Funding for Coffee Shops

Thursday, August 31, 2006

If you are looking to start up a coffee shop, one of your biggest challenges will probably be financial. Since everyone that is reading this is probably in a slightly different position financially, there is a lot of ground to cover. There are many ways to fund your business, and they all have disadvantages.

If you have very little credit then getting the capital will probably be the hardest part. The first thing you are going to want to start with is getting good data together for your coffee business. You will want to be able to accurately show projections for the revenue and expenses to the last dime. You may not be able to project demand 100% accurately, but if you can account for every cost that you will likely encounter, you will gain a lot more trust with the people with the money.

If you are going to be getting a loan, it is very possible you will be looking at getting an SBA loan, but they often require some collateral, which could pose a problem. There are a lot of ways to make it so you either do not need as big of a loan, or can avoid it all together. One possible way to get around the need for a loan is to lease your equipment from your suppliers. This will reduce the total amount of money you need up front.

It might be possible to partner with a friend who does not have the time to contribute full time, but would like to contribute capital and help manage the shop. This really depends on your situation, because there are certainly are situations where this perfectly describes you and your friend, sibling, or even parent.

For the people that are looking into starting a coffee shop that are in a different position, and have credit. Then the issue moves a little more from just getting the capital to managing risk so you do not lose your current way of life. For instance, a lot of starting business owners will use their equity in their home in some way to finance their business. Whether it is a second mortgage, or some business loan that is secured by the property in another way.

Some people look at the risk and just turn the other way and continue on their lives. However, I think education is a much better way to manage the risk. The more you learn about business, the more you will feel ready for the challenge.