Quote:
Originally Posted by dinoo82
... able to get a loan of $35,000? The money would be used for a start up bakery.
|
I hope you are not a Partnership, as that will be a
BIG red flag (to lender AND should be to yourself). YOU need to protect yourself AND your partner, form an LLC or Corp (C or S depending on your needs and preference)
Follow the advice above, AND I will recommend looking to 'non-conventional' sources for lending. (Small Community Lenders, Economic Development districts, City, County, Credit Unions, Benevolent Foundations, local investor groups with loan funds). It will help if you are in a 'rural' region that has USDA Economic Development Dollars flowing to it.
It is very difficult to find a lender for 'start-up' (usually they want 3 yrs profitable business that is showing solid management and good growth.)
"bakery" is a strike against you due to the statistically high failure rates in food service businesses. (Don't take this personally, but be prepared for an uphill battle in both lending and operation)
You will need a very indepth business plan with substantiated projections (3-5 yr). Lenders will require life and disability insurance on the principle baker, business leadership, and guarantor of loan.
Owners must have a 20-30% equity stake in entire capitalization, and as mentioned 100% of loan proceeds covered by collateral. (lenders discount assets significantly to assure recovery of their $$).
Rate, For a start-up business, you will be paying
Prime + 4 to 5% (or more) =
8.25% today 25Mar2011
Remember that commercial loans have a SHORT lending period, usually 3-5yrs, You can usually renegotiate at new rate w/ fees, or take your lending needs elsewhere.
I know it seems like robbery, but the lenders insist it is the cost of risk. They are obligated to be robust fiduciaries of their depositors.