Starting a Coffee Shop – Funding Sources

Besides having a coffee shop business plan, you need to have your funding source(s) defined when starting a coffee shop. There are many options available for you, but we will talk about the most common.

SBA – So many sources push SBA loans, SBA LOANS, SBA LOANS! Let me first say, the Small Business Administration loan program is awesome, if you can get approved. Although they have loosened up some of the requirements lately, it is still somewhat tough to get approved.

First of all, the government does not loan the money. The standard program is a bank loan though there are some micro loan programs available that use funds from capital groups. Most of these loans are normally collateral loans, and they are backed by the US government similar to HUD and FHA home loans. What that means is that if you should happen to default on the loan, the government will reimburse the bank for certain percentage of the loan amount. That is good for the bank, and good for you if you can qualify for one of these loans. They are tough to get I’ll say again, and there is a lot of paperwork to fill out and file. You also have to have good credit, very good assets, low debt to income ratio, and unencumbered collateral.

Some SBA loans can take some time to get approved and then funded, but if you are approved, they usually have up to a 7 year repayment period and a favorable interest rate. It’s best to talk to an approved SBA lender for particular details, as the bank calls the shots, the SBA only backs the loan. You can work with a local SBA office as well for details or go to¬†http://www.sba.gov

Personal – This is the easiest form of financing, but less likely for most people. Try to put all you can into this venture from your own pocket without ruining your marriage, family or jeopardizing your home. If you do get financing, you will be required to pitch in at least 25% of the total you need to start your coffee shop anyway. The more you have in, the more the bank knows how serious you are and more likely they are to fund you. They also know the more you have in personally, the less likely you are to run when the times get tough.

Cash is king. Liquid assets are a great source of funding. Liquid assets are assets that can be converted to cash quickly like stock, bonds, or a 401(k). I only recommend any retirement plan as funding as a last resort. This is what I did when I ran into capital problems and could not get a loan because I was maxed out. It’s best though to leave this money alone and search out other options.

Real estate equity – This is a good source of funding if you have enough equity in your home or another piece of real estate. The interest rates are usually favorable as well.

Friends and family – if you cannot put in as much as you need to, friends and family are a good way to raise additional capital. Just be sure it’s clear how you structure the money deal: are they investors, partners, both? Are you issuing them stock in your corporation? Whatever the deal, get a contract attorney to draft the paperwork to make it legal. It will cost you about $500-1000 or so for this service and when it’s done, you will be glad you did it. Spell out all details.

I once saw a guy invest in a restaurant and the owner wanted a loan only, so they had a repayment plan but not any written contract stating what was what. The investor assumed he was now a ‘partner’, as in part owner and started showing up daily, scheduling meetings, wanting to rearrange the store and making menu change suggestions. That was not a pretty situation!

Investors – most high dollar investors want to see success before they pony up cash to someone they do not know. However, it can happen at the beginning though. You need to surround yourself with PWM: People with Money. This can also be the friends and family route. Ads online and in the paper are ok, but will most likely bring you more weirdoes than real investors.

Join local business organizations, talk with the Economic Development Corporations and chambers of commerce in the areas you are looking to open and ask them for investor referrals. A lot of investors shy away from seeding food and beverage related businesses unless it is a liquor establishment but they are out there.

Non-traditional lenders – aka private equity firms, capital groups fall into this category. Their guidelines are less stringent but again, most want existing businesses looking to expand. They also are not normally looking for food industry investments because the risk is too high and search out tech type companies that have a higher return. However, this is again certainly not the law.

Banks – traditional lenders, they are tough ones to get on your side if you have NO money to kick in or marginal to bad credit, and no collateral. Sometimes just a lot of work, a lot of talking and an awesome coffee shop business plan may just be the thing you need to get them to help you. A banker on your side that believes in you, and you have established a relationship with could be what stands between you and a funded loan. Treat them like gold.

Credit Unions – usually most do not do much in the way of business financing, but for those that do, their guidelines are slightly more relaxed than a traditional bank, like those for personal financing but you will still have to qualify.

Credit Cards – I am not recommending this option! If you do use them, be sure they are a very low interest rate, even 0% with some of the introductory rates some banks give. You may want to have back up cash in case you run into problems with one.

Be careful, however because after the intro period is over, the rate may go higher than you think if you are still carrying a balance. Also, if you are late one time, you run the risk of getting rate-jacked. That is when the credit card company jacks the interest rate to the default rate, as high as 29%! Yes it should be illegal but unfortunately for us, it is not. They can also raise the rate whenever they want regardless if you are in default or not. It’s in your agreement with them; i.e. the fine print. Once the rate is up there, it is very difficult to get it lowered again. Chase is the most famous for this. Just be careful!

Credit cards are good for purchasing however, if you get the rewards points or airline miles programs. I have several I use for purchasing and have gotten several airline tickets and thousands of dollars in gift cards for using the cards and getting points. Besides that, you can effectively buy more time for your accounts payable if you plan the billing dates correctly.

So whatever source(s) of funding you choose for starting a coffee shop, be sure you know what you are up against. Do your research and talk to the people that can help you. Stay focused, and well informed regarding your planning stages. Be sure your prospective lender gets a copy of your coffee shop business plan. All lenders will want to be sure you know what you are up against! Good luck.

Benefits of Drinking Coffee in the Evening

Do you love drinking coffee? If you do, you are going to love it more when you learn about what it can do for you and your health. It’s no secret that a nice cup of coffee can instantly perk you up in the morning and put you in the right mood the whole day. But did you know that it can also have great benefits to your health?

Studies show that drinking coffee can lower the risk of certain diseases like diabetes, cirrhosis, and certain kinds of cancers. This is made possible by the compounds present in the coffee, the most known to help among which are antioxidants. Antioxidants also help in making your skin glow, and in consuming the right amount of coffee every day, you’ll look and feel healthier inside and outside.

Of course, apart from how it benefits you physically, the mere aroma of coffee can do wonders for you already. The smell of coffee in the morning is sometimes enough for me to wake me up and energize me, let alone drinking my favorite brewed coffee.

The aroma of the coffee has also been found by studies to calm people, so if you’ve been in a daze lately, smelling your cup of coffee before drinking it can relax you already.

It’s important to note however that there is a recommended amount of coffee to be consumed in a day. One to two cups of your favorite black coffee is enough to get you through the day, but be careful in adding too much sugar or milk to go easy on the calories. And while coffee can do a lot for you, too much of it cal have bad effects to.

Too much coffee in a day can dehydrate you and increase your blood pressure. So even if you love coffee as much as everyone else, it’s always to take everything in moderation.

Those trying to diet and lose weight may actually be hindered in their progress by their coffee consumption. If you want to avoid long term weight gain you should avoid caffeine. You might think in the short term that you can lose more weight by drinking more coffee each day.

This happens as a result of the diuretic effect of coffee, you’ll initially lose water but not fat. Caffeine increases stress hormones within your body that increase the risk of hypoglycemia, or low blood sugar levels. You will likely feel hungry sooner than you should as a result of this hormone.

You also aren’t helping things by adding extra sugar to your coffee. In conclusion, research has shown that drinking some coffee may actually be good for your health. However, the same research also proves that drinking more than three cups of coffee per day may begin to increase the negative health risks that could arise.

Make sure you don’t attempt to drink more than this amount of coffee. Doing this lets you get the benefits of drinking coffee without the potentially harmful side effects of drinking too much coffee.

Coffee Can Make You Prone To Stretch Marks

Nothing beats a hot cup of coffee to jumpstart your day. But don’t overdo it. Experts say that drinking too much coffee and other caffeine-laced beverages can increase your chances of getting stretch marks.

Caffeine is a stimulant that is consumed by 80 percent of the world’s population on a daily basis. The stimulating effects of this drug make it a popular ingredient in coffee, tea, cocoa, cola, and energy drinks. Upon ingestion, caffeine affects mood, stamina, the cerebral vascular system, and gastric and colonic activity.

While the Institute of Medicine does not consider caffeine as a diuretic owing to conflicting reports, caffeine-containing beverages can increase the urinary output of some people, causing them to lose fluids.

“Your reaction can depend on the amount that you consume, the type of product, and your tolerance level. If you have urinary incontinence, you may experience a greater ‘urgency’ to urinate after consuming a caffeinated beverage. You will need to monitor your reaction and tolerance to caffeine to determine how you are affected,” said dietitian Betty Kovacs in MedicineNet.

Stripped of water, the skin becomes less elastic and dry, making it an easy target for stretch marks. So if you’re a caffeine junkie, now is the time to take it easy and drink more water instead.

“Adequate hydration keeps your skin soft and less likely to develop stretch marks. Caffeine can increase your risk of stretch marks. If you’re stuck on your caffeinated coffee or tea, make sure you balance the fluids. Drink just as much – or more – water as you drink coffee, tea, or soda,” said MedicineNet.

Improving your diet can also do wonders for your skin. To lessen stretch marks, MedicineNet advises readers to consume lots of zinc, such as nuts or fish; foods high in vitamins A and C, such as carrots and citrus fruits and milk; and protein-rich foods, such as eggs. These foods supposedly promote skin health and there’s no harm in trying them.

Of course, your susceptibility to stretch marks depends on how bad your skin is overstretched. Repeated overstretching due to pregnancy, obesity or weight loss can greatly increase your chances of developing them.

“Stretch marks are a normal part of puberty for most girls and guys. When a person grows or gains weight really quickly (like during puberty), that person may get fine lines on the body called stretch marks. Stretch marks happen when the skin is pulled by rapid growth or stretching. Although the skin is usually fairly elastic, when it’s overstretched, the normal production of collagen (the major protein that makes up the connective tissue in your skin) is disrupted. As a result, scars called stretch marks may form.,” explained TeensHealth, a project of the Nemours Foundation’s Center for Children’s Health Media.