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TOPIC: start up costs

start up costs 30 May 2006 14:23 #29085

I have a question:
My husband and I really want to start an independent movie theater in our hometown, but how does an "average Joe" get a $800,000 loan to start? Is it even possible? How did you all do it?
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Re: start up costs 02 Jun 2006 02:35 #29086

  • jacker5
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Pray alot!
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Re: start up costs 02 Jun 2006 08:33 #29087

Banks are a little bit more educated when it comes to the movie business now.

You may or may not remember the overbuilding multiplex spurt in 1999/2000.

Because of all the chapter 11 filings, the banks all lost quite a bit of money.

$800,000 loan to start? You're going to need a big down payment.

Since 1987
Since 1987
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Re: start up costs 02 Jun 2006 08:44 #29088

  • filmguy
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A bank will almost never be a player. They don't understand the biz and don't like the idea of putting "their" money into a dedicated use building. What I've found with banks is that they're more willing to help with an existing business than a starting business. Then the problem is that no matter how good an existing theatre is doing (doing well usually means higher purchase price) a bank will open their "how to be a banker" book, and tell you that they will loan you %80 of the APPRAISED value of the comercial property. Now I don't know if there are any appraisers out there that are going to give a building a very favorable appraisal when they can see that most of the floor isn't flat. So now you're stuck alot of times having to come up with probably in the range of %50 of the puchase price yourself, and a bank won't acknowledge your share if it is leveraged or borrowed in any way. Getting a developer as an investor to put up a building to your specs and doing a lease to buy agreement is just about the only way to start out on your own in a new building.

I got my feet wet in the business by renting a run down twin and getting to know the industry. Then I got the opportunity to buy a small 4 screen in a resort community and was able to get it on contract for deed. That venture has been lucritive enough to get the attention of some "old friends" of mine who happen to be looking for an investment that they can depreciate over several years then sell for a profit (to me) in another town that is prime for a new cinema.

It's all about who you know and luck of the draw. Unfortunately, many investors/developers believe what is the common misconception anymore that theatres are dying and want a more comfortable investment. You've really got to have your facts about the business and the demographics of the proposed area and believe that it can be done based on your data.
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