Tried and True Methods to Obtain Capital to Open a Bar

Now that we are starting to see a light at the end of the tunnel that is COVID-19, many restaurants and pubs are starting to reopen to the public. Eager customers who were previously having beer delivered to their homes are now considering heading to their favorite drinking hole. If you are looking to open your own bar, this may be the best time to get started.

While the idea of opening a bar and making money to do what you love may seem enticing, owning a business is not without its downsides. You will need to be all-in on your investment as you work weekends, miss out on vacations, deal with rude customers, and, of course, search for the money you need to start the bar in the first place. Let’s look at both some traditional and innovative ways to satisfy the financial needs of your business venture.

What’s Your Business Plan?

The first thing you want to do when deciding to open a bar is create a business plan. Doing so will enable you to find out exactly how much money you will need, and it will also give you some insight into what running the bar will cost and entail. If you are taking out a loan, grant, or asking friends for funds, you will not only need to know how much it costs but also how you will make money to pay back the investor if necessary.

Consider the type of bar you want to run. Will it be a neighborhood bar where folks come just to relax and have a drink, or are you looking at a sports bar that would require additional menu items and expenses for large televisions and technology? You will also need to consider the city where you will plant your roots, your target market, and demographics. And you will need to determine if the people you hope to turn into customers live in or near the area.

Opening the bar is one thing. Planning for expenses once you are up and running is another, and you will have to account for that in your loan request. In addition to lease payments and utilities, you will also need to pay for licenses and permits, inventory, payroll, insurance, and more. Once you know how much you’ll need, enter it into an online loan calculator to see if you can manage the monthly payments.

Loans and Grants

Once you have all of your financials figured out, your first choice may be to apply for a loan. If this is your first business, then you should consider applying for a loan through the Small Business Administration (SBA). This is a government agency that provides loans to entrepreneurs to help keep our economy chugging along. There is less risk in this type of loan because even if you default, the government will pay back a portion of the loan.

You also have the option to apply for a personal loan through your bank. In either case, you will have to explain your business plan and how you expect to earn money to pay back the loan. If you need more money than the bank is prepared to offer, then you can try putting down a larger down payment, or if poor credit is the issue, bring on a co-signer.

Another option is to secure a grant for your business. You can typically find applicable grants through the SBA or on your state website. The good thing is that most grants do not require repayment. However, they may also not be enough to cover the costs, and you may need a supplemental option.

Other Ways to Secure Capital

If you have been through every bank and lender in town and you can’t seem to secure the funds you need, then you may have to go through more untraditional means. One way might be pitching your idea to family and friends and asking them to invest. If they are interested, have the agreement confirmed in writing. An even better approach would be to have some trusted friends or family members become co-owners with you.

You may also consider crowdfunding. This is the process you’ve likely seen through websites like Kickstarter and Indiegogo, where you pitch your idea to the world and see who wishes to donate. To garner more interest, offer rewards to those who donate specific amounts, like a free drink on opening day or their name on the wall.

Another option is to pitch your business to an angel investor. These are typically third-party investors who are looking for the next big opportunity, and in return for their money, they get a share of equity in your company. The good thing about this setup is that they are vested in your success, so they can offer tips and advice that can help your new bar thrive.

Opening a bar is a dream for many entrepreneurs, and with proper planning and realistic expectations, a hard worker can make the dream come true. It’s not easy- no successful small business venture ever is. But with the proper plan in place and the necessary financing arranged, you can be well on your way to the entrepreneurial pursuit you always knew was possible.