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  • #990528
    Infest
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    Hi guys, wondering if anyone whose bought a cafe/restaurant/takeaway shop can offer some advice.

    I’m basically wanting to know everything and anything.

    My friend and I, currently working as chefs (head chef/sous chef) for a large company, wish to buy a small cafe/fish and chip shop. We currently work anywhere from 50 to 70 hours (on a salary) and wish to invest that many hours into our own place (where we can do what we want, cooking wise and reap the rewards, so to speak).

    We’ve tried contacting business brokers and banks, but noone seems to get back to you – is that normal? I thought it’d be like purchasing residential and that the sellers would be keen to earn their commission.

    With loans, is there any way to get over a $50k loan without having to use residential as a security? Can they secure it with the likes of business equipment?

    There will be more questions, no doubt, but we wish to do this as we are (24 and 20) and think whilst we are young and passionate about the industry that it would be a good time to try our own place.

    Thanks in advance!

    #1177368
    ThexArm
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    I haven’t bought a cafe/restaurant/take away but I tried to buy one a year ago.

    I was consulting SBX business brokers they were pretty good in getting back to me with information. But, I had to go through their website and contact them based on the business I want to get information on. So, it would be a good idea to register your interest on their website?

    I guess banks won’t talk to you unless you have a security or personal assurances. If you have a business plan and have some savings to show then you probably can approach banks.

    Good luck with you venture. I hope someone with more information may shed some more light!

    #1177369
    Anonymous
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    Hi Infest, and welcome to the forum :)

    This isn’t my area of expertise, but previous threads (like this recent one) suggest that obtaining financing without property as security may not be as easy as you’d have hoped.

    If you’re able to update your post with any additional info about your circumstances, it may help the community here give you more useful advice.

    At the same time, we’d love it if you’d share your name with us – we’re all very friendly around here :)

    Good luck, and I hope you find the cash,
    Jayne

    #1177370
    MissSassy
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    Hi and welcome

    Wow big questions

    Lets see – if you had $50K would you lend it to people to buy a business when you will not receive any asset as security?
    The business itself will not be an asset for the full amount as it is too risky.
    Businesses love to fail, regardless of the efforts put in, particularly food businesses.
    The people borrowing will not have any income to pay back the $50k other than the business which itself is no guarantee.

    Sorry if this sounds harsh but the banks are a business too.

    Chances are you have no history of borrowing for property or other business success stories so your potential lender has to consider why.

    My suggestion is that you both start saving you money in a big way if this is what you want to do.

    Create a plan and create a business partnership agreement or you will be in even more pain because friends and business don’t always go well.

    I am happy to help you along the learning process as there is a lot to learn as you don’t know what you don’t know.

    #1177371
    Infest
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    My name is Michael.

    We want to purchase an already established place as we want something that’s proven it works (Nothing is proven, but we won’t change much at first – so hopefully stays the same revenue wise)

    It’s a very daunting process but I am really excited as we already work a LOT of hours (70+ a week) and I think putting that effort into our own place would be very rewarding.

    Thanks for all the advice so far, can’t wait to hear more :)

    #1177372
    LucasArthur
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    Hi Michael

    Am sure that there will be some finance peeps pop up, although to be honest they rarely put their nose in here as most people seeking finance of late on FS have no assets to secure against (as you state).. and to be frank, an asset is RESIDENTIAL OR COMMERCIAL bricks and mortar with equity – nothing else to the level you are potentially seeking.

    Kelly’s advise, as usual, is spot on and not harsh at all.. just factual, especially since the GFC hit as the banks are gearing their business revenues on deposits more so than lending and risk tolerances are much less at present.

    There are some things you could consider, as will the banks, if deciding to go ahead which will also include what Kelly has suggested meaning to save save save and have some money to put into the setting up of the business itself. This is referred to as hurt money, at the moment you appear to be asking the bank to contribute 100% of the hurt money for you dabble in this business. Not trying to be offensive re the ‘dabble’ although they have no assurances of return and banks hedge the bets there way, they want to know for sure they will be paid and if not it is recoupable. Unfortunately, business assets (other than commercial/residential as previously mentioned) are not considered assets for the bulk of a lending operation. They can be used, sometimes, for lending against themselves.. eg you buy an oven and loan against the oven (cant think of term right now but there is one for this) and so forth.

    To be looked at favourably, and i know you dont want to hear this, the bank wants to see:
    a. considerable hurt money from you (bones in the game)
    b. security for that sort of funds (unsecured $50k is rarely if ever given of late)
    c. history and stability of regular income from directors/partners (your ability to earn should you have to return to the game if business fails)
    d. Proven history in this type of business (being chef would surely count)

    In todays climate i feel each would need to be met to even be entertained at present for the sums of $50k

    As your query is quite limited with info, something you may also want to consider is if one of you can stay employed as this would also look very favourable in the banks eyes as you have funds coming in to contribute if there are any shortfall.

    Another note: any sums you provide the bank as previous revenues of the business will be severely cut down (or sensitised) for the purposes of profit/loss etc

    Yet another point, how do you intend on operating the business from an initial cash flow perspective? that is, is the $50k lend purely for business purchase or do you need to borrow more to cover initial SAV of business and so forth?

    I know i have added more food for thought than answers, but hope its provoking something to consider.

    Cheers
    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1177373
    Infest
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    I do have 2 residential properties that I could use to secure a loan, but the person I’m going into business with doesn’t have anything to contribute in that way.

    Just wondering, all the takeaway shops you see around, how do they all do it? Some people have said to get personal loans but then doesn’t that negate tax deductions?

    I’ve got a lot of research I need to do haha.

    We want something that we can cook what we want, how we want. If we’re not happy with produce we’re getting from a supplier, we change. Between me and her, we want to run front of house and back of house, both of which we’ve done, successfully.

    Loan wise, is it an option to apply for 2 separate business loans on the one business? CBA offers $50k unsecured.

    Taking this all on board and I thank you for your replies! Keep them coming :)

    #1177374
    LucasArthur
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    Hi Michael

    Honestly, sounds like you know what needs to be knownand have some more peculiar queried. Could be wrong though.

    Meaning, you have residential yet unwilling to use. Reason not to use is due to partner not having security? Partner doesn’t need security from a banks perspective if your equity is sufficient, unless this is YOU not wanting to be the only osrtmer securing it. If this is the case this is something you need to be vlmgortable with, and of not comfortable with it imagine how a bank will feel if asking for unsecured as you are unwilling to have any skin in the game and want them to take all the risk?

    Furthermore, nobody has said that banks do. It offer $50k unsecured as you already sppear to be aware that the CBA does but the feedback has been about the info you have provided and if you’d get approved and also staying about security. Although the bank ‘offers it’ doesn’t mean they just ‘give it’.

    It’s s bit like lotto, I know there is the possibility of winning millions of dollars but I must have the right numbers (or criteria) or even more appropriately I know banks can lend millions upon millions to one person to buy. House although the likelihood of average joe blo being approved is nearly never die to serviceability issues.

    This $50k unsecured tend to require history of budiness (you’ve owned the business not buying the business), generally existing client of bank and generally have a relationship with that bank already. New to bank rarely gets large loans unsecured.

    Lots of things to add although ultimately I believe it is going to require some out if box thoughts from yourself if you progress. This may be easier if you seek advice from an accountant and also by speaking to the banka directly, because everyone in here can ot speculate (based on personal experience) and the bank
    Is the only answer.

    Reason for accountant: to discuss personal loans and tax implications. You could do personal loans and lend it to the business with interest able to be written off etc. but I will tell you this, the moment you tell the bank you want an unsecured personal loan to set up a business they will more likely walk away because personal loans are not meant hot commercial purposes.

    Reason for bank, cod they have the products you are seeking are are ultimately the only ones to answer most of your lending queries.

    Lots of info, not negative just to the point on what can and can’t potentially be fine.

    Cheers
    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1177375
    LucasArthur
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    Oh,

    Forgot to comment on your query about how other take away shops do it? Other than this being something along the lines of ‘how long is a piece of string’, inky experience most take away shops (small family owned fish and chips or burger shops etc) have been started with CASH and the successful operators either a) keep that first business and build upon there empire one at a time or b) flip the first business for a profit and reinvest a small amount (again cash) to start another whilst using their profit to buy properties (commercial or residential).

    Other than cash to start, some foodie places for young ones starting out have received a hand from their parents or used property to secure any lending required.

    Again, fromy limited experience and discussions on this topic almost all I know have saved and started with cash.

    Curious though, and asked this in my first comment, are you intending on borrowing for the business value PLUS initial operating expenses?

    Cheers
    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
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