Saturday, 26 October 2013

Getting Money for your Restaurant Concept !!!

I have had several readers enquiring about where to get the money to start their restaurant. While I would love to say that you can go to a bank and get a loan easily or go to a particular angel investor group and get the money, the real answer is what you already know - you will need to find the money on your own.

For a concept on paper, you will need to dip into your own savings, get money from friends and family (either as debt or as equity - I prefer debt as it is clean and you are very clear in your mind that this is a loan that you need to pay back, preferably with interest). If you own a property, banks will lend you money not so much for your business, but based on the value of your property. Essentially the property will be the collateral for your loan. Even these loans are not too easy to get as banks will be worried about the usage of the funds and need to be convinced about your ability to payback the monthly dues. They may want someone to underwite the loan - i.e. someone else takes responsibility of paying the monthly dues if you fail. Of course, if you have a few wealthy friends, you can coerce them into funding your business idea or underwriting your bank loan.

VCs typically look at this space once you have established your business, are operationally profitable and have demonstrated execution and scaling abilities. So you will need to get to a 8-10 unit level before getting any serious interest from VCs. Angel Investors may not have the appetitie for large Capex restaurant concepts.

In summary, you are pretty much on your own to find the funds required for your restaurant business concept.

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