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    4 Replies Latest reply on Jun 9, 2008 1:26 PM by Lighthouse24

    New Business Loan

    upandcomer Newbie
      My name is William I am currently in college for business and when i get out next year, and I would like to start planning out a new business. It will be a bar and food service, what would be a good loan amount for making a building and buying property? I plan on keeping this business a normal size bar nothing extravigant. What type of loan should I get? What loan has the lowest interest rating?
        • Re: New Business Loan
          Lighthouse24 Ranger

          Welcome to the community, William. The amount of money you'd need depends on a lot of factors. For example, a limited service bar (no kitchen) in remodeled tenant space in a suburban area where commercial property values are declining right now might have a start-up cost around $45 per square foot or $1,800 per person capacity (i.e. you could expect to spend a total of about $180K before opening day to start up a bar with a 100-person capacity). Obviously, if you were taking over a leased space that was already a bar, you could do it for less than that. On the other hand, starting from scratch -- a full service bar in a newly constructed free-standing building in an urban area with high commercial property values -- could run $175 per square foot or $7,000 per person capacity ($700K for a 100-seat establishment), and maybe even more if you're buying the land.

          I'd say that about 60 percent of bar owners provide their own funding, or obtain funding from friends and family. About 30 percent obtain financing from a seller (i.e., they are buying/taking over an existing bar). About 7 percent of new bars being opened now are funded by franchise operators. That leaves 3 percent whose founders get construction, renovation, and start-up money from commercial lenders or investors. There's a reason that number is low (it's hard for the average guy to get a traditional loan in the amount needed to open a new bar).

          You'd likely be financing the property differently than the fixtures and equipment. Your other start-up costs (supplies, advertising, etc.) would be funded differently still. So you don't need (or try to get) one huge loan for the full amount. At this point, I'd highly recommend you take advanatge of some free resources and counseling like SCORE to get your plan going and outline some of these unknowns.

          Hope this helps. Best wishes.

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