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small business loan

 
Posts: 81
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does anyone have experience with applying for a small business loan? any certain places to look for . how to i go from wanting to open a food truck to actually working for myself and operating a food truck?
 
steward
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When you say 'food truck', do you mean a truck selling produce, or selling prepared meals?

Rules/regs would be different for either of them. Each state/county/city has their own rules governing such operations.
A lot will also depend on what is subject to sales tax in your region. Some states tax groceries, and I believe they all tax prepared meals. If you are selling non-taxed items, it is much easier to set up...one less big hurdle to jump over.

As far as getting a business loan, you will need a detailed business plan (with facts and figures) before anybody will talk to you. From my experience, the only people who can get a loan are the people who don't need one. If you are wealthy, everybody wants to loan you money, but if you are poor, they pretend that you don't exist.

 
Kelson Water
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im thinking a food truck or food cart that sells local carrot juice and/or local bean burritos.

i somewhat remember hearing on npr about organizations that coordinate individual investors with small business. the investors make micro-loans to small business at lower intrest rates than banks.

i am almost certain i have heard of this method of loan before.


yeah. "things" have changed alot since i heard about it maybe six years ago, though i am wondering if anyone has seen anything like it since.

thank you for the thoughts
 
pollinator
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Learn how to make a business. You're going to be an entrepreneur! There are schools and courses for just this thing. Don't know what resources you got near you, but look around. What I learned back when is that doing anything at all requires pushing your nose out there and talking to a LOT of people. You want to learn stuff. You want to arrange agreements. You want to buy stuff. You want to get you name out there to customers. You want to network so you know what's happening in your chosen field. Look at Paul, he's doing it right in front of us all. [edit: To be clear, I refer to Paul's frequent solicitation for input and his continuous efforts at connecting w/people; don't have a clew about his banking...] You'll do it different, but business is all about people and generally speaking the more the better - with obvious caveats. One trick my teachers taught was that you must be able to answer the question "what's your business" and answer it well in 15 words or less - something like that, been a long time. The point is distill your essence so you can put it across fully and with confidence in one or two sentences. You really want to make it possible for people to hear you and also understand quickly, clearly and easily; muchos wordos don't cut it in a face to face opportunity.

Another thing I learned is that the one single most important startup tool is the BUSINESS PLAN. Required. No shortcuts. No hiding and wishing and dreaming. BUSINESS PLAN. It teaches you the facts of life as you make it. Start to finish, every detail, contingency plans, prices, wages, equipment, next years gas price, the works. It shows you and others that you're serious. It's your primary tool to get funding.

Business ownership is not a job, it's a vocation. It will be 24/7 for 3 to 5 years, 60-70 hours/wk - or more. For a long time any minimum wage grunt will be making more money than you on an hourly basis. If possible find a small group of people starting up just like you; think support group, trade war stories, tips, all that stuff. Helps the psych.

Know that you are embarking on one of the most truly American traditions and it need all you got one way or another. The above is a laundry list of things that will give you an edge, improve your odds - take what you want and run with it. <g>

Rufus
 
Rufus Laggren
pollinator
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And your question:

> biz loan

You look everywhere. Friends, family, members of your church, big bankers, little bankers, your land lord... Re. banks, be _sure_ to shop around. Policies vary widely. Per above it's pretty much required that you have a really complete business plan. No biz plan = no thought to most people and pretty much they're right. Most new businesses are family funded. Bankers should be vetted but it's rare to find any enthusiasm there. But they hung out the shingle so go make them earn some of that money they make by talking to you. Get as much info from them as you can: advice, leads, references, anything they can say could help later.

You basically want HELP. Help comes through people. So we're back to my free advice above. Talk to everybody (do try to talk sense, though); everyday, everywhere. Make connections, friends, even acquaintances are good. If you don't have eidetic memory, keep notes, organize the notes and follow up on them. I doubt very much Facebook will help you much here, but you should probably establish a presence there so you can put it on your cards. Oh. Cards. Meet people hand out cards. You're a businessman now.

Rufus
 
Kelson Water
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thank you=)

 
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You are more likely to get money if the business is already generating an income, even one very modest. Even if you are just doing the very basics. Then you can get a loan and expand to a point where you even make a decent hourly wage/profit.

Also would help to have all possible contracts negotiated.
 
Instructor
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One potential source for loans of this type might be the Program Related Investment type from foundations that Eric mentions in his podcast.

I'm not sure where to look for this PRI type, perhaps Eric can add some details on this.
 
Kelson Water
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i will plan on listening to the pod cast though yeas, it would be fine with me if my question about loans was answered directly here by Eric


=)
 
steward
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Here's a bit of a repeat of what John, Rufus and Josh said, but maybe a bit helpful about what not to do.

A handful of my small business clients applied for loans at regular banks and were turned down. I was not involved in the bank loan application process, though I think all of the rejected applicants had these factors in common:

  • fairly new - only 1-3 years history
  • low profit margins
  • little or no assets as collateral
  • .
    One was able to get a loan from a relative.

    One was patient and eventually got a very small loan from the bank (+/-$500) to begin building a business credit track record.

    Other businesses have used credit cards to finance early or low cash periods. (Not really recommended.)

    Note also that if your food truck is considered a restaurant, the failure rate for restaurants is crazy-high - I recently heard that 9 in 10 fail. So, I'd recommend start scrimping, saving and setting aside your own funds!

    Kelson Water wrote:
    i somewhat remember hearing on npr about organizations that coordinate individual investors with small business. the investors make micro-loans to small business at lower intrest rates than banks.

    i am almost certain i have heard of this method of loan before.



    The Slow Food movement has spawned a Slow Money movement, which might be what you heard about on NPR. Besides the PRI Neil mentioned, I've been wanting to learn more about BALLE / Be A Localist. Perhaps they might have some links or resources for you.
     
    Author
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    Many options many already covered here.

    Regular banks.
    Friends family credit cards.
    Put together a CSA model and have people buy shares ahead.
    Join a small business program with lending options. I started my seed company that way - went to a class every month and that same group of farmers had a lending pool. This group is now called Accion USA.
    I know more about farm specific loans which I addressed in another post.
    There will be at trainer at FPC who is writing a book on creative financing for food businesses, Elizabeth U. Send mean email at toensmeier AT gmail and I'll pass on her info. She worked for Slow Money who would definitely be someone to talk to.
    Also do order the fall issue of The Natural Farmer which consists entirely of excellent profiles of creative financing of food businesses, including two examples of million dollar loans including High Mowing seed company.
    Goodluck!
     
    pollinator
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    I would start without a loan. I think at least half of the start ups fail and then you have the loan and no business. I would safe up for a very old truck. When you are talking about food truck I would not go fancy with burritos. I lived in an inner suburb and there was an old man with his son and they sold their produce. They came once a week at the same time had a bell an cried potatoes, strawberries vegetables. The son had to bring the potatoes in the cellar. They made a good business even there were a lot of greengrocers and markets three times a week. In Greece we saw the same, but they stood at certain corners rather than driving around and they had somewhat more choice.
     
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    Don't borrow money, for nuttin, never. It is a sure recipe for failure for most folks. Start small, use old crap. The quality of the product and your ability to supply it will lead to success or failure.
     
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    I have started 8 businesses from scratch over 40 years.
    There is nothing wrong with borrowing money
    = if its  good borrowing IE Home etc
    - affordable in the worst case scenario
    Bad loans are
    - for holidays
    - party

    A business plan is a must and you need to do that yourself, using templates available.
    You need to do the plan because its your business and you need to be on to everything about it.
    DO NOT have somebody else write it, you will learn nothing

    My best advise I think its to start small, but look around and take notes of what others are doing.

    Once you have it running, obtained figures. learnt from mistakes, that when you think about borrowing more.
    Think of an improvement that will make you stand out.
    Do not start a race to be lowest price.
    Maybe start with just one product and as you earn money build up there.

    I think borrowing from friends or family is a disaster waiting to happen, non business people have different expectations.
    Once it is up and running with one product, then think about bring in outsiders, but have it well documented.
    hope it works out
     
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    I was an entrepreneur at age 29.  I sold the business at age 40 and made enough to invest and retire on a middle class income for the rest of my life. I've had "business loans".

    Most here are sugar coating a bit.

    1st:  A "business plan" is for you. Banks don't care.

    2nd: Use your equity first. As in equity in your home, car, or whatever. If you do not have confidence in taking the equity out of your home and using those funds, then why would anyone else loan to you if you won't loan money to yourself? Tap any equity you have.

    3rd: The term "business loan" is very misleading. You will sign your name, you will be responsible for the debt, you will only get out of that debt by either paying it off or filing bankruptcy.

    The time to obtain a loan in business is when you don't need a loan.

    I obtained loans in business by being able to buy broken down production equipment and repairing it to use. I paid cash out of my pocket for the equipment (pennies on the dollar), paid cash for the parts I needed to repair them, and repaired it all myself (I'm an engineer). Several pieces of production equipment were worth $50K-$400K once I worked my magic on repairing them. I took out a $250K "business loan" on the equity on the equipment/used those as collateral. I might had have had $75K in cost (and a lot of my time) into repairing them but they were valuable after I refurbished them. I was using that equipment to run production with at my manufacturing company. It was all "bought and paid for" so the bank used it as collateral.

    About being an entrepreneur. I had $280K cash to toss in as startup/seed money. I had already burned through $100K+ before I landed my first customer.  I was 29 and literally started from my garage.  I worked in R&D as an engineer for Kodak, I was a lab rat so they let me do my work on 3rd shift. I worked 3rd shift for 3 years and grew my company full time during the day for those 3 years. I had 13 employees before I ever took a dime in pay from the company. I quit my engineering job at the start of my 4th year in business. I took a starting wage at my business of $12/hr but was paying employees at the time $30K-$55K/yr. I worked 16-18 hours a day for 3 years without pay (between business and my engineering job) just to give the business a fighting chance to succeed.  I then worked 16-18 hours a day at my business (after I quit my engineering job)  for the next 8 years until I sold it.

    I had 120+employees during boom times but typically always had 50-60, and during super busy times I had 300+ (with 180 being temps for 13 months) and leased a 28K sq ft facility. I never paid myself over $85K a yr but had revenue of almost $5 million/yr. When I sold it I did not owe a dime besides for maybe $10K on a credit card I used for business. I was all about establishing equity and selling at age 50 and retiring....I made it out 10 years ahead of schedule.

    I  highly suggest you read the book "E Myth".  It's a great read if you are thinking about going into business. It shows you what being an entrepreneur is all about. It's been 19 years or so since I read it, but it still rings true. One example in the book is about someone that is a good "baker/pie maker" and that person wants to start their own business baking pies. That person in essence is only creating a job for themself, they are not starting a business. It would be wise for that person to keep their job.  A business person that can run a business is who starts a business, not a pie maker. What does a pie maker know about marketing? Sales? Accounting?  Overhead?  Profit margins? Cash Flow, etc, etc etc?  And are you going to be the manager over people too? Do you still expect to be able to "run production" (baking pies) and do all of that stuff too? What about attending PR events like Chamber of Commerce meetings?  

    To continue playing the Devil's advocate here, why hasn't someone else with the cash simply bought a stand like you want to buy and hired an employee to run it?  If there was money to be made (I am talking money to be made, not creating a job) then those in the business world would be all over it.

    Most fail in business because they are clueless.  You either have to have a superb product that everybody wants and nobody else offers or you have to be the slickest used car salesman in the history of the world.

    I truly wish you all the best. True entrepreneurs are viewed by me just the same as I view other combat vets (I am a combat vet (Gulf War 1))...both earn my respect because both are tough and not many get to experience either.

    Please remember that you are starting a business not creating a job for yourself. Sure the 1st few years may find you running the stand....but your goal is to hire someone to do that for you. Then you buy another stand, and another....then you franchise your brand.


     
    I found a beautiful pie. And a tiny ad:
    September-October Homestead Skills Jamboree 2019
    https://permies.com/wiki/118704/permaculture-projects/September-October-Homestead-Skills-Jamboree
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