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    3 Replies Latest reply on Apr 13, 2010 12:38 PM by phanio

    Questions about Nightclub startup

    lavvman1 Newbie

      My name is Donny and I live in the state of Illinois. I would like to start a nightclub/bar in a great location and I have been offered a excellent real estate deal that I really would like to purchase. Here is my situation I have been working on my credit for a year or so and trying to pay everything off. I have a low debt to income. Debt is about $550/month and my income is about $2500/month. I have been current on all my bills for the last year, however my credit score is very slowly climbing. I have about a 635 average. I have the complete backing of my family both financial and moral support. My mother and grandfather want to help me get this property as they agree its an excellent deal. My mother has high debt to income about $800/month and income is about 1200/ month but has average 700 credit score with no collections. My grandfather has a low credit score but has a low debt to income ( About $500/month debt and $2200 income retirement and pension). The building I would like to purchase is on the market at $50k listed with a bank so I would offer them less of course start at around $40k and see where that goes. The building was a former tavern and is still setup for that business. With the support of my family so you think that I would qualify for a loan and which loan should I apply for? I know its a risky business venture and I DO have 5 years experience as a bouncer 1 year/2 years manager/2 years general manager with another nightclub before going to college. However I have my degree in law enforcement. Any help would be appriciated.
        • Re: Questions about Nightclub startup
          Navigator
          Lavvman1-- do you have stats on how that previous tavern performed, so you have a baseline to go against? How about traffic patterns for that location, as well as the nearest other nightclubs? The cost of starting a nightclub is perhaps higher than you think. There are some good books on Amazon that I've bought on how to do it-- I've actually bought a few of them. Make sure you have enough money to ride out the first 6 months not making a profit.
          • Re: Questions about Nightclub startup
            bpfinance Adventurer
            I definitely agree with Mongoose. Almost everyone that we work with forgets about significant business expenditures when determining startup costs. How much you actually need depends on what Mongoose already mentioned: where the night club is, how much traffic is expected, how large the tavern is, etc... I am not sure how Illinois regulates bars/night clubs in terms of alcohol sales, but sometimes it can cost a significant amount as well as training expenses to obtain that license.

            Additionally, I would not recommend borrowing money from family members ever. If it is absolutely necessary, regardless of how stupid it may sound to you now, you should draw up an agreement about how and when the funds will be paid back. If they are simply cosigning the loan, you need to have an agreement with them about how the money will be paid back to the bank and who will be responsible for paying back the funds. The bank will likely make all signers jointly and severally liable, but that doesn't state that you can't have a private agreement between you and your cosigners. Also make it clear who gets the profits and how much profit they get if you are planning on some type of profit-sharing.

            There are significant liability issues involved in this industry. You will need to obtain liability insurance, and I highly recommend that you create an entity to separate your personal life from your business and assist in liability protection. This needs to be set up correctly, otherwise the liability protection from a separate business entity is worthless.

            If you need any assistance with anything involving your startup or have any more questions, feel free to contact me:
            forumresponse@brienprivatefinance.com

            http://www.BrienPrivateFinance.com
            • Re: Questions about Nightclub startup
              phanio Pioneer
              Do you have a business plan that outlines the additional cost you will need to run a business once you purchase the business? I would suggest you start with a business plan - there are free sources like SBDC or SCORE that can help you research and develop your b-plan. With plan in hand, you could then approach a SBA lender - there are many SBA guarantee programs that just might work for you.

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