Risks of night club business?

[Jazmine1980]

What are the risks of night club business?
why night club close down? why they fail?

What are the cons and pros of night club business?

I heard banks afraid to give a loan to nightclub business.
Even they do give me a loan I need to down pay 20~25%?
Is this true?

Is there any one who got a loan from the bank for your business?



Thank you
I really appreciate your answer!:)

[Rainee]

Risks of the nightclub business are like any other business - you may not be able to generate enough revenue to meet your expenses and liabilities.

From the standpoint of a lender, the nightclub business is risky because 1) revenue and earnings are often difficult to verify, and 2) there are few real assets for the bank to take in the event that you fail to repay the loan.

I think larger banks will require a minimum of 50% owner equity in order to extend a term loan for a bar or restaurant, although right now you would be lucky to get any loan at all.

To the best of my knowledge, most bar and restaurant businesses are financed with equity from owners/partners, cashflow from existing operations, and loans from private sources. Except for very large products, or unless there is a proven "brand name" attached to the project, bank financing is difficult to get and usually very expensive.

[baseballbar]

The only scenario I have heard where a nightclub was able to get bank financing to set up their operation is if they owned their building, and used that as collateral. So really that isn't a hospitality business loan at all, but a more traditional commercial real estate loan.

If anybody has ever gotten a business loan to open a bar or nightclub (unsecured by their business or home real estate) I would love to hear their story, and what bank was willing to write it....

[seandell]

Risks are long hours, divorce if your partner does not understand the business, alcoholism if you are already a drinker.

I have had many a talks with people that want to open up a place, I always tell them to take a job in a restaurant first, then a manager job in a restaurant, one that's at least 60 hours per week. If they can hack that they have somewhat of a chance.

As for loans, in this day and age, good luck. I suggest save your $$, hire a lawyer and incorporate, then take on partners, make some $$, sell your interest in the first company and open your own.

In California what I see is Most nightclubs last 3 years, then a reconcept has to be done.

Do your homework, and always have more $$ then you need to open it, because it will cost you more then you thought!

[KeystoneDerby]

Dont forget the obvious legal risks. When I ran a nightclub, ( mind you this was in NY) if a fight broke out on our property...EVEN if we have been closed for an hour ( i.e. fight at 5 am) we would get a summons by the police and have to go to court.

There were also noise concerns, gang activity, and general drunken stupor. Also...good luck with insurance!

And as above, VERY long, stressful hours, drinking and many headaches from loud PA systems:eek: