How I overcame struggles with banks and secured equity for my new business
Omar Samaha knew plenty about the restaurant business but underestimated how hard it would be raise finance
Omar Samaha had gathered years of experience in the restaurant trade before setting up his own café in 1996. While his experience as a head waiter setting up a new restaurant had taught him about health and safety issues, setting up accounts with suppliers and day to day management issues, Samaha underestimated how hard it would be to get the borrow money from the banks to finance the business.
Samaha spotted an opportunity in taking over the lease for a café in Westbourne Grove and scraped together some money to start the business. “I started without knowing where I was going to get the rest but I just wanted to get in,” he said.
Having raised the initial cash, Samaha found that the bank he had done business with for ten years were not as helpful as he had hoped. Without any personal assets, they were reluctant to offer any money. With the help of an Enterprise Agency, Samaha put together a business plan and went back. Eventually he secured a £3,000 loan and Fresco was set up in July 1996. During the process of setting up, Samaha also secured a £3,000 overdraft when the bank turned down a further loan.
Although Samaha had won the first battle, he found that the problems really started when Fresco was up and running. With winter setting in, Samaha approached the bank for a loan of £1,000. The money was to be used to install a water heater to save boiling the kettle to wash the dishes. Although Fresco had been running for six months, it had yet to show a profit and the bank would not lend him any money.
Fresco survived and one and a half years later was showing a turnover that doubled the original estimates. Samaha wanted to expand. He had seen a nearby property that would make an excellent site for a restaurant to capture evening trade from the same customers who ate at Fresco during the day.
Samaha had a partner willing to put up half of the £50,000 needed and set about trying to raise the remaining £25,000. Samaha found that the banks were unwilling to use the lease on the Fresco site as collateral because it was less than 25 years. Samaha explained that the banks seemed to focus on his first six months at Fresco when it was making a loss rather than the more impressive figures that followed.
To secure the loan, Samaha would have to remortgage his personal property with the bank. But changing lenders would cost in the region of £5,000.
The response from other high street banks was the same. Samaha considered moving his Fresco business account. But that would mean waiting six months to get approval for an overdraft. The deal fell through and Samaha lost nearly £1,000 in fees paid to solicitors in trying to set the deal up.
Samaha did not give up on the idea of setting up a restaurant and a few months later found a property in Blandford Street. Taking advantage of the property boom, Samaha had his flat revalued and managed to set up Fairuz with the money he was able to borrow.
Samaha’s latest venture, Fresco Juice Bar, was also set up in July this year in the Whiteleys shopping centre. Armed with professional business plans and several years of profitable accounts at the original Fresco, Samaha found the process much easier.
Despite his problems with the banks in raising money, Samaha’s businesses are now thriving. But he still believes that it all comes down to the people involved and sometimes getting a helping hand from a friendly bank manager.
“The worst thing is having had a good relationship with someone who is contact with the business and the people change. Then there is a person who knows you only on file and in figures and you have to go through the whole thing again,” he said.
The worst thing is having had a good relationship with someone who is contact with the business and the people change.