Financing a Burrito Bar

Financing a Burrito Bar

Financing Option

The option to utilize the capital from the uncle of $25,000 with a lower interest than the bank is a good deal however, I choose the$50,000 line of credit from the bank which, in conjunction with the personal capital of $30,000 for business will give me the financial stability for a start-up business which was the best option for the business.

With a line of credit as the owner I’m still in control of the financial aspect of the business and able to acquire without collateral, the flexibility of a line of credit gives me access to funds when needed without the being charged interest for what I don’t use. With the line of credit, I’m able to build a business credit rating, and take advantage of the length of time the loan can be opened.

The financial analysis section of my feasibility study requires pertinent information which intel’s the “Operating Costs:  These are the ongoing costs, such as rent, utilities, and wages that are incurred in the everyday operation of a business.” According to ( University of Wisconsin Center for Cooperatives), overhead cost: loan payment of $50,000Labor cost

o   Building cost: $500.00

o   Insurance: $75.00

o   Other fixed cost $150.00

·      Product cost

o   Food cost $1.50 / 30%

·      Processing and selling cost

o   Utilities

o   Supplies

·      Sales revenue

o   Sales price per burrito $5

o   Sales revenue estimated: $117,000

·      Total cost, revenue and profit:

o   Total overhead cost:  $725.00

·      Overall Feasibility Evaluation 

o   Summary and Conclusions 

o   Recommendations

This analysis considers the according to (Theuri), “rate of return, inflation, sources of capital, payback periods, breakeven point, residual values, and sensitivity.” is a brief informative part of the financial forecasting of the business plan provides a way of comparing over a time period the costs and revenue.

The consideration of accepting my uncle’s loan versus other available sources of financing has it benefits but, this kind of business adventure has its disadvantages. The lack of clarity can come into play when money comes from family. The assumption that lending money gives stake into the company, family into personal business, and family dispute.

In closing, the financing option that I choose was the line of credit and based on the reasons listed above it leaves me with more control of certain aspect of my life, I enjoy my family and the none interference of financial disputes, and also, the line of credit provides me with the flexibility that is needed to borrow funds as needed, in addition, to the length of time that’s it is available to utilize at my disposal.

References

Boniface Theuri. Project planning and feasibility study. Retrieved http://www.slideshare.net/marsmfyam/project-planning-and-feasibility-study

University of Wisconsin Center for Cooperatives. Cooperatives: a tool for community economic development. Retrieved http://www.uwcc.wisc.edu/manual/chap_5.html