How to Raise Money to Open a Bar, Pub, Restaurant or Nightclub
Wherever you are going to be looking for capital, the first step in securing investment should always be to write a detailed business plan. There is simply no point in asking for money until you know exactly how your business is going to work, and on what terms you are going to be able to repay your investors. This plan should cover both strategic and financial details, including those elements which are specific to the entertainment sector.
When raising money to open a bar or restaurant premises which serve alcohol, it is particularly important to have understood the relevant legislative framework in your neighbourhood. Perhaps most importantly, you will need a liquor licence. The provisions for obtaining one vary from state to state, with some regions allowing transfer of liquor licences between business owners, and others insisting on individual applications.
Whatever the case, no investor is likely to give you any money unless you can prove that you will be granted a licence. You will also need to prove that you have complied with relevant health and safety legislation, and that you fully understand the applicable rules around opening hours and zoning.
Once you have constructed a strategic and financial plan, you will need to examine your funding options. The first and easiest option is, of course, to contribute from your own savings and assets. Unfortunately, most people aren't fortunate enough to be in a position to do this, or are unwilling to take out additional mortgage finance.
Family and Friends
The second easiest option is to raise capital from family and friends, but do be cautious if attempting this. You should be absolutely confident that those who are lending you money are aware of the risks, and should generally treat their loans as strictly business arrangements. Don't take the generosity of personal investors for granted, or you may find that your friendships don't last.
If neither of the above options are available to you, then taking your business plan to a bank is the next best course of action. In order to succeed here, however, most financial institutions will want to see that you have 'skin in the game'. They will not be impressed with an entrepreneur who is only willing to risk the bank's money, and even a small personal contribution will help in proving your seriousness.
You will also need to have done significant research into the sector and your specific neighbourhood, as only proven financial information about the profitability of similar ventures is likely to persuade a bank to take a risk on your new business.
It may also be worth looking into so-called 'angel investing' schemes, in which experienced businesspeople invest in your business for a cut of the equity. Whilst this is less likely to be an option for a simple bar or restaurant start-up, if you have a particularly innovative or ambitious idea it may be worth investigating further. Such investors are likely to have even stricter criteria than banks, but once they are on board, their experience can be invaluable.
This article was contributed by BusinessesForSale.com, the market-leading directory of business opportunities from Dynamis, the online media group also behind FranchiseSales.com and PropertySales.com