30K of my own money in equipment and was only looking for $35 more. I had been operating the business part time for 3 years at local farmers market, so I was not officially a start-up. My credit score was 665 and their minimum was 650. I met every criteria and then some, yet after 4 weeks of them vetting the whole project, I was turned down.

From my experience with business financing, unless you have enough cash on hand to cover the loan, lending institutions will not take the risk. And restaurants and coffee bars are the highest risk of all. Many open, many close quickly. My situation was virtually risk free and still no go. Screw 'em. I had 40K worth of 0% financing for 12 month offers from my credit card companies, and while I loath using them, I really had no choice. The build is going forward and I need to have the equipment there to install.

That out of the way: How much are you looking for? The UCEDC gives micro loans up to $35K at 3% interest for 5 years fixed.

Other SBA lenders go much higher. Interest rates typically 9-12%. Find you're nearest SBDC and work with them on your project. Lots of free advice and they have relationships with the local lenders.

 

[John P]

deadtree, The first thing I would say is "cart before the horse". I always tell people I'm consulting with that everything starts with preparation, and the biggest part of preparation is "How do I pay for this?" Don't fall in love with a space or attempt to negotiate a lease without having funding in place. Yes, there's a lot of by the seat of the pants things that happen, but everything, everything has to be predicated by you knowing you can do and will do what you set out to do. Believe it. And then prove that you believe it by putting everything on the line.

As almico noted, your local SBDC and the UCEDC are great resources that can help you find the best way to navigate accessible funding. But for your first business project, the reality is that most of the money for a small business has to come from yourself or people who love you. That means savings, credit cards, and home equity or 2nd mortgage -- if you aren't willing to put your house at risk, you are asking for a safety net that calls everything into question - and the banks can see that. Being an entrepreneur isn't a right, most people who choose to do it probably shouldn't and those that want to and will be successful will find a way through the obstacles. The first thing you have to ask yourself is, "What am I willing to risk?" If you are not willing to put everything on the line when you are an unproven entity, how can you expect a bank or investor to give you anything.