How to Start a Nightclub with No Money

The bar and nightclub industry reached $36 billion in 2022. Nightclubs are profitable, high-energy establishments that serve drinks to customers and provide live music to entertain guests. Are you interested in learning how to start a nightclub with no money? Keep reading to discover the investment opportunities you should consider if you have no money and the nightclub insurance you need to boost your eventual income.

SBA 7(a) Loans

The most common loan from the US Small Business Administration (SBA) is the 7 (a) loan. These loans are backed by the SBA, a government agency whose mission is to help small businesses compete in the economy and actively works to protect their interests.

One way they do this is through issuing beneficial loans. SBA loans are typically affordable to small business owners because they cap the interest rates. Your SBA loan will be more generous and less likely to lead you into debt.

SBA loans are also guaranteed by the government up to a certain amount. This means if you fail to repay the loan, the lender still gets to recover a percentage of the loan from the SBA. An SBA loan provides an incentive to lend to someone who might otherwise be too risky or doesn’t have enough collateral to cover an expensive loan. Below is a description of some of the most common SBA loan types:

Standard (7a)

A standard 7a SBA loan has a maximum loan amount of $5 million and an SBA guarantee of 85% for loans up to $150,000. The guarantee lowers to 75% for loans above $150,000. A lender of a standard 7a loan does not have to take any collateral for loans up to $25,000. Standard loans take 5-10 business days to get approval from your application date.

Small (7a)

Your small 7a loan can grant you up to $350,000. Like the standard loan, the SBA guarantees 85% up to $150,000 and 75% for loans above $150,000. Collateral for the loan is only required once the loan exceeds $25,000. A small 7 (a) loan has a 5-10 business day turnaround time.

SBA Express

As the name suggests, the SBA Express is a loan with an expedited turnaround time. Once you file an application, the SBA promises to respond within 36 hours. The maximum loan amount is $500,000; the SBA will guarantee 50% of your loan. Your lender doesn’t require collateral for loans below $25,000.

Export Express

The export express is an even more expedited loan that the SBA will respond to within 24 hours. It gives you a maximum of $500,000 and guarantees 90% of loans $350,000 or less. The SBA will cover loans worth more than $350,000 for 75%

Crowdfunding

A crowdfunding campaign can be an effective way of how to start a nightclub business with no money. Thanks to the advent of the internet, pitching your business idea to lots of people has never been easier. Below are some commonly used services that you can use to raise money for your business through online donations.

EquityNet

EquityNet helps you raise the needed capital regardless of the business model. This crowdfunding platform has helped 1,000 CEOs start from scratch. With over 15+ years of experience, EquityNet can hook you up with the right investors. Try EquityNet now and raise anywhere from $10,000 to $10,000,000.

Kickstarter

Kickstarter is an online platform where you can set a goal to reach that others can contribute to. With Kickstarter, you must reach your predetermined goal before your project succeeds and you get paid. You can get excellent exposure for your campaign on Kickstarter's popular site.

Kickstarter has over 21 million unique visitors per month. However, choosing a popular site can be a double-edged sword. Since it is popular, you will also have more competition; you must put some work into creating a unique campaign to gets your business idea shared and noticed.

Gofundme

Gofundme is another popular crowdfunding site. Unlike Kickstarter, Gofundme focuses on charity and donations. Users of Gofundme don’t expect something in return for their donation, and they do it out of the kindness of their hearts. Through Gofundme, you can raise funds for equipment, tools, vehicles, and other costs for your business with the kindness of strangers.

Indiegogo

Another excellent option for crowdfunding your business is Indiegogo. Compared to Kickstarter, Indiegogo gives you more control of your project. For example, Kickstart requires that you hit the goal to fund your business, while with Indiegogo, you can choose how you want your campaign to go. Indiegogo has a different audience than Kickstarter, seeing itself as catering to more niche or specialized campaigns. They have more project categories compared to Kickstarter.

Business Loans

You can apply for loans to help pay for your business's starting and continuing costs. When taking out a loan, you should have a plan to repay it. Loans will have an interest rate, meaning you will pay more money back than you are lent. For example, if you get a loan for $20,000 with a 6% interest rate over two years, you would be paying back 21,273 in total.

Loans are excellent ways to start a business because, unlike an investor, you don’t have to get the bank a share of your company's equity. When starting, the downside of many types of bank loans is that you have to get approved. Since you haven’t demonstrated a profitable business yet, banks may hesitate to offer you good loan terms and approval. You can offset this disadvantage by working with online lenders like Uplyft. Try Uplyft that can help you get up to $5 million dollars of funding extremely fast (as little as 4 hours!!!): Apply for loan now.

Venture Capitalists

You can pitch your nightclub business idea to a venture capitalist to secure funding for your business. Venture capitalists typically give you capital in exchange for an equity stake in your business. A venture capitalist often wants to be involved in the decision-making process, meaning you lose some freedom when bringing them on. The venture capitalist is counting on your business quickly becoming successful so they can start benefiting and getting a steady stream of income that totals more than they invested. Since you are exchanging equity for capital, you don’t have to worry about loan repayments. This can be excellent if you are researching how to start a nightclub with no money.

Angel Investors

An angel investor gives your business money, typically in exchange for equity. They are willing to stake their wealth in your company because they like your idea, want to help a struggling business owner, and believe you will succeed. While venture capitalists typically work in a firm and can pool others' resources, an angel investor will take on the investment project themselves. This means that angel investors usually have less to invest than venture capitalists. Unlike a venture capitalist, an angel investor will have a more hands-off approach to business decisions. You can contact angel investors through organizations like the Alliance of Angels or the Angel Capital Association.

Vehicle Financing

Your nightclub might offer a driving service to get customers home after drinking or to pick up VIPs. You can use a vehicle financing loan to help purchase or pay for necessary vehicles. A bank may offer you up to 100% financing for the cost of your vehicle. This makes it ideal for people starting a nightclub with no money.

Merchant Cash Advance

A merchant cash advance (MCA) financing plan gives you instant capital in exchange for a cut of your future credit card sales or bank account withdrawals. With an MCA, you can access cash without immediately worrying about making loan repayments. This is a big advantage over a traditional loan because there isn’t a looming payment amount you might be unable to pay. Since an MCA only takes a percentage of your credit sales, even if you experience a dip in business, you won’t be punished because there isn’t a set payment.

The trade-off for the advantages of an MCA is high-interest rates. For this reason, it is recommended to see if you can find another solution for your cash problem before looking into an MCA. Also, If your business doesn’t see a lot of credit transactions, you may have trouble paying down the debt and get stuck in a constant cycle of increasing debt. If you predict you will make plenty of credit transaction sales, then an MCA can be a smart business decision.

Should I Get a Business Term Loan?

It depends on if you can get approved. With a term loan, you get an immediate injection of cash into your business that is repaid over a period or term. This term duration is fixed, but the loan may have a fixed or variable interest rate. An advantage of a business term loan is that it is tax deductible. This means you can claim these loan payments on your taxes to help you save on your bills.

However, typically term loans are better once you have set up proper cash flow for your business to ensure you will make the necessary payments. For this reason, term loans are best for expanding your business rather than starting out. It may be difficult to get approved if you don’t have a proven track record of cash flow and profits. However, if you are starting a new business but already have another successful one, the bank will look at your ability to make payments more favorably.

Issuing Stocks

You can issue and sell stocks if your business has a corporate legal structure. A stock buyer will have a fraction of ownership in your company, called a share. Sometimes people will buy stocks to become a significant shareholder in your company. Some companies pay shareholders dividends based on the number of shares they own. Different stocks may offer different advantages. Typical types of stock include:

• Common stock: As the name suggests, these are the most commonly traded stocks. They provide equity ownership in your company.

• Preferred stock: A preferred stock grants the stockholder equity and the ability to get income from the company through dividends.

• Voting stock: This stock allows someone to vote on company policy and operation decisions during shareholder meetings.

• Par value stock: A stock with par value has a price floor, meaning it cannot be worth less than the set minimum value. Companies will often make this minimum value one cent.

• No-par value stock: Unlike a par value stock, a no-par value stock does not have a minimum trading value.

Another reason someone might buy stock in your company is to speculate on the stock market. Your stock price will likely be low if you are just starting your business. Someone may buy a stock at a low price to sell it later when your business becomes more successful.

Reach Out to Your Personal Network

Don’t hesitate to contact your friends, colleagues, and family and pitch your nightclub business idea. These people are a more receptive audience, meaning they hopefully won’t take as much convincing to invest in your business as a cold call to an investor. Friends and family might be more lenient if you don’t have all the details worked out yet. Even if your friends and family don’t want to be significant investors, a small amount of support can go a long way without any money. Perhaps, your personal network can provide enough money to create a business plan to woo a potential big investor.

Your friends and family might also be able to help you with the labor and time needed to assemble your nightclub and get the appropriate licenses to open. Friends and family can make great business partners because you have already developed a sense of trust over the time you have known them. A friend or family member might not demand a controlling share, equity, or part-ownership of your business. They might just want to help you succeed, even if there isn’t a substantial benefit for them. Be careful, though. If the business starts accumulating debt and they invested heavily, you might risk your life-long relationship with them.

Government Business Grants

The government occasionally grants relief money for businesses at the federal or state level. Typically the government will do this to boost the economy or relieve struggling businesses. By going to grants.gov, you can search for grants and sort them by your eligibility, industry, post date, opportunity status, and agency that offered them. Below are some examples of grants nightclubs have qualified for:

Restaurant Revitalization Fund

In 2021, a federal grant package was offered to bars and restaurants called the Restaurant Revitalization Fund (RRF). This fund provided $28.6 billion to businesses that included:

• Nightclubs

• Restaurants

• Food stands

• Food trucks

• Bars

• Bakeries

• Breweries

• Taprooms

• Inns

• Wineries

Paycheck Protection Program

The Paycheck Protection Program (PPP) was a relief program supported by the US Small Business Administration that ended in 2021. After applying for a PPP loan, your business would be granted up to eight weeks of the cost of your payroll. This benefit was delivered as a cash payment to the business. Business owners could use these to cover expenses that included:

• Rent

• Mortgage interest

• Utilities

• Uninsured property damage from vandalism

• Supplier costs

The great thing about these loans is that they had a low-interest rate of 1%, and you could get them fully forgiven as long as your business retained the same level of employees and at least 60% of the loan was spent on payroll costs.

Insurance Requirements for Boosting Income

Now that you know how to get some capital for your fledging business, you should invest some money into insurance coverage. One that we recommend is a business owner’s policy from NEXT.

A business owner’s policy allows you to bundle insurance policies at a discounted rate. Insurance companies may offer a 5%-10% discount on their BOP. These are the insurance policies you may find included in a BOP:

• General liability insurance: General liability insurance protects your nightclub business against claims like bodily injury, property damage, and personal injury from third parties. For example, if a guest slips on a wet spot on your dancefloor, they may sue you for their injuries.

• Commercial property insurance: Commercial property insurance protects your business from the financial consequences of fires, theft, vandalism, water damage, explosions, wind, lighting, and more. This policy protects your nightclub building and any property within a set radius.

Business interruption insurance: Business interruption insurance covers operational expenses you fire, theft, vandalism, and other covered perils force you to temporarily suspend business operations.