Bank Loans for bars

[NYCdude917]

Hello All,

My partners and I are planning to open a bar in Manhattan, and are currently working on a business plan.

I know there is a lot of money allocated for SBA loans, but was wondering if anyone had any REAL information on the reality of doing so.

We've registered with the NYS Small Business Program, and they've given us hope of potentially attaining these federal loans.

As in any gov't program, the startup kit provides many success stories, but you never really hear of the failed attempts.

Assuming the following:
A solid, well written business plan
An established LLC
Having 30-40% of asking loan amt on hand in a commercial bank account, ready to use for the business venture.
(oh and the proper backgrounds for a liquor license)

So once again, I ask:
Does anyone have any REAL information on applying for a commercial loan, in reference to starting up a bar?

your thoughts...

Thanks in advance.

[David]

All lending institutions have a set criteria for commercial loans. If you are looking for an SBA loan, find out what banks are SBA friendly. You can get a list from the SBA. Nightclubs are probably the lowest on their list. I feel that it's because they really don't understand our business. It's also hard to substantiate the numbers that you put into a business plan. Most successful clubs won't tell anyone what type of cash flow they are producing.

When you start your loan search, try and go to the bank that you know will turn you down first. Use the info that you learn from them to build a more solid plan and attack.

[club125]

After getting the Banks that are approved to write an SBA, remember the SBA is only backing the loan, the bank is the lender. The SBA will also only authorize the loan approx 60% of the assets. The difficulty is the "cash" nature of the biz, so it may be a lot less than you expect. Try dealing with a bank that you currently deal with and is in the same area as the club.

[kevin543]

I presently work as a Small Business Relationship Manager for a major bank and have plenty of information regarding financing for start-ups...here goes:

1) You will need a comprehensive business plan

2) You will need to provide 25% of the total cost of the project as a down payment to qualify for a Small Business Loan.

3) You will want to work with a bank that is a Preferred SBA Lender...this will reduce the time necessary to close the deal.

4) You will have to show that you and your partners have the experience and know how to be successful. Why would it make sense for the bank to lend you money...you must be very well
prepared to answer this type of question. This is ultimately what it comes down to at the end of the day!

It really isn't all that complicated.

Send me a message at kevin.mccourt@juno.com and I can provide additional information and assistance if necessary.

Good Luck!
Kevin

[R'Bar]

We were actually able to get a loan (SBA) through a major lender, National City that was only secured through the equipment we were going to purchase. In my short experience everything that has been posted is very important...b plan, experience, % of project cost, etc. The best piece of advice I could give is find a banker that believes in you and buys into your concept. The underwriters are the ones that make the decision; therefore your idea is only as strong as your banker trying to sell the idea in for you. We were blessed with someone who listened to us, took the time to understand our points of different and put together a compelling argument.

In short, if you can meet the criteria mentioned in the post above and can find a good banker he/she can help you get a loan. If that is the case, keep them close.

[smiley blonde]

I have always heard that most banks will not lend money to people who want to own bars/nightclubs because of the high failure rate.

Is this NOT true??

I am pretty sure that when my friend opened his bar that they put down their own money

so if the bar fails after one year as 80% do then one still owes all of that money to the bank right?

I know a lot of people who have lost EVERYTHING when they opened the bar and it ended up closing

the financial risk seems overwhelming!

[Jhelm]

I would recommend trying to get a commercial loan first if at all possible. Find a banker you like and trust, and have them help you. A commercial loan is harder to get, as it requires a lot of collateral, but the interest rate is more around 10 or so, where as an SBA loan is closer to 20%, and you have SOOO much paperwork to fill out every month. I would go to a bank that is SBA friendly, try and get a commercial loan, and if they deny you, then use the same banker to get the SBA loan. A good banker will really work with you, and they do want you to get the loan.

We went to a bank that was SBA friendly, got denied for a commercial loan, and then when we were in the process of applying for an SBA loan, we found someone who put up a house as collateral for us. GOOD LUCK!

[R'Bar]

I have always heard that most banks will not lend money to people who want to own bars/nightclubs because of the high failure rate.

Is this NOT true??

I am pretty sure that when my friend opened his bar that they put down their own money

so if the bar fails after one year as 80% do then one still owes all of that money to the bank right?

I know a lot of people who have lost EVERYTHING when they opened the bar and it ended up closing

the financial risk seems overwhelming!


Most banks won't unless you have the standard criteria, but I think the overwhelming odds many times scares people off. We've defied a lot of odds up to this point and we're nothing special. We had half the amount of the loan in personal cash, so that showed them we were serious about this. Again, it all goes back to the upfront research you do, how good your b plan is, credit, how well you can sell your idea and how well a banker can sell your idea to an underwriter.

Another option (depending on where you live) is plugging into many of the philathrophic organizations and getting to know the influential people in the city. Many times they will be willing to back a project if they stand to gain in some way. Bars are a little tougher sell, but it can be done.

[smiley blonde]

But if you know for example that your bar may not make it past a year, then do you just start paying the bank back the money?

How do you know when it is time to jump ship, especially if you have a loan from a bank?

also, how much do bars typically loan someone if they put a good amount of money down- for bars that is?

[R'Bar]

But if you know for example that your bar may not make it past a year, then do you just start paying the bank back the money?

How do you know when it is time to jump ship, especially if you have a loan from a bank?

also, how much do bars typically loan someone if they put a good amount of money down- for bars that is?

I guess my first question would be why in the world would you want a loan if you knew you were going to fail in the first year. To your second question, it's time to jump ship soon as you have those doubts. And for your third question, consider you have met all the criteria, the SBA will require you to have around 25% of the total project cost.

Getting into the bar/nightclub/restaurant business is risky...however if you do your homework and are prepared it's a calculated risk. If thats the case, then calculated risks can turn out to be very success.

[workingcapital]

there is always subprime lending. thats what we do. its not to open a bar/nightclub but if you can get open, can get you funds for any business need. no collateral. this is fast capital based on your projected annual gross sales. if the banks say no, we may be able to help. need at least 1 full month ownership under your belt. we target this industry.

info@advancefundinginc.com