hello- great website!

i recently registered an LLC in new jersey with one partner. the plan is to open our 1st coffee shop sometime during summer 2005. we will each be investing personal funds of 30k each for a total 60k. we will still need another 40k to complete the buildout and all other expenses and open doors to the public the business plan is very detailed and outlines repayment of the loan within 5 years even under worst case scenarios.

questions:

1- as an LLC, will personal guarantees be required from either or both of us on the 40k loan?
2- if so, how much of a problem might my medicore personal credit rating be?

(some backround: i have been on workers comp for 5 years, therefore i know my employment history/credit rating is not exactly what banks will be looking for. i will be using a portion of my settlement money for my half(30k) of the initial investment. just to give as much detail as possible, my partner is an accountant with excellent credit and employment history and makes about 80k/year. my father who has about 30 years retail management experience will be running the business until i am properly trained to take over but he will NOT be an owner. also we will be using the #1 consultants in the specialty coffee industry and this is supposedly supposed to help somewhat. )

any thoughts or suggestions would be so greatly appreciated. thanks in advance!

"as an LLC, will personal guarantees be required from either or both of us on the 40k loan?"

Almost certainly, you will have to.

" if so, how much of a problem might my medicore personal credit rating be?"

I do not think it would be much of a big deal for that amount of money as the other partner seems to be strong enough to support it. {depending on his financials}

what if i were doing this alone and investing 60k myself and requesting another 40k, then what would my chances be of getting the loan? thanks.

(wico of 640, not employed 5 years due to my workers comp case, and i have no personal collateral)

"what would my chances be of getting the loan? "

Slim

But you already knew that. I can not tell you from far away what your chances are by yourself, but without the presence of a strong guarantor they are very small. Banks do not lend to startups unless the risk can be mitigated by some factor.

You need a business plan and specific help from someone that is able to go over the numbers.

i do have a business plan including financial projections based on industry research and consultation. they show a complete repayment of the loan within 5 years even under worst-case scenarios.

but will the business plan alone help mitigate my not being a strong guarantor? what courses of action can i take if my partner backs out and i still need to secure an additional 40-70k(depending on whether i put in an additional 30k or not to cover the partner who backed out)? is finding a replacement investor or co-signer on the loan my only alternatives?

with a strong business plan including projections and a personal investment of 30-60k and an experienced manager on board, would i not qualify for anything even through the SBA?

is there anything else i can do to increase my lendability?

thanks again for your advice- it is priceless for all of us you help.

The business plan is not a mitigating factor. The lack of a business plan would be an additional weakness. The guarantee of the SBA is a mitigating factor.

Finding another investor is another avenue to strengthen the credit.

The repayment shown in your projections even under the worst case scenarios…….. How could I put this……… are not really worth much to a lender. The thing is that at the amount of money that you are looking for it does not even pay to have an analyst dissect your numbers. If anything, the assumptions will be checked out to make sure they are not overly optimistic. The fact is that this is probably more a character/guarantor loan than anything else.

There is a visitor to these boards that works on a state development agency. He can probably give you better insights.