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How to Get a Small Business Loan for a Coffee Shop?

We appreciate you for having an entrepreneur’s vision and there is no second thought about that. At the same time, you need to have some skills, to begin with, one. But do you know? Starting a coffee shop does not require great knowledge and that will help your business dream come true. You can start a coffee shop and do not worry about the investment as we will help you with financing. 

But, before that let us throw some light about the coffee shop business and how do you go about getting a small business loan for a coffee shop. 

To start with any business, you need to have funding and you will always worry about how to get funding. There are several ways in which you can arrange for the money. Let us list them for your better understanding. However, you must choose to apply for a small business loan which will be an effective way to start a business. Let us brief you about why small business loans and how to get them in this blog. 

Indian Coffee Market 

Before we start with the details let us analyze some statistics about coffee production and business in India. India follows Vietnam and Indonesia in producing a large volume of coffee. Karnataka produces 1152 Kgs per hectare of Coffee annually. Independent cafes market value is expected to increase to 83 billion rupees by 2020 in India. 

Above all, 40% of the young Indian population consumes coffee and they depend on the coffee shops. Thus it is worth investing in this business and you are sure to make a profit. 

Different ways to get money to start a coffee shop

  1. You can ask for a loan from banks – Bank loans are best but will ask for many documents, the processing time is high, collaterals will be asked which you might not have and hence the loan application gets rejected. In short, there is a lot of process and too many conditions imposed. 
  2. Pledge your assets like land or jewels to get money from a lender – Here you can sell your property or hypothecate them for want of money. You will get money but will feel insecure about losing the property. 
  3. Ask for money from local lenders – The possibility of being cheated is more as these lenders do not follow any rules. They also charge more interest percentage which will make you sink before making a profit from the business. 
  4. Apply for a business loan with financing companies – Financing companies will offer unsecured loans with minimal charges. They also provide money for less interest and ask for very minimal documents. The process is simple and you can get a loan in 48 hours. Repayment of the loan can be done in easy monthly installments and hence you can focus on the business without any tension about money. 

What should you consider to get a small business loan for a coffee shop?

Now you know the source to approach for a small business loan. Follow the steps given below to apply for a small business loan for a café. 

 

Understand the market 

Market knowledge is the key to take your business to success. Yes, you cannot start a coffee shop in a place where there is no customer demand. Therefore identify a place where there is a need for a coffee shop. For instance, start a shop where there are people around and who are interested in coffee. People in Kerala prefer tea than coffee so you need to identify the market where your coffee shop can generate profit. 

 

Make a business plan

Soon after understanding the market, make a business plan. This is important to understand your position including the knowledge you have, the things you require to start a business. The business plan must include a plan about the location, people, materials required and the cost.     

 

Choose a location 

Then decide on the location based on your plan. This means you need to set up your café in a posh location when you have the ability to set up with all luxuries. On the other hand, select a location where middle-class people live if you are going to make a minimum investment. 

 

Decide on the cost 

Now, comes the most critical factor and that is the cost. Cost estimation is the key to get a small business loan. Consider the following factors to calculate the loan amount. 

  • Cost for purchasing equipment – Coffee brewing machine, grinding machine, roasting machine are the three main things required to start a coffee shop. You need to roast the seeds, grind them and brew them. Apart from that the vessels and cups must be purchased. Include these and calculate the cost.  
  • Shop set up cost – Here you identify the cost needed to make an infrastructure with minimum chairs and tables. Setting up fans and lights etc. 
  • Professional fees – This will include the charges to be paid to the local authority to complete the legal formalities as per the shop act and obtain a license to start the shop. 
  • Administrative costs – Till now we mentioned about one-time cost and the administrative cost will be the monthly cost that includes the shop rent, and bills. 
  • Promotional marketing costs – Marketing is mandatory to reach customers. You can start with printing flyers, brochures and also give an advertisement in papers and TV. Depending on your plan you may want to calculate the cash need. 
  • Salary – You just need a couple of people for cleaning, serving, etc and hence know the cost of giving out the salary for these resources. 
  • Tax – Tax amount is also crucial to be considered before you apply for a loan and you get a fair idea about how much funding you require a loan.

 

Get the documents ready 

After you know how much you want, you need to get your documents ready. However, we do not ask you for paperwork. Bare minimal documents like your identity proof, address proof, shop license, credit score, bank financial statement, PAN card, source of income proof, and passport size photographs must be uploaded for us to verify before we process your loan application. 

 

Apply for loan 

  • The final step is to apply for the loan. Access the website of the financing company and go through the details posted there regarding the application process for a small business loan to set up a coffee shop. 
  • Fill the form with your details and upload the documents.
  • Understand the terms and conditions before you agree upon the same. Know the interest rates, processing fees, and other charges. 
  • Seek clarification before agreeing and wait for not more than 48 hours to know your loan status. 

You are now ready to start your coffee shop. Wishing you good luck!


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