7 Ways to Finance Your Dream Bar

By Loren Bornstein


Loren Bornstein

August 15, 2017

Posted in Restaurant Management, Industry & Culture

So you want to open a bar…how are you going to pay for it?

In nearly a decade of working behind the stick (behind the bar), I’ve had many a customer talk about how they want to open a bar. A few even spoke to me about helping them open it. But when we start to talk beyond dreams, most don’t want to talk about the reality behind it all. The reality being finances.

For those of you serious about owning a bar, it’s imperative you do the research to understand all the options available to finance your bar. I asked Dave Bertelo, who spoke at length about red flags in bar failures, about what it takes to finance your own bar. He and his partner just secured funding for their own bar, thanks in part to a private investor. Dave gave me a list of the various financing methods they considered.

Take notes, my ambitious industry enthusiasts and entrepreneurs!


Let’s Get Financial

When it comes to starting any business, you need to be serious about money. Your options are pretty varied, some of which include: the SBA, micro loans, crowd source funding, home equity loans, private investor, self-raised funds, credit cards, and merchant account funding.

I know a lot of these terms are intimidating. Thankfully, Dave gave better explanations of each for you:

SBA (Small Business Administration)

What is it? The Small Business Administration is a great place to start when looking at loans for your bar. The 7(a) Loan Program is SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes—including your new bar!

Benefits: The money isn’t coming out of your own pocket and there are regulated interest rates, so they can’t just change on you should your financial stability also change. This is a great starting point for many a person intent on opening a bar.

Hazards: A downside is many banks don’t offer these loans. There is a lender match attachment to SBA’s website which helps deal with finding a good lender, but, as Dave and his partner found out, a lot of banks don’t offer these loans unless you are also interested in purchasing the real estate too—which is usually way above the money many potential bar owners can shell out.

Ideal Lendee: You need to have a professional quality business plan and demonstrate financial competency. Talk to a few banks and financial advisors to get a better understanding before starting the loan process.

Micro Loans

What is it? Micro loans are exactly that: small loans that usually range between $30 and $40k. These lenders are easily found through the SBA and other organizations like Kiva. Like any loan, to qualify, you need to be prepared to demonstrate a quality business plan and your ability to start and run a successful business.

Benefits: Smaller loans are easier to pay back, and easier to get even if your credit isn’t the best. Smaller loans mean you don’t borrow more money than you need, so you can also get used to paying back debt on a smaller scale as well. Microlenders are often excellent financial counselors and help advise small businesses on how to best use their loans.

Hazards: No business can be started on $40k alone. $40k might cover your property rent, but you still have to finance equipment, construction, and whatever other systems you need to run. Also, they do come with slightly higher interest rates than bank loans.

Ideal Lendee: The ideal candidate for this can have okay credit, but you still need to have a good business plan. Most lenders and banks won’t take you seriously if you can’t demonstrate an understanding of finances and business or aren’t open to advisement. Here’s an excellent article for more information on micro loans.

Merchant Account Funding

What is it? Merchant funding is when a merchant gives businesses upfront cash or capital in exchange for a percentage or a portion of future credit card sales.

Benefits: Faster access to cash. You can pay back at different rates each month depending on your sales—keep track of your finances!. No collateral (like a home) or great credit required.

Hazards: Higher, non-regulated interest rates. Fees.

Ideal Lendee: People with not the greatest credit. People who need the cash now. You’re confident you will have enough money to make payback, especially as different fees and interest rates can occur each month.

Crowd Sourcing

What is it? Crowd funding sources like GoFundMe, Indiegogo, PayPal, Venmo, and Kickstarter where you can reach out to friends, family, and various social networks to support your bar/venture.

Benefits: Doesn’t cost you any money, you can withdraw money that is donated at any time. Helps you build a customer base and work on your marketing strategy.

Hazards:  Some crowd funding sites take a percentage from the money donated to you to make their own profit. For larger sums of money, the success rate is less likely. The age group most using and donating to these sites are 24-35—not exactly the money makers in society. Especially if that isn’t your target audience, you are going to struggle.

Ideal Lendee: People who don’t qualify for loans and don’t want to do Merchant Funding. People who have a large network. People willing to hustle online and talk about their bar and reach out to their network again and again. You have to be your own sales and marketing team.

Private Investors

What is it? Mr. or Mrs. Big Bucks. A venture capitalist. A friend or family member who has the money to invest in your dream bar. Someone who believes in your idea and concept and is willing to fund you.

Benefits: It’s not your money. You aren’t losing any money since you aren’t putting any in. Contracts can be drawn up without interest rates attached. Compensation to the private investor may not be a return on capital, but could just be a certain level of involvement in daily goings-on.

Hazards: It’s someone else’s money, and you are responsible for what happens with it. If the business fails and they lose their money, you’re probably not going to be able to ask for that financial help again. Especially if it’s a friend or family, it might really hurt that relationship. If you signed a contract and there are specifics that weren’t met, you could find yourself in a lawsuit.

Ideal Lendee: You’re connected in the industry and you know what you are doing and who to rub shoulders with. You are confident in your ability to make a profit and satisfy the person investing in you. You aren’t about scamming. You’re ready to hear people tell you no over and over again when you ask for their financial help. You’re okay with possibly sharing part of the business whether it’s in ownership or day-to-day involvement.

Risky Options

The next two sections are choices I consider more special case options, and cannot wholly recommend because of the risk they present. Both of these financial options can have big negative effects on your personal credit and general welfare, especially as good personal credit is needed to be considered for so many life decisions like a buying car, a place to live, etc. A reminder that when considering investing your finances in anything, it is a good idea to consult a financial advisor.

Home Equity Loans

What is it? Your home is your way to finance your bar.

Benefits: Homes can often leverage a large loan from a bank. If you’re opening a bar, chances are you are going to need a couple hundred thousand dollars. If you don’t already have any business credit, your home is an excellent way to get the money you need without using credit cards or microlenders.

Hazards: Your house is literally your source of money. If the business fails and your home is the financial guarantee, you’re out of both a job and a home.

Ideal Lendee: Homeowner. A homeowner who isn’t trying to also save money to send a kid to college or another big venture. There’s a lot more to understanding home equity loans than just this, so I’ve also attached this article from Entrepreneur which has some more answers for those of you interested in exploring this route. If you really believe you have a fantastic business model, invest your home.

Credit Cards

What is it? Since the economic recession of 2008, many small business owners have used their personal credit cards to get their businesses off the ground. This is a pretty risky move because this is one’s own personal credit, not business credit. I’ve seen people looking to joint own a bar combine their personal credit cards. Ideally, you want to have fantastic credit, all obligations are paid off, and you are able to make the minimum payments that occur on your credit card each month.

Benefits: If you have good credit, you can try and negotiate lower interest rates with your credit card company. This article does a great job at further breaking down what you need to understand when it comes to financing with personal credit.

Hazards: Remember, you are putting your own credit on the line. Ruining your credit trying to open a business will make your own personal life more difficult including renting a home, a car, or future ventures. Not to mention it is even harder to get a loan if you have bad credit.

Ideal Lendee: You are your own lendee. You are responsible for paying your minimum card payments and communicating with the bank about large expenditures on your card.


As you can see, there’s a lot of options to consider when it comes to starting your own bar. Have you opened or considered opening your own bar? What financial options did you do/are you considering? Let us know in the comments below.

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