Thursday, April 2, 2009

Sense of Urgency

Jane and I recently met with a banker to talk about loans. We already knew that a Small Business Administration (SBA) guaranty would probably be required, and that it would take a while for the government to process our loan application. What we didn't know was that we'll need to be sufficiently funded, and have a location picked out, before we apply.

According to the SBA, banks typically like to see equity account for at least 25% of financing. That means if our expected startup cost is $800K, Jane and I will need to come up with $200K before we can apply for an SBA loan.

Location-wise, we won't be able to sign a lease until we've received a loan. We'll definitely need to have a place picked out, though, and have it thoroughly inspected (with the help of our trusty architectural team) so we'll be able to claim a specific renovation expense instead of a broad range.

To meet our goal of being fully capitalized by the end of May, Jane and I have a lot of work to do. The SBA can process a loan application in two weeks, but they're swamped with applications right now. Hopefully we'll be able to raise enough investment capital and choose a location by the end of this month, and hopefully the following month will be enough time for the SBA to make a decision. At least we picked a suitable political climate for audacious hope.


PJ said...

I feel ya! You need money to get a location, but you need to know what location you want to know how much money you need. If they don't coincide... well ya, it's hard!

Will you guys have the funding in time? How's the location look?

Joe said...

No location yet. We have six places we're considering, but they all have significant drawbacks. Hopefully some new listings will pop up in the next couple of weeks.

Investors want to hold onto their money as long as possible, which is understandable, so I probably won't know where I stand on equity capital until the end of the month.