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How much debt did you incur to open and what terms?

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snowman

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Inspired by the % profit thread…

How much did you go into actual debt to open your doors? What is your term on the loan (years/months and monthly payment)? Also, did that debt include the building or do you lease?

I keep dreaming about cashing in my 401k and taking what’s left after taxes and penalties (guessing 100k) and opening a pizza restaurant. Luckily, my wife is grounded in reality and won’t let me.

I’m just curious what kinds of risk you guys took.
 
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snowman:
Inspired by the % profit thread…

How much did you go into actual debt to open your doors? What is your term on the loan (years/months and monthly payment)? Also, did that debt include the building or do you lease?

I keep dreaming about cashing in my 401k and taking what’s left after taxes and penalties (guessing 100k) and opening a pizza restaurant. Luckily, my wife is grounded in reality and won’t let me.

I’m just curious what kinds of risk you guys took.
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I have not opened from scratch, and if you are risk averse I would not recommend it.

But my first purchase, I received a 10 year loan at prime plus 1% (at the time around 7.5%). I put 30% down.
 
With a down payment of $100k or so, there are many, many opportunities in the Dallas area.
 
I bought an existing business for 85000.00 in 1999 I sold my house put down 35000.00 financed the rest and paid it off in 5 years. I think the interest rate was around 6.5% (then seller financed us) and the payments if I remember correctly were about 650.00-680.00 a month I leased the building at 1000.00 per month. My 3rd year was a struggle because we had a major pizza franchise open in our town (9500 ppl at that time) plus 3 other restaurants! But we made it through and 2.5 years ago we moved to a larger location added dine in and havent looked back our town has grown (11000 ppl) and so have we.
 
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I took on zero risk…

I got a credit card offer from Bank of America with a $35,000 limit @ 6.9% interest. I told them I wanted several checks as they were to be used for start up costs and leasehold improvements (it was a signature loan so it didn’t matter what I wanted to use the money for). I got a $60k loan from a local bank (SBA guaranteed) to cover all equipment and the franchise fee. I “guaranteed” it with the money that was borrowed from Bank of America by depositing it all into the business checking account.

Total personal investment was $0. Total overall investment was $95,000 to open a brand new restaurant. Interest rate on the credit card went to 9.9% since I withdrew the entire amount within a month. The term is 7 years. Interest rate on the bank loan is 10.5% for 5 years. Total payments for both loans is about $2,000/month. -J_r0kk
 
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I bought out an existing piiza place for $28,000 3 years ago. We acquired an SBA guaranteed loan 7 years at prime (8% floating), which required a lien on my house, a life insurance policy with bank as beneficiary, and personal guarantee on the loan . . . .no LLC signatures here.

Payment were about $670 a month, and we just secured a loan to pay that off with better terms from a private lender (10 years at 7% fixed) to get payments down to $240 a month.

We have been finalizing a build-out plan for a new location that will require $50,000 to $60,000 improvement costs on my dime. We are looking at a private party loan (no bank) for 10 years at 7% if it all pans out.
 
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Thanks guys. By “terms”, I meant only length of time. You can certainly offer up interest rates, but I figure that’s kinda personal. I was really looking for the “5 year loan, paid it off in 3” kind of things. One of the biggest fears is the debt payments ruining the profit potential.
 
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“j_r0kk” said:
I took on zero risk…

I got a credit card offer from Bank of America with a $35,000 limit @ 6.9% interest. I told them I wanted several checks as they were to be used for start up costs and leasehold improvements (it was a signature loan so it didn’t matter what I wanted to use the money for). I got a $60k loan from a local bank (SBA guaranteed) to cover all equipment and the franchise fee. I “guaranteed” it with the money that was borrowed from Bank of America by depositing it all into the business checking account.

Total personal investment was $0. Total overall investment was $95,000 to open a brand new restaurant. Interest rate on the credit card went to 9.9% since I withdrew the entire amount within a month. The term is 7 years. Interest rate on the bank loan is 10.5% for 5 years. Total payments for both loans is about $2,000/month. -J_r0kk[/quote

hey jr0kk how did u managed to get the loan from the bank? what type of loan was it and what did they need from you in order to approve you? if you don’t mind me asking
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RaymiR writes:
hey jr0kk how did u managed to get the loan from the bank? what type of loan was it and what did they need from you in order to approve you? if you don’t mind me asking
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Well, it wasn’t as easy as you might think. The bank I actually got my loan from was the 5th bank I went to. I’d actually gotten turned down by 4 others. It’s an SBA guaranteed loan.

I presented him the facts:
  1. I had $35,000.
  2. I needed an additional $60,000
  3. I showed him my business plan with my resume`.
  4. I told him I would open my business checking account at his bank and would push over $500,000/year through his bank.
He believed in my plan. More importantly, he believed in me… and got it done. I had my money in less than 2 weeks.

The $35,000 was deposited into my business checking account I started at his bank. He asked for a detailed list of the equipment, sent the entire package (business plan, credit reports, equipment list) to an SBA guy that he knew and they ran it through.

I wish I could say there was a magic formula. I’m sure there is but I’m not smart enough to figure it out. I guess I just presented him with a vision that he believed in and he made it happen. -J_r0kk
 
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good for u… you are very lucky… it’s so hard to get a business loan now days… even when u have good credit… I’m trying to get things ready my self so I can give it a shoot…
 
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