Financing Your Gourmet Food or Gift Basket Business (Part 3)

Banks & Other Lending Institutions: Some Harsh Realities for Gourmet Gift Basket Companies

The first place that most gourmet food and gift basket entrepreneurs turn to find financing is their bank or other lending institution.  Usually, there is a history of personal dealings that will give some degree of "comfort" to the lending officers.  Regardless of any previous history that you, as the gift basket professional may have, you must have a completed Business Plan (see our section on How to Write a Gift Basket Business Plan) if you are to be taken seriously by the lender.  This demonstrates that you have clearly considered all of the risks associated with starting a gourmet gift basket business and believe that you have a reasonable chance of success.

Regardless of the quality of your gourmet food shop / gift basket business plan, you should be fully prepared, however, to also provide details of your own personal net worth and the tangible assets that you hold.  Depending on the size of the loan, you may be asked to provide "hard security" or "collateral" (e.g. pledge your matrimonial home, cottage, investments etc. to the institution).  This is often one of the most frustrating experiences that an entrepreneur starting a gift basket business (or any other business for that matter!) must endure.  (It is at times like this where sarcastic jokes about bankers willing to give you an umbrella on a sunny day but at the first sign of rain want it back originate!).  Despite the "feel-good" ads that all they regularly run on television and radio, almost all banks are very reluctant to lend money to any start-up gift basket venture.  You must be able to demonstrate that even if your gourmet gift basket business is completely unsuccessful, the bank will still get its loan back.  Entire books have been written about this topic, so we will not continue to discuss it here.  Understand, however, that this is what is required to gain funding from a bank and that it isn't likely to change any time soon.


Funding Your Gourmet Gift Basket Business With A Bank: Count On A Personal Guarantee Requirement

You should also fully understand that when you borrow money from a lending institution for your gift basket business, you are personally liable to repay it.  Even if your company is incorporated, the bank will usually require you to provide a personal guarantee.  As well, if they agree to grant you a loan to start or expand your gourmet food shop or gift basket business, they will normally require you to carry property and liability insurance on your business and a life insurance policy on you and your partners (if any), with the bank as the beneficiary.

Realistically, you may want to consider taking out a personal loan or line of credit to start your gourmet shop or gift basket business. (This will be subject to the normal lending criteria for individuals and have virtually nothing to do with your gift basket business).  As bizzarre as it may seem, the same process that you would go through to get a loan to purchase a car or another major purchase is what you will likely have the most success with in getting a loan for your gourmet gift basket business.


Government: Lenders of "Last Resort" For Gourmet Shops and Gift Basket Businesses

The American and Canadian governments (at the federal, state / provincial and local levels) all provide some financial assistance to small businesses.  In fact, there are innumerable funding programs available that vary by region and time of year.  In America, the Small Business Administration (SBA) exists primarily to assist small business educationally and financially.  In Canada, assistance for small businesses comes from a range of federal and provincial government agencies.
 
Most of the government funding is provided to businesses that plan to create new jobs.  As well, some industries are much more heavily favored than others, as they have been selected by the bureaucrats as "strategically important" for the economy as a whole and have more funds allocated to it.  (Unfortunately, the gift basket, gift and gourmet food industries are not usually included on this list).  Finally, most government financial programs provide funding (via loan guarantees primarily) to incorporated businesses only.  As such, unfortunately, it is unlikely that any government at any level will be of any assistance to your gourmet food or gift basket business.

Phyllis and Greg Sprout began their company, epicureanfoods.com, in July 1993.  They specialize in supplying hard-to-find gourmet foods and gift basket supplies to gourmet shops, gift shops and gift basket companies across North America. 

They have helped the founders of literally thousands of gift, gourmet food and gift basket companies start and grow their businesses.  Many of these companies remain excellent customers of epicureanfoods.com today.  They can be reached at phyllisandgreg@epicureanfoods.com.