Financing...
Before you start dreaming your life away (which will be merited later) you've gotta bring yourself back down to earth for just a few brief moments and get down to brass taxes. Is this even possible, this whole starting my own drive thru thing?
Yes, yes it is. And there is always money for any great idea. There are a few ways that make getting the money you need easier, and that is what we are going to talk about here. The question of the day is: Is it easier to get a loan on an asset, or a liability? Now that you've rolled your eyes at the lucidity of this question lets unpack the answer behind the answer. It's a heck of a lot easier to loan money on something that you will someday own. When you go to a lender and say "I have this great idea for a business, it works in the northwest really well and I think it will do really well here too. What do you think Mr. Banker Man? I have $50,000 to put down... can you give me $300,000?" Hmmm... I don't think so.
But there are a few ways to make it easier.
Number 1: Make your building an asset
- Buy a building that you can take with you when you go. Not that you'll have to go, but the lender will feel much happier knowing that they have collateral for $100,000 of what they are loaning you. Add your equipment in there to make it $150,000. If they had to repossess your building they could sell it. Otherwise it's cut as a loss, a property improvement.
- Don't chince on the building just because it will be modular (movable). It will cost you a little bit more to buy a 30 year building (a building that doesn't have to be remodeled for 30 years) as opposed to a 10 year building but it will pay off in the end, plus a larger percentage of your total start-up expenses will be backed by collateral.
Number 2: Write a killer business plan with realistic Financial Assumptions
- You need to know where this idea is headed and your lender will want to know that you are actually headed somewhere real. Now is the time to pretend... pretend you've started this drive thru coffee store and explain every part of what it looks like and why it exists. What is it's purpose? Get a business plan template and go to work. It ends up being pretty fun too.
- In order to know beyond a shadow of a doubt that this is really going to work financially, you need to do a ton of research on this market and how it preforms. Put all that perspective and info into your Financial Assumptions. They must be realistic. And, for your own sake, you need to do a "Worst Case Scenario" Financial Assumptions. I don't recommend showing this set to your lender. The financial research is one thing you cannot "wing it" on. Make sure you do your homework.
Do these things and your chances at getting a good loan will increase. Don't do these things and you may not be able to get a loan at all. And even if you do have a nice little nest egg to put down on the table, every smart investor knows that it's always better to use "other people's money" to make money. The same principle applies here. Essentially, you can create collateral for over half ($150,000) of your loan. How's that for a start-up loan.
Check out http://www.a-zresources.com/ They will loan on prefab buildings and coffee equipment.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment