There are several steps an entrepreneur needs to take to realize his or her great business idea. If this idea is a new coffee shop, the entrepreneur may need to get financial support from a bank, lending institution or friends and family.
Before any reputable institution will lend start-up money, it needs to have clear evidence that the entrepreneur has what it takes to make the business a financial success.
This may include a good business plan and proposal that makes clear the entrepreneur can create a coffee shop that will draw and keep customers.
It should also show how the borrower plans to minimize costs and maximize profits, create an attractive atmosphere and that the entrepreneur has enough knowledge and experience in the business. A short proposal letter giving pertinent details should accompany the business proposal.
There are more than 50,000 coffee shops in the U.S. and the number is growing. If an entrepreneur wants to start a new business, he or she will need to give lenders a good reason to invest.
This includes how the new coffee shop will stand out from the rest. For example, it may have a super location with no competition within miles, serves excellent coffee and snacks at lower prices than local competition, or provides a comfortable meeting place for locals, students or shoppers.
Small Business Administration
One of the best ways to find funding is to contact the US Small Business Administration (SBA). It will help connect the entrepreneur to lenders that are willing to support small businesses as well as to other programs that support small businesses.
The SBA has local offices where people can get free counseling and advice about starting a small business. It is usually recommended for restaurants to be Limited Liability Companies (LLC).
While much of the same information that is in the proposal letter will also be in the business plan, the purpose of the letter is to give the lender a quick view of the important facts. The aim is to make the lender feel interested in reading the business plan.
The letter should contain the following information:
- The location of the coffee shop
- The primary investors
- The date of opening
- The targeted clientele
- The services offered
- The main vendors of coffee beans
- The required government permission
- The borrower’s solid grounding in the business
- The borrower’s knowledge of running a coffee shop
The proposal letter will most probably be read before the lender looks at the formal proposal. If the letter gives a credible impression, there is a better chance the proposal will be considered.
The borrower may want to include certain details about the business to attract the interest of the lender. However, these details should be kept to a minimum, after all, they will be in the formal proposal.
Some examples are:
- Labor costs
- Price of one cup of coffee
- Other food served and its source
- Monthly rent of premises
- The brand of coffee and why it is good
- Any selling points such as the beans are organic or Fair Trade
- How many cups need to be sold each day to cover expenses
- Information about the décor
- Any additions such as free Wi-Fi, magazines or TV
Below is a sample proposal letter for a coffee shop. It is a formal business letter and must have correct spelling and grammar to show the lender that the borrower is professional.
If it does not accompany the business plan and formal proposal, it may be sent by certified mail to the person concerned. If the letter is to a bank, the borrower needs to call the bank and find out the name of the person in charge of lending to businesses.
Sample Proposal Letter For Coffee Shop
Name of Borrower
Address of Borrower
City, State, Zip Code
Name of Lender
Name of Lending Institution or Bank if Applicable
Address of Lending Institution or Lender
City, State, Zip Code
RE: Cover letter for a loan to open a coffee shop
Dear Name of Lender:
This is a formal letter to accompany my request for a small business loan. I have worked in Name of Coffee Shop at ADDRESS for the past five years.
The first four years I worked part-time while I finished my degree in business administration, and the last year I worked there full-time as the manager.
It is my aim to open my own coffee shop at ADDRESS near the Techno Park. There is no coffee shop in this area and my market research shows that a good coffee shop would be a success.
I have secured the location on the main road into the Park and all of the government certificates and permission to open the shop. I have also received a certificate of approval from the health department.
My aim is to open the shop on DATE, but I do not have the funds to finish fitting out the interior. I plan to seat 20 in a relaxing and stylishly designed environment.
I will serve freshly brewed coffee from 6am – 8pm six days a week and closed on Sundays from beans supplied by my vendors at Brazil Coffee Beans. I also plan to serve homemade cake and cookies from a local vendor that also has restaurant permission certificates.
My friends and family have provided half of the amount I need, and I have purchased the coffee-making equipment. I am requesting you to give the other half, which is AMOUNT.
I hope all of your questions are answered in my formal proposal. If not, I can be reached at Phone Number or at Email Address. I am hoping for a favorable reply soon. Thank you for taking the time to consider my proposal.
Signature of Borrower
Printed Name of Borrower
Enclosed: Formal business plan and proposal