Financing: How We Did It

Money. It's usually the biggest stumbling block in a motivated entrepreneur's plans. The bigger the plans, the bigger the budget. While we often hear motivational "experts" telling us to "dream big" and not to limit our ideas, what's the point if you can't get the finances to achieve them? This is the question I know people are dying to ask right after they ask "So what made you think of this idea?". Naturally they want to hear the "How?" after the "Why?". I don't get bothered when people ask me, in fact I'm impressed! This person isn't going to let the risk of a little awkwardness stand in the way of finding out what other people are doing! Asking questions and putting yourself out there is what helps you discover options you hadn't even considered.

No big reveal here though, sorry to disappoint! I have no hidden gem that will reveal hundreds of thousands for you to start your dream business. We got loans from a few different places and we'll have to work our butts off every month for 7 years to make sure those payments get made. Our loan for The Local Kitchen is approx. $400,000 and that's just what's inside the walls, we don't own the unit we're in. Our equipment cost was around $120,000 and our build-out was around $280,000. Our ventilation alone in that space was $60,000 (barf). Our loan payments per month are around $7000, rent is $4,000 plus utilities, insurance, repairs, marketing, office and cleaning supplies etc etc etc. Enough to make you wake in a cold sweat some nights, that's for sure.

We spent months applying for grants from everywhere. We tried to explain that this business would help other businesses get started and would benefit our city immensely. We tried tech grants, agriculture grants, arts, anything that we thought could possibly work for us since there are often grants that are under utilized and, if it's a slow year for applicants, we might just get lucky. No luck though and eventually we had to decide to stop putting our efforts into applying (grant applications are no joke, they are a ton of work).

Next we started applying at banks. It seemed like no one we talked to understood the concept of a shared commercial kitchen and the amount they needed down was way more than we had (some as high as 30% of our total budget). We had pooled our money along with a family no-strings attached loan and had enough for 10% down but we couldn't go any higher than that. We were turned down three times before we found one. In the meeting with Darryl from BMO he revealed to us that his wife had a bagel business on the side and he knew there was nowhere in the city to work in a commercial kitchen space. It was everything I could do not to hug him right there. We got approved but the battle wasn't over yet by a long shot. Most banks will only finance things they can repossess, and BMO was no exception. So that meant the labour on installations, down payment on the space and working capital to get started wouldn't be covered by BMO and we needed almost everything we had to secure that loan. 

Luckily, we were working with Women Entrepreneurs of Saskatchewan at this point, using a business advisor that we had started with before we even started The Local Bar. She had mentioned that the best thing about financing through WESK is that they will finance working capital. So we applied with Agnes and were approved for the remaining amount we needed. 

I was camping when I heard we'd been approved for our financing. When I didn't seem excited my husband asked what was wrong with me? "You did it!" But I knew we were no where near out of the woods yet. In order to get approved for the loans you need to provide lenders with income and expense projections as well as quotes for the work from contractors and equipment providers. We had never built a commercial kitchen before. We had no idea if we had budgeted the right amounts and zero money left if we went over on those budgets. Rather than being excited I was so nervous I could have puked and I know Bailey and Caitlin felt the same. 

The next three months were as terrifying as they were exciting. (Of course) our quotes were off, it's almost impossible to be 100% of what the project will cost before you start! The project was going to cost more than we thought. But by that time we were already into the project and couldn't just walk away. We had no more money, literally none. At one point it looked like there was no way the project could go any further and we were $25,000 in. We had to adapt or quit. We ended up stripping away all the (pretty) things we didn't absolutely need and buying used equipment and using SilverChef to rent-to-own the things we did buy new, we managed to stay nearly right on budget in the end. Unfortunately, we had to use up our contingency fund during the build out and, instead of having a cushion to help us get caught up, we had to hit the ground running. We even started selling Christmas baking before the kitchen was completely done just so we could get a bit of money coming in (it takes a lot of cookies to pay rent though).

We had to put all of our savings into this business, and put a house up as collateral, and none of us have taken a paycheque yet. Every penny we make right now goes back into the kitchen but we believe in this concept and in Saskatoon's culinary talents. I love knowing that our business is helping make Saskatoon better and being able to give advice to others who want to do the same. I know we made the right choice and I'd do it all over again if I had to (god I hope I don't ever have to...).

As we start to have more and more member businesses using the kitchen we are starting to feel like it'll all work out. By using The Local Kitchen these businesses don't have to shoulder large overheads themselves but instead share it proportionately based on how much production time they need. We hope this is helpful as you start your business and that you can get some steam going so that if you ever do decide to expand, to a point where you need financing of your own, you have some historical sales data to back you when you go to those meetings at the bank. The cooking classes that we offer were not in our original business plan but we came up with that as another revenue stream to cover some expenses. It's been pretty successful and we hope people realize that by coming out to those classes and having a good time and a good meal you're also supporting many small businesses using our space because the income from those classes helps keep our hourly rentals at a reasonable rate. 

Julie Gryba2 Comments