Loan or partnership?

paulwf

I'm kicking around a few ideas for funding a new business and would love any views on the best way of financing it; obviously I would take professional advice to back this up but just want any thoughts for now.

Basically the concept is a cafe franchise and whilst I would be putting in a lot of money myself there would still be a shortfall. A business loan would not be an option due to a lack of security (i.e. property) to back it up with.

The first option is asset finance. The advantage is ultimately I would have 100% ownership of the business. The disadvantage is on a 35K loan over 3 years there is likely to be 10-20K of interest to pay (!) and cashflow would be impacted to some extent as of course there is the monthly loan repayment.

The other option is to get a silent partner to provide funding. This would help with cashflow and I estimate it would take 3 years plus before their dividend would outweigh the interest on a asset financing. If all goes well the partner would also get their investment back plus more when the business is sold.

Two questions about a partnership: 1) can I propose their percentage return up front or does that have to depend on how much each partner invests in the business either now or down the line? 2) As I would also be the business manager as well as the business owner can I draw a managers wage at the rate paid by other franchise units?

Many thanks for any advice!

ukbill69

Don't do partnership ever, you will regret it. Trust me, done it and always goes bad.

Horace

Avoid business partnerships because if something happens you will be left carrying the can.

As for a cafe franchise - set up a catering business isnt wise in the present climate because people don't visit them.

I came across a franchise yesterday called thebestof - they do all sorts of things and have a franchise for business (its like an online directory) and I know that its £6000 to get it, you get lots of training and support as well.

I will find the web address and post it here.http://www.getthebestof.co.uk/?source=google&kw=Thebestof&gclid=CNaK7dqLg5sCFZ4U4wodWy21sw

Its definitely a better business model than a cafe.

paulwf

Thanks to you both for the advice, much appreciated.

I can't give full details of the business here but it is aimed at the younger market which doesn't seem to be so badly hit in the recession as they haven't got things like mortgages to pay. The company even opened 4 units last week and about 6 in the last month - a recession actually seems a good time to open a high street business as you get a wide range of locations to choose from at low rents and lower staffing costs.

In my town a 2 floor Costa with outside seating recently opened (there is already one in the nearby bookshop) and the place is constantly packed, the recession isn't hitting all customers. I also work part time in a mid to high end food retailer and although their profits and turnover are down a bit the place is still packed, there is still a lot of money about.

I used to research info full time for a text message company like AQA and 118118 text, and whilst I visited probably hundreds of sites a day I don't think I once used thebestof. I know they do offline activities as well but I don't think they have a good model as only a few towns are covered in depth so most people will use a national directory site instead. I can't see any reason a company would want to advertise on there (certainly not at rates to make a full time living), and whilst people still need to eat in a recession companies don't need to advertise.