On a Shoestring... Creating a Workable Concept on a Tight Budget

As the old saw goes, it takes money to make money. For better or worse, this is true to some extent; however, if only wealthy people could start businesses, there would be very few entrepreneurs.

This is particularly so in the restaurant business, since institutional financing is often scarce for startups and money is typically raised from personal resources. Everyday hundreds of people look to open their own restaurant and build a successful, long-term business. One of the greatest challenges facing these would-be restaurateurs is the funding of their new ventures. Understanding that there are a number of ways to go about sourcing and attracting the required financing, the lion's share of these new owners will wind up putting together a patchwork financing package that will include money from family, friends, business associates, and possibly the Small Business Administration (SBA).

Let's put a face on this situation: A guy or gal takes early retirement from a corporate gig to start a local bar and grill. He or she may have some equity in the house, and a savings account from which to draw. Uncle Bob, Mom and Dad, and a few friends want to invest as well. The owner knows it will take several months to begin generating positive cash flow, so he needs something set aside to tide him and his family over until the business gains momentum. This is not uncommon.

Be aware that undercapitalization is one of the leading causes of restaurant failure. You need to pad your budget to allow for contingencies. That said, even Donald Trump's resources are finite, and the difference between success and just another failed attempt may be resourcefulness -- an absolutely indispensable trait of winning entrepreneurs. This article will explore ways to open your new restaurant on a "shoestring" budget while still producing the desired result. We'll look at methods to stretch your capital budget dollars and find "hidden" sources of funding.