Expert: Jim Meadows - 11/29/2004

Question
Hi,
I am Eric and I was wondering how much money down I need to have to have a 750 000$ business loan?

I am currently 15, and My goal is to own a McDonalds by the age of 25(with debt). but how many thousands do I need to barrow 750 000$ for buisness loan?

thank you very much,
Eric Saumure

PS: I know it is a very hard question to anwser but could you please just ballpark a number to give me a impression please. (100 000, 300 000, 500 000)  

Answer
Eric, Good idea to start saving early. As important as it is to save, its equally important to receive a firm foundation of education. So study hard & finish high school as well as college. Work experience in the food service business or related businesses are also important.

As to the specifics of your question I think you already know he answer, "it depends". There is really no specific equity requirement. But let me give you a typical scenario:

You began work in the food service industry as early as high school, and continued through college working part time in the office of a McDonalds owner/operator. You have worked in all phases of the business.

After graduation from University at age 22 with a degree in Management you managed three McDonalds, getting to know the Company Corporate movers & shakers whom you met at the annual franchisee conventions & were also able to increase per store sales by a compounded rate of 8% per year.

At age 25, the owner offers to sell one of the restuarants to you for $1,400,000. You have saved $140,000, which the bank accepts as sufficient for a down payment. Without the experience and ability to convince others of your potential and competance, 50% ($700,000) would not be enough of a downpayment.

Sorry for such a long answer but I was trying to give you a sense of how things actually work. Good Luck, Jim