Question:
Is there any private financing out there and how can one find it? I am getting no’s from all the banks and have tapped all my family and friends. I still need to raise between $50,000 to $100,000 and don't know where else to turn.
– Josh Lawson, Owner, Bad to the Bone, Craig, CO
Answer:
Banks are notoriously skittish these days about lending money to independent restaurants—that is no secret. People talk about restaurant failure rates of up to 90 percent. While the higher numbers are largely a myth, the perception of restaurants as high-risk investments remains.
In this environment, independent restaurateurs are getting creative. Here are a few examples I have seen lately:
- Many people have dreams of being a restaurant owner. Hannah Hoffman, chef-owner of Cibo per Strada, an Oakland, CA based gourmet food truck and caterer, leveraged this fantasy to bring a number of small investors on board at $10,000 each. Her pitch was over a series of tastings, of course.
- New microlenders focused on food businesses are popping up. The New York Times recently covered one started by the Boston Beer Company (the brewer of Samuel Adams) called “Brewing the American Dream.”
- Banks increasingly want to see that you have skin in the game. Since you have property, and perhaps additional assets like a house, you may be able to get a mortgage or even a line of credit that is not a business start-up loan per se, but along with your other funding, may put you over the hump to get started.
Jamie Tiampo, founder of eatTV.com and seefoodmedia.com, and a partner in dell'anima and L'Artusi restaurants in New York City, says, “Friends and Family can be a great place for startup capital, but they often come with complications not found with unrelated parties. Unfortunately, $50-$100K isn't usually enough to interest private equity investors or venture capital, and is more than most banks are willing to cough up in unsecured loans in a post-Lehman era... A lot of chefs and restaurateurs often find startup funds from a high-net-worth restaurant patron who believes in their concept and loves the food. There are also local angel investor groups who meet on a regular basis who may be willing to listen to your proposal.”