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“Ask The Experts” is written and provided by Scholarship Media. It does not reflect the views of The Collegian or its advertisers.
Since my sister and I were kids, we have dreamed of owning a book-and-tea shop. It looks like we’re finally going to make the dream come true! After I graduate this year, my sister and I want to go in together as business partners. She’s got the degree in PR and marketing, and I, as a literature major, have the skills to curate a great book collection. We have plans for book clubs, evening events, and community engagement. But neither of us has a ton of financial experience, at least on a scale this large. We’re trying to figure out how to get a loan to start our business. Do you have any suggestions?
Financing a startup company is pretty tricky. Lots of lenders don’t want to take a risk on a business if they don’t know how well it’s going to do. Start by talking to your bank. Bank loans can be expensive, but they’ll give you an idea of the territory. There are several options out there for new companies, though. Your safest bet might be a microloan from a non-profit or a loan from the U.S. Small Business Association. There are lots of alternative options out there, which you and your sister should look into together, but be careful; lots of these methods are complicated or risky. Really investigate your options and compare them to decide what the best route is going to be for you.
One funding option that might work well for your sister is taking out loans from family and friends or crowdfunding. If you go this route, stay professional. Let those who are lending you money know what the risks and rewards are. Keep a record of written documents, and communicate with your lenders constantly.
You’ll need to decide if you want to incorporate your business or become a limited liability corporation (LLC). The recommendation for startups is usually to go with the latter, because they are easy to start, register, and change. They also keep you from being double-taxed. But don’t take our word for it; be sure to consult with a financial or legal expert before you decide how you all will register your company.
Since your business is location-specific, you will also need to invest in some real estate. If you’re buying a space, you’ll need to take out a mortgage or home loan. Even if you and your sister rent a location to start out, you may want to start saving in case the business takes off and you decide to buy or build your own location. The lending consultants at Huron Valley Financial tell us that you should make sure you can meet with a lender personally and make sure your loan is as personalized to your situation as possible.
Since neither you nor your sister have a background in accounting or economics, you all should probably hire on a person to take care of all the bookkeeping. It sounds like you two have the skills and passion to make this a successful endeavor, but if you can’t keep your numbers organized, you won’t be able to last. Financing professionals often recommend outsourcing your accounting or getting outside help to coordinate financing, taxes, and payroll as a worthwhile investment. It will help your core company keep running smoothly and efficiently, so you can spend your time focusing on the aspect of the business you do best.
Speaking of worthwhile investments, did you know it’s actually possible to become a tea sommelier…?
“You can never get a cup of tea large enough or a book long enough to suit me,” C.S. Lewis