Posted by Redline on May 26, 1999 at 18:37:33:
Johnboy - I’m sure going to look because now it’s bugging me … I remember seeing it on two different occasions written somewhere but the way I’m (not) organized it could take me years to find but I’ll try! 
RL
Is it possible to purchase a nightclub/bar with little or nothing down? - Posted by Master Number
Posted by Master Number on May 26, 1999 at 12:10:19:
I would love to own a nightclub with a lounge
for entertainment and food.Is there a way to
make this a reality by using creative financing
and can you direct me to literature that might
educate me on this particular subject? Thanks a million!
I’ve done it twice but do not recommend it!!! - Posted by SCook85
Posted by SCook85 on May 26, 1999 at 21:24:23:
I’ve been there and done that. You are buying a job, a very tedious and demanding job. What I thought was glamorous and fun ended up not being so much fun. Think about why you want to do it. You may no something about the business, but running a business is what you really need to know. Read Rich Dad Poor Dad before doing it. Don’t become the self employed person with the worst job of all.
If you should choose to do it, best of luck with your venture.
SCook85
Nicghtclubs and/or resteraunts - Posted by Dirk Roach
Posted by Dirk Roach on May 26, 1999 at 16:56:01:
Hi MN,
I have worked in many nightclubs when I was younger, and have been on the promoting side of it, and also looked into starting my own.
Personally in my own experience, what started out as a romanticized and glamorous ventures, turned very quickly to a real pain.
The same also happened with a coffee house that I later opened.
First of all, alcohol licensing is expensive. Pretty much the cheapest way around it is to open your nightclub in a building which already has an existing liquor license (like a hotel) and cut them in on the action. This can also be of great help when you start looking into liability insurance, something else which you will need either your attorney or someone who knows the in’s and out’s of it, to help you with.
As with any commercial business venture get ready to ride the fun roller costar of city politics (fun things like zoning variances etc, always seem to pop up).
Personally I got hit in the coffee house with barrier-free (the Handicap area of state government in Michigan) to the tune of 15k to rebuild bathrooms.
A lot of your cosmetic stuff can be financed, but most lenders are going to want you to guarantee the notes, unless you have an established Corp or some such.
Personally I don’t currently know of any books on the nightclub business, but there maybe some out there.
Fact of the matter is though, a nightclub and/or a restaurant can be a job. I remember working 100 hours plus a week on various issues that come up. Of course I was 22 at the time, but it still wasn’t very much fun.
The thing about starting a club is, when you work at the club, you rarely have time to have any fun there.
But that is my jaded opinion of the matter.
I do know a several people who have really made quite a go of it. However the budgets that they work with are real big numbers.
Good Luck
Dirk
Re: Is it possible to purchase a nightclub/bar with little or nothing down? - Posted by Bill Gatten
Posted by Bill Gatten on May 26, 1999 at 16:35:42:
Dear Mister Master, muster up your courage and consider the following:
Find a seller who will take, say, 35%-40% cash, and agree to carry 60%-65% (they usually will, as these business are difficult to finance otherwise). You then do a Sale and Lease-Back of all the equipment in the restaurant (i.e., you arrange to sell the equipment to a restaurant equipment leasing company, then lease it back from them). This not only gives you the cash for the down; but it also gives you a much preferred tax treatment: instead of a Depreciation Schedule, you get 100% write-off for your “equipment rental expense.” Depending upon the age, type, and condition of the equipment, expect a maximum residual value of no more than 10 to 15 percent over, say 3 years?maybe less. It’s of utmost importance too that you deal only with a leasing company that specializes in this type of equipment. A general leasing company (if they do it at all) will charge exorbitant rates, and will not give the used equipment any residual value at all ('as they don’t know how to dispose of it for a profit at the end of the lease).
If the equipment leasing company, wont give you 35 to 40 cents on the dollar for the equipment, you may need to advertise for a partner/investor with good credit or some cash?and/or get back to the seller and work out a larger carry-back. Often times they will go for a percentage of the profits over a 5 to 10 year period, rather than a fixed payment. However, whatever you do–make sure that your payments to the seller don’t start for six months to a year following COE? you’ll need that money for your “start-up error buffer.” You can also generate more cash up front by renegotiating the building lease for a longer period–to coincide with the seller’s pay back schedule–thus buying perhaps 3-4 months of free rent in exchange for the longer lease.
If all of this fails, call any body in the phone book whose first name is Tonu, Luigi, or Rocky? their rates are high and their terms are shorter, but they’ll be happy to do the transactions.
Good luck.
Bill
Re: Is it possible to purchase a nightclub/bar with little or nothing down? - Posted by Redline
Posted by Redline on May 26, 1999 at 12:59:04:
I believe that a majority of these businesses are sold with seller carryback and some of them can probably be bought for little down. I think the reason for alot of seller carryback is partly because these are tough businesses to run and turn a profit - and also alot of banks and I believe the SBA won’t loan on a bar/nightclub because they’re too risky and because they serve alcohol. (Someone please correct me if I’m wrong).
RL
It’s possible… - Posted by David Alexander
Posted by David Alexander on May 26, 1999 at 12:51:10:
It’s possible to buy anything with Nothing Down, at least of your own money. Stick around and learn. It’s not just about technique but about finding a Motivated seller.
Recently I was trying to buy one of postal centers from a motivated seller willing to carry back paper on the business, it would have been a slam dunk deal, but I was moving in slow motion.
Wouldn’t have put a dime of my money.
David Alexander
you know… - Posted by Dirk Roach
Posted by Dirk Roach on May 26, 1999 at 16:59:05:
Hi Bill I just wanted to add that in most major cities you’re going to most likely find yourself dealing with those guys in the phone book, when it comes to liquor supply’s and other area’s on the day to day. Nolt trying to sound pesimistic, but that is really just the way of the world.
Dirk
Re: Is it possible to purchase a nightclub/bar with little or nothing down? - Posted by JohnBoy
Posted by JohnBoy on May 26, 1999 at 13:58:07:
I think you can use SBA loans for a nightclub. But I would double check first to be sure.
Here are the type of businesses SBA will not allow:
Real Estated Investment and Other Speculative Activities
Lending Activities
Pyramid Sales Plans
Illegal Activities
Gambling Activities
Charitable, Religious, or Certain Other Nonprofit Institutions
As far as buying a business with no money down goes, yes, it can be done. I’m closing on my 3rd business tomorrow. All 3 were purchased without using one dime of my own money. The first one was 100% seller financing, the 2nd was 100% bank financing, and this one was 100% bank financing with using the SBA.
Anything is possible under the right circumstances.
SBA loans: What approach? - Posted by Barbara_NY
Posted by Barbara_NY on May 26, 1999 at 16:36:02:
I read your post and thank you for the info. I went shopping for a working line of credit for real estate investment purposes. One of the banks only does SBA secured loans. All expect a full business plan.
If the SBA doesn’t loan on Real Estate Investment businesses how might a business plan approach this issue to be successful? A full plan is a time consuming process and I don’t want to pour days into a project that is doomed from the get go.
Any ideas?
Re: Is it possible to purchase a nightclub/bar with little or nothing down? - Posted by Redline
Posted by Redline on May 26, 1999 at 14:55:59:
I’m 99% sure my SBA pack last year stated that they will not loan to alcohol related businesses.
RL
Re: SBA loans: What approach? - Posted by JohnBoy
Posted by JohnBoy on May 26, 1999 at 18:47:11:
SBA does offer a builders line for real estate. You just can’t borrow if the money is mainly for investment purposes.
Here’s what it says about the builders line:
BUILDERS LINE: If you are a small general contractor or builder constructing or renovating commercial or residential buildings, this can finance direct labor-and material costs. The building project serves as the collateral, and loans can be revolving or non-revolving.
Re: SBA loans: What approach? - Posted by JohnBoy
Posted by JohnBoy on May 26, 1999 at 17:04:21:
SBA will not guarantee loans for real estate investment purposes. However, if you were going to own and operate a business located on the real estate you wanted to purchase, then they will guarantee a loan for the purchase of the real estate also, but you must occupy the real estate with your business.
You can read up on SBA loans at their web site.
Re: Is it possible to purchase a nightclub/bar with little or nothing down? - Posted by JohnBoy
Posted by JohnBoy on May 26, 1999 at 16:57:58:
Do you still have that packet? I don’t think that is correct. I can’t find anything relating to a business that serves alcohol as not being qualified under SBA.
Here’s what their program states.
Standard 7(a) Eligibility Requirements:
Type of Business
Most types of small businesses are eligible. The following types of businesses, however, are NOT eligible:
(1) Nonprofit, religious, or charitable organizations;
(2) Businesses primarily engaged in lending or investment activities;
(3) Businesses engaged in real estate investment and other speculative activities;
(4) Businesses principally engaged in teaching, instructing, counseling, or indoctrinating religion or religious beliefs;
(5) Pyramid sales distribution plans;
(6) Businesses engaged in illegal activities;
(7) Businesses deriving more than one-third of their revenue from legal gambling activities;
(8) Private clubs not open to the general public;
(9) Consumer and marketing cooperatives;
(10) Loan packagers earning 30 percent or more of their revenue from packaging SBA loans;
(11) Businesses engaged in activities of prurient sexual nature; and
(12) Businesses or their Associates that have previously defaulted on a Federally assisted loan.
Unless your talking about opening a strip club or selling moonshine, I’d say selling alcohol legally would qualify under SBA guidelines.
Commercial property - Posted by Biff
Posted by Biff on May 26, 1999 at 18:06:44:
So I guess buying commercial property is out of the picture also, huh??
Commercial property - Posted by Biff
Posted by Biff on May 26, 1999 at 17:57:11:
So I guess buying commercial property is out of the picture also, huh??