How can I establish a relationship with bankers and other investors in my community to secure a business loan?
My dream is to open a franchised hotel in the future with a business partner, but the starting cost is high. I read that a majority of the people who open a franchised hotel do it on a loan, but come up with a 30% down payment. The loan I will try to get is ten million USD, and I can get the 30% down payment through investors, as I have some people who can potentially invest enough to add up to 30%.
I am in high school now and will go to college to study business/accounting. Next year I will work at a local hotel to learn more about the business because I'm a year too young to work there now (17 yrs old). I plan to work at a hotel in college too in order to gain even more experience, and then (hopefully) get a loan and start my own with my partner.
Are there any tips to help me get a loan? I read some stuff from the WSJ (http://guides.wsj.com/small-business/franchising/how-to-finance-a-franchise-purchase/) and it said that it's unlikely to get a loan approved unless you're a prominent figure in the community or you have a relationship with a banker.
Any tips to establish myself as a prominent figure in a community or how to establish a relationship with a banker?
Another thing it said is that it's unusual to get a loan approved with unsecured collateral. My partner I don't exactly have a net worth of 10 million yet, nor do we have any credit scores because we don't have credit cards or any previous loans. Will our lack of high net worth prevent us from getting a loan? Should we buy stuff on credit cards in order to establish a good credit score?
Any tips or advice on this would be much appreciated!
You certainly have your challenges in front of you. The good thing is that you have a lot of time to realize your long term vision.
Banking relationships are just like business relationships, you will want to develop and nurture the relationship. This is done long term and with many meetings with your banker. Discuss what your long term plan is and ask what the banker will want in order to receive financial support from them in the future. A detailed business plan is an absolute must! Take the time and compile your information as you learn about the business environment. Your banker can help you with this.
To establish credit, take out some small loans over the next years and repay them as per agreement (or even a little early), even if you don't need the loan. Invest the loan proceeds into a GIC or other short term form of investment to reduce your cost. (The interest on the loan may even be tax deductible if you invest it).
Also, if the bank has a credit card, get one and use it for small purchases on occasion and pay them off when due. These easy to do items will establish a good credit history for you. Don't overdue the credit as it can overwhelm you if you aren't careful. Think of it as "smoothing the path" for your future.
Two years after your initial question, hopefully, you've had some luck and made progress with your financial goals. It's not always an easy journey!
Coincidentally, about two years ago Lending Express established itself as a leader in the field of financial technology and small-to-medium business funding solutions.
Given that your post relates so closely to the solutions that Lending Express provides, the following answer may still be useful even if you have figured out your business funding.
Regarding establishing yourself as a prominent figure in the community: as you're likely well aware, the 'community' that has become increasingly important over recent years is the online community - specifically on social media but also on other sites and platforms. The first step should be to make a website. Even something basic will do at the beginning, and you can improve it as you go. As you add content to your website, you'll want to keep SEO (Search Engine Optimization) in mind.
Learn more about SEO, here: https://www.lending-express.com/blog/how-improve-website-seo-ranking/?r=BUS&ad_ID=sa7w62bK
Of course, you'll want to then continue by making a Facebook account for your business so that you can really begin networking and interacting with potential customers and potential investors. From there, you can spread your reach to Instagram and Twitter. If you've already begun developing an online presence but haven't made a separate account for your business, be sure to do that! Maintain a level of professionalism by creating a unique brand for your business.
Regarding building your credit score and qualifying for a loan, it will take effort but it doesn't necessarily need to be a nightmare.
First off, yes, you'll want to get a credit card and use it to build your credit score. You must first learn how to use a credit card responsibly and wisely! You can do that, here: https://www.lending-express.com/blog/raise-credit-with-credit-score/?r=BUS&ad_ID=sa7w62bK
The chances of you getting approved for a business loan through a bank is slim, but there are solutions for small business owners who need (or want) financing to give their company the boost it needs. Lending Express offers a fast, easy, and FREE way to apply for business loans. There's no risk to your credit score either, which is really handy for businesses still getting their footing.
With advanced algorithms, Lending Express assesses your financial profile and then matches you with the loan provider that best fits your profile and needs. Worst case scenario, if you don't qualify, you still receive tailored guidance on how to improve your financial factors (including your credit score!) and better your chances of getting approved for a loan.
You can apply online for free and get business financing in as little as three hours (yes, really). Apply here: https://www.lending-express.com/apply/?r=BUS&ad_ID=sa7w62bK
Good luck, and do let us know if you have any other questions!
Good to see a young entrepreneur like you. In addition to the banks, there are other ways to raise capital for your business. One is to look for "angel investors" who can be partners in your business as an option for the process of having an initial capital as well as cash flow for your operation.
Research the markets where you would like to initially open your operation and see the options for raising capital. There is also the option of conducting franchise training or searching for options at the International Franchise Association (https://www.franchise.org) as this is a very interesting market and has some specific rules.
Well, I hope these tips can help you. Good luck!
Unless you have a 7 figure net worth, in addition to a minimum of a 30% cash downpayment, you will need to pledge a cash reserve of at least 12 months loan payments plus 5% of the project to cover potential cost over runs. Good luck.
The main thing that your idea was worthy of their attention, you can only contact advertising, the first impression decides everything, find the right approach and the right words. Good luck!