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Will a Bank Finance My New Bar Venture?

Question – There was a bar that closed in my town due to the owner’s health and has been closed for over a year.  The owner did not keep good records and it showed a loss for the earlier years he owned it.  I feel like no bank is going to finance this adventure without a profit loss statement proving that the business made money, so I am pursuing a possible lease option with the owners for one year to create my own profit and loss statement  with option to buy after one year, but I probably will need a small loan for working capital.  What do you think of that?


Our Response – While it was an existing business in the past, it is now essentially a startup and banks do loans all the time for startup businesses with no historical P&L and that’s why they look to higher down payments than existing businesses. (typically between 15%-25% for a new business vs 10%-15% for an existing business)

The lease option isn’t a bad way to go and will give you an opportunity to test drive the business to give you an opportunity to get it profitable and that you want to do this long-term without taking on a huge loan. Plus, it will make getting a loan much easier, provided there is ample profit, since you now have one year of operations under your belt.

With a working capital loan you aren’t buying little that the bank can hold title to which is risky to them as well, but should be able to work out a deal by using your existing personal assets as collateral to cover the loan.