Starting a new coffee shop? You’re in for an extremely rewarding career – but you should also be prepared for a lot of hard work, a lot of planning, and lot of stress. And for many startups, one of the hardest things will be finding the requisite funding.
Major coffee equipment, like an espresso machine or a roaster, can be highly cost-prohibitive to buy outright. Then there are all the things that people often forget to account for, but can quickly add up: fridges, prep tables, storage containers, cups, utensils, decorations, licences…
So whether you’re looking to raise a little or a lot, here are some tips for how you can find the investment you need to make your business dreams a reality.
1. Know How Much You Need
Before you start looking for funding, you have to know how much you need. And before you know how much you need, you have to know exactly what you need.
Start with your equipment. Big ticket items are easy; whether you’re opening a cafe or a roaster, you’ve probably already got a basic list in your mind. But don’t forget to include all the smaller items too. Write it all down, being as specific as impossible. And don’t forget to include prices (including tax).
Even the small things can get expensive quickly. Credit: Pixabay
2. Prepare Your Business Plan
It’s not just how much you need to buy, but also how much you’re going to earn, that you need to know. After all, how can you organise a repayment schedule if you don’t know when you’ll have the money?
In terms of making plans, you should know everything you need to open your shop before you ever ask for funding. Investors, banks, and even your friends and family will be more willing to invest in your venture if you can explain these details to them.
Your business plan will also help you to make smart marketing and purchasing decisions, anticipate future problems, and stay focused on your goals. In short, a well-researched business plan is vital – and this holds true no matter where you’re applying for funds.
Making a business plan is the first step toward getting funding. Credit: Pixabay
3. Look in ALL the Right Places
Whether it’s angel investors or bank loans, many people look for a one funding source, but this is a mistake. Financing even the smallest of coffee shops can be more expensive than you realize – and so you may need multiple investors.
What’s more, having these additional funding plans may help you to get your main piece of funding. That may sound contradictory but, trust me, it’s true. If you’re planning on taking out a loan, bankers will often expect you to invest some of your own money or have funds from other sources. Similarly, other investors may see it as sign of you taking the business seriously.
In short? Diversify your search for funding for a higher likelihood of success.
Be prepared to pitch to multiple investors. Credit: Pixabay
4. Ask Friends and Family
You might be reticent to ask friends and family members, but – if they can afford it – they should be one of the first people you ask. They’re the ones most likely to believe in you and your ability to be successful. They are also more likely to offer you a loan with lenient terms than a bank would.
And after all, if people are going to benefit from your hard work, shouldn’t it be the ones you love?
Personal connections can count for a lot. Credit: Pixabay
5. Apply for a Loan
Loans are often people’s first choice of funding, but be aware that they’re not easy to get. Most banks will require a lot of information from you, and the requirements are probably different in each bank. Do your research before you apply, so that you don’t risk missing deadlines.
Sometimes, especially for a first time business loan, it’s helpful to have someone who’s willing to co-sign for the loan. It could be a family member or a friend – anyone who is willing to assume some of the risk to secure a loan. Be aware, though, that it’s a significant thing to ask someone do this. If you can’t make your repayments, the bank will come to your co-signer seeking their money.
So do everyone a favor and be ready with your business plan. Think through all the details and be sure that you can make money at this venture. Taking a loan out, with or without a co-signer, is a serious step. Defaulting can have a major negative impact on your credit – not to mention you’re the rest of your life.
Signing on the dotted line is a significant decision. Credit: Pixabay
6. If the Bank Turns You Down…
Sometimes even the best ideas with the best planning get turned down by banks. There can be a variety of reasons why your loan might be rejected, and not all of them are within your control.
One alternative is to use credit cards. Now this comes with a warning: you should never purchase something on a credit card if you’re not 100% sure you can make the repayments. But as long as you can do that, you can use the card to make small purchases, and then pay it off gradually every month. You don’t need a bank’s approval because they’ve already given it to you, and you don’t have to submit any sort of business plan (although I recommend you do have one!). In short, it’s quick and easy funding without all the paperwork.
However, credit cards are risky. It can be easy to get too deep into debt, especially if your business doesn’t achieve its anticipated growth. Making it even more dangerous, business credit card limits are often much higher than personal credit card limits, and most credit card companies are eager to hand them out. Avoid taking out more than you can afford to pay off should you have to close your doors permanently.
Credit cards can be a short-term funding option – if used carefully. Credit: Pixabay
Starting your own shop isn’t easy, and nor is it risk-free, but that doesn’t mean you can’t do it. You just need the passion, ambition, and business planning to make it work.
Seek out multiple sources of funding and be determined to make it happen, even if that means funding it at least partly by yourself. Have thorough plans, and backup plans, and more backup plans.
And remember, determination and planning will take you much farther than finding the right source of funding ever will. Don’t be afraid to try.
Written by E. Squires and edited by T. Newton. Feature photo credit: Pixabay
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