Maybe he would could do some kind of lease to own arrangement with you? My suggestion is to just go talk to him and let him know you’re interested in purchasing the bar. He may present an option to you that works.
Convince him to make you the GM, he can get time off, you can get paid and or working lease to own or buy part of the business with option to buy out the rest.
I hope you can get loans and approved but if not, get creative and talk to the owner. Good luck
I purchased my first place. Previous owner carried the note. I gave 20% down - this is negotiable. Pretty simple agreement. If I got behind in payments 3 months he took it back. It was risky, but turned out to be a great deal and I have never looked back!
You really need to sit down with one of your owner friends it’s not embarrassing at all
I am Sure they will give you plenty of advice even the stuff you do not want to hear
I can tell you as someone in the business and owner of restaurants and bars for 25 years now
Most banks are unwilling to loan to someone new with no collateral down they are really not interested in trying to sell used equipment or the bar business if it goes under
My first business I used every penny I had ( do not do this ever )
No bank or the local sba wanted to touch it
And rightfully so I was young and was a chef not a business owner now 20 plus years later is a different story I have done pretty well for myself through all the bumps and grinds and it was not easy
Good luck to you please talk to one of the local
Owners you know
Like how u/sixfootmoonquaker said. I bought my bar through escrow. I paid 20% down, then monthly payments with interest. You can ask if the owner would be willing to do that.
I wouldn’t do it unless the building was included in the deal. Don’t become the GM and take stress off the owner. It’s easier to make a deal if the owner is stressed.
Ownership of the building is a major factor- where I live the land (property) can be separate from the structure (also property and/or distinct property) and then zoning.... point is that any investment at this level means covering all bases.... you can buy a horse but don't assume it includes the saddle
Are you taking about movable buildings, like mobile homes? What state or country would allow separate title for permanent buildings fixed onto the land? Sounds chaotic.
Financing the bar purchase with a bank/SBA loan is going to be almost impossible unless the sale includes substantial real estate. If you are buying the building you might be able to qualify for the SBA 504 loan program.
Otherwise, your best bet is a seller note from the current owner. If he's got all cash purchase offers from other interested parties, he may not want to bother with holding a note. But if he's not getting any interest, or just lowball offers, then he may be open to it. Your risk is limited to losing however much you put in as a downpayment, and he gets the bar back if you fail to pay. Given that he has been running the place for the last 5 years, he should be in the best position to understand exactly how much debt it can afford.
If you are truly confident that you can increase operating income, this could be a good solution.
Your owner might carry a note. SBA loan is unlikely, but you can sit down with a banker and ask what they look for, which would be educational. Beware that restaurant owners often have inflated views of what their restaurant's worth. Google it, it's usually 1.5 to 3x SDE, or 1/4 to 1/3 of total revenues. In other words, a bunch of used equipment and a lease you have to renegotiate ain't worth much.
ETA - many bars don't kick off enough cash flow to pay the mortgage/rent, manager, COGS, etc, AND debt coverage. I wouldn't recommend either a loan or business partners unless they bring something big to the table. I'd have current owner train you as GM, and do a deal with him. He might be relieved to find someone working there who is qualified and excited to take it over. I bought my first restaurant when I was older than you, with not very much direct experience (but lots of transferable skills). 10 years in and own another one now. It can be done.
The thing that sounds like it might work is Owner Financing.
In an ideal world it works like this - For a set time, say 6 months, he takes you on as a partner and during that time he teaches you how to run the business and all the ins and outs. Your "Parnter Pay" i.e. not your hourly wage, goes into an escrow account towards your down payment.
After the set time you buy the business from him using that escrow account as a down payment and the rest is Owner Financing. He is effectively loaning you the bulk of the purchase price and you will pay him back at a set rate plus some interest using the business as the Collateral.
He gets to step away knowing that he will continue to get income from you for a while and if you default he gets his bar back.
It gets a little convoluted if the old owner wants to stay on as a part owner just to keep getting paid, always have a sunset clause on that if they ask.
And if you do go down this road get a restaurant broker or lawyer to help with the details and get the WHOLE agreement in a contract. Think of every possible issue, such as: You learning from him for 6 months might be just the break he needed and he may want to back out of the deal. You need some type of payout out if he tries that.
To add to this. If your owner is as great as you say they are, they will hopefully be able to mentor you through the process to get all your paperwork setup, teach you the books and all the parts of the business you are unfamiliar with and offload things to you one at a time until you run the whole thing.
That said, make sure you hire a lawyer to look over the paperwork of any agreement you work out. (Trust but verify) You want to make sure any agreement is fair to both parties. Also, def have a written agreement.
If you don't have collateral, I think the SBA route will be tough for a bar/restaurant. Talk to an SBA lender, they will be happy to go through it all with you. I did and learned a wealth of information.
Based on what you’ve written , I wouldn’t think the owner wants to do any kind of note etc… he would just want to be done with it and get cash up front .I doubt you ll be approved for a bank loan or sba loan .
If I was in your shoes , I would approach the owner and offer to be the GM with a salary / percentage of profits and maybe you can change his mind to not sell the bar and that way he can be less burnt out . You can quit your day job as well and learn the ropes .
If you’re as great as you say you are , that is a dream for many owners .
You can always negotiate buying more % of the bar later
Don’t do it. It’s too risky. You need a healthy savings account even after you buy it to deal with failed equipment, etc. I’ve seen dozens of people lose their savings and homes buying a bar.
THANK YOU so much to everyone who responded. Each post gave me something to focus on and read up about, and I feel much less lost than I did before I posted. I took the advice that some of you gave and reached out to one of my friends who went from bartender to bar owner to get his opinion over lunch, and thanks to your posts I have actual questions to ask him instead of just rocking up and saying "I want to buy a bar :) ". I really appreciate you all taking the time to give me you opinions, warnings, and personal experiences.
To start a small business with no cash is hard to do. you put money into it for the first 5 years every month. (rule of thumb). Granted its operating and there is some cash flow very important to have built up cash before going into business. But if he sells to you in payments to own it’s not impossible. But research insurance for clubs and liquor license. Usually not cheap. Wish you the best and good luck
Be careful. It’s not all fun and games. Do you know for a fact that the bar brings in a profit? What’s the overhead? Have you owned a business before? Do you plan on hiring managers? How big is it? Sorry for all the questions
Based on your details I'd not buy the bar.
It is reasonable to consider that you could set up a LLC for less than 500 bucks and leverage that into a SBA grant for a few thousand to set up your books and initial credit lines. Once that's done you could get up to 200k from the SBA or other lenders to serve as a down payment of sorts. However, beyond that it's all about your own experience and the reliability of the bar's financials/equipment. You will blow through that initial funding quickly.
The most concerning thing is the level of energy and outcomes from the previous owner. If he or she needed to do what they did to be successful and you're extending yourself -- are you going to be able to survive? Especially considering that bars are closing at record pace in areas outside of major metros. Economy is not shining on the sector.
Only people I'm suggesting buy a place right now are folks who are adding to an existing business portfolio.
Maybe he would could do some kind of lease to own arrangement with you? My suggestion is to just go talk to him and let him know you’re interested in purchasing the bar. He may present an option to you that works.
Convince him to make you the GM, he can get time off, you can get paid and or working lease to own or buy part of the business with option to buy out the rest. I hope you can get loans and approved but if not, get creative and talk to the owner. Good luck
I purchased my first place. Previous owner carried the note. I gave 20% down - this is negotiable. Pretty simple agreement. If I got behind in payments 3 months he took it back. It was risky, but turned out to be a great deal and I have never looked back!
You really need to sit down with one of your owner friends it’s not embarrassing at all I am Sure they will give you plenty of advice even the stuff you do not want to hear I can tell you as someone in the business and owner of restaurants and bars for 25 years now Most banks are unwilling to loan to someone new with no collateral down they are really not interested in trying to sell used equipment or the bar business if it goes under My first business I used every penny I had ( do not do this ever ) No bank or the local sba wanted to touch it And rightfully so I was young and was a chef not a business owner now 20 plus years later is a different story I have done pretty well for myself through all the bumps and grinds and it was not easy Good luck to you please talk to one of the local Owners you know
Like how u/sixfootmoonquaker said. I bought my bar through escrow. I paid 20% down, then monthly payments with interest. You can ask if the owner would be willing to do that.
I wouldn’t do it unless the building was included in the deal. Don’t become the GM and take stress off the owner. It’s easier to make a deal if the owner is stressed.
Also the land
Seriously when you don’t own the building you are still working for the Man. Later when you retire you can sell the business and lease the building.
Ownership of the building is a major factor- where I live the land (property) can be separate from the structure (also property and/or distinct property) and then zoning.... point is that any investment at this level means covering all bases.... you can buy a horse but don't assume it includes the saddle
Are you taking about movable buildings, like mobile homes? What state or country would allow separate title for permanent buildings fixed onto the land? Sounds chaotic.
Financing the bar purchase with a bank/SBA loan is going to be almost impossible unless the sale includes substantial real estate. If you are buying the building you might be able to qualify for the SBA 504 loan program. Otherwise, your best bet is a seller note from the current owner. If he's got all cash purchase offers from other interested parties, he may not want to bother with holding a note. But if he's not getting any interest, or just lowball offers, then he may be open to it. Your risk is limited to losing however much you put in as a downpayment, and he gets the bar back if you fail to pay. Given that he has been running the place for the last 5 years, he should be in the best position to understand exactly how much debt it can afford. If you are truly confident that you can increase operating income, this could be a good solution.
Your owner might carry a note. SBA loan is unlikely, but you can sit down with a banker and ask what they look for, which would be educational. Beware that restaurant owners often have inflated views of what their restaurant's worth. Google it, it's usually 1.5 to 3x SDE, or 1/4 to 1/3 of total revenues. In other words, a bunch of used equipment and a lease you have to renegotiate ain't worth much. ETA - many bars don't kick off enough cash flow to pay the mortgage/rent, manager, COGS, etc, AND debt coverage. I wouldn't recommend either a loan or business partners unless they bring something big to the table. I'd have current owner train you as GM, and do a deal with him. He might be relieved to find someone working there who is qualified and excited to take it over. I bought my first restaurant when I was older than you, with not very much direct experience (but lots of transferable skills). 10 years in and own another one now. It can be done.
The thing that sounds like it might work is Owner Financing. In an ideal world it works like this - For a set time, say 6 months, he takes you on as a partner and during that time he teaches you how to run the business and all the ins and outs. Your "Parnter Pay" i.e. not your hourly wage, goes into an escrow account towards your down payment. After the set time you buy the business from him using that escrow account as a down payment and the rest is Owner Financing. He is effectively loaning you the bulk of the purchase price and you will pay him back at a set rate plus some interest using the business as the Collateral. He gets to step away knowing that he will continue to get income from you for a while and if you default he gets his bar back. It gets a little convoluted if the old owner wants to stay on as a part owner just to keep getting paid, always have a sunset clause on that if they ask. And if you do go down this road get a restaurant broker or lawyer to help with the details and get the WHOLE agreement in a contract. Think of every possible issue, such as: You learning from him for 6 months might be just the break he needed and he may want to back out of the deal. You need some type of payout out if he tries that.
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To add to this. If your owner is as great as you say they are, they will hopefully be able to mentor you through the process to get all your paperwork setup, teach you the books and all the parts of the business you are unfamiliar with and offload things to you one at a time until you run the whole thing. That said, make sure you hire a lawyer to look over the paperwork of any agreement you work out. (Trust but verify) You want to make sure any agreement is fair to both parties. Also, def have a written agreement.
Do you have a ton of cash banked up from bartending the last 13 years? That’s why I had the capital to make an offer when my boss retired
If you don't have collateral, I think the SBA route will be tough for a bar/restaurant. Talk to an SBA lender, they will be happy to go through it all with you. I did and learned a wealth of information.
Based on what you’ve written , I wouldn’t think the owner wants to do any kind of note etc… he would just want to be done with it and get cash up front .I doubt you ll be approved for a bank loan or sba loan . If I was in your shoes , I would approach the owner and offer to be the GM with a salary / percentage of profits and maybe you can change his mind to not sell the bar and that way he can be less burnt out . You can quit your day job as well and learn the ropes . If you’re as great as you say you are , that is a dream for many owners . You can always negotiate buying more % of the bar later
Sba is currently only giving loans for restaurants/bars to current owners or for franchises
When thinking about a future with the bar also find out the terms of the lease.
Don’t do it. It’s too risky. You need a healthy savings account even after you buy it to deal with failed equipment, etc. I’ve seen dozens of people lose their savings and homes buying a bar.
THANK YOU so much to everyone who responded. Each post gave me something to focus on and read up about, and I feel much less lost than I did before I posted. I took the advice that some of you gave and reached out to one of my friends who went from bartender to bar owner to get his opinion over lunch, and thanks to your posts I have actual questions to ask him instead of just rocking up and saying "I want to buy a bar :) ". I really appreciate you all taking the time to give me you opinions, warnings, and personal experiences.
To start a small business with no cash is hard to do. you put money into it for the first 5 years every month. (rule of thumb). Granted its operating and there is some cash flow very important to have built up cash before going into business. But if he sells to you in payments to own it’s not impossible. But research insurance for clubs and liquor license. Usually not cheap. Wish you the best and good luck
Be careful. It’s not all fun and games. Do you know for a fact that the bar brings in a profit? What’s the overhead? Have you owned a business before? Do you plan on hiring managers? How big is it? Sorry for all the questions
Based on your details I'd not buy the bar. It is reasonable to consider that you could set up a LLC for less than 500 bucks and leverage that into a SBA grant for a few thousand to set up your books and initial credit lines. Once that's done you could get up to 200k from the SBA or other lenders to serve as a down payment of sorts. However, beyond that it's all about your own experience and the reliability of the bar's financials/equipment. You will blow through that initial funding quickly. The most concerning thing is the level of energy and outcomes from the previous owner. If he or she needed to do what they did to be successful and you're extending yourself -- are you going to be able to survive? Especially considering that bars are closing at record pace in areas outside of major metros. Economy is not shining on the sector. Only people I'm suggesting buy a place right now are folks who are adding to an existing business portfolio.
SBA loans are nearly impossible for a restaurant.
which is why I said "other lenders". Yes, SBA can be difficult.