Starting a Brand New Restaurant- Considerations
Most people who dream of having their own restaurant or bar business are not dreaming of owning someone else's business or of owning a franchise location where all the decisions have been made for them.
The dream is a dream exactly because it doesn't exist anywhere else and it has all your personal touches and the specific things you would like to see in a place that you haven't seen anywhere else or that you may have seen somewhere else and would like to bring to where you are or you would like to incorporate different elements from different places into a single location of your own.
Chances are you've already given some thought to what kind of restaurant you want or what kind of bar you plan to open and you have some ideas about what he would like it to be and a picture in your mind of how it will look.
Even with those initial ideas however there is still a lot of business planning and details that need to be worked out in order for you to be able to present an effective plan to use for raising money. In this section of our guide we help you to narrow down exactly what it is that you hope to start and likewise rule out a lot of the things that won't apply so that you don't waste time or energy exploring options that won't fit your concept or aren't practical for the ideas you have in mind.
Brand new startups are the hardest to fund, because they have no history and no assets. The banks are more reluctant to fund them because they have no way of assessing the risk, and nothing to come after if the loan falls through. They also typically loan less, usually fifty percent, compared with the eighty to ninety percent they will loan you to buy an existing restaurant. You may think you are a great risk, but the bank is protecting its interests the only way it knows how, by saying no to everyone.
That isn't to say if you have other assets you can't get a loan and then use it for a startup, you can. If you have equity in your home you can get a loan against that and use it for a startup, or you can borrow against any other asset you have, like stocks, a 401K or some other asset. You can also get a personal line of credit, although these are expensive and don't usually go very high unless you have a high net worth.
For most startups, the SBA for small business loans is out, and if it isn't, they usually won't loan over 50% of the total required as mentioned. If you have collateral and good credit and your own cash, you can use the SBA to help you launch, but it doesn't come through for most people. It is more helpful if you are buying a building as part of your startup, but you still need your own cash for the down payment.
None of this is meant to talk you out of trying to start a restaurant from scratch but just to make sure you understand the hurdles you will face and that if you have no money and no experience in the restaurant industry you are more likely to succedd by buying an existing business and converting it into something closer to your dream restaurant rather than trying to start a brand new concept.