Explaining a hostel to the bank...

[HostelEastNashville]

...can be quite the daunting task, even going in armed with a business plan and eyelashes to bat. Shameless, I know.

So, after years of preparation and research and building and planning and...well, you get my gist...I'm so ready to finally jump in with both feet and open a hostel in East Nashville (Tennessee, USA). What a great location to share with international guests visiting Music City...between the already-established tourist crowd, the backpackers, and the frequent songwriters/musicians staying in town short-term, we should pack 'em in and make a decent living - all while loving what we do!

The problem? Banks don't "get it". You do. That's why I'm here and thank you for reading.

I came to this site and spent hours soaking it all in to...well, pretty much to steal your ideas. Great ideas! Extremely helpful ideas! Many thanks for all the hard work that's gone into this site and for the people who are willing to share their knowledge and experiences...worth its weight in gold!

I'm very interested in talking with hostel owners and entrepreneurs to find out how they got the ball rolling...a mentor of sorts. Also would love to explore the possibility of teaming up with a serious partner who would be interested in offering a loan (willing to pay substantial interest) or who would be interested in joining me as a partner for a percentage of the profit...surely, we can execute whatever plan may suit our mutual needs the best. I've already invested quite a bit of money and bought the property where Hostel East Nashville will live. Still have about 40k left to raise / borrow to tweak the floorplan and furnish the hostel...so, we'll open our doors as soon as funding comes through (anticipating a Grand Opening on August 20). Meanwhile, I'm hoping to connect with an investor/partner who can appreciate hostels as much as I do. All the determination, focus, careful choices, and business savvy in the world won't (or hasn't yet) gotten me far with banks...thought maybe this would be just the place to go with my groveling.

Anyone interested in hashing this out and going for it? I'm open to any and all questions / inquiries / ideas /concerns. Our work-in-progress website is here if you'd like to check it out (you can also download our business plan from the homepage to see the "master plan" of what we'll be about, how we'll tackle the market, and why the profit potential is so promising): Visit www.HostelEastNashville.com

Contact info is on the website...thanks for reading and hope to hear from you!

--Amy

[santa klaus]

Hey Amy,

That´s a nice place. It´s a shame the banks act so stupidly at the moment. I´m sure less than a year ago they would have thrown any amount at you you´d ask them for.

They are in panic mode. Yesterday I have read that the HypoVereinsBank of Munich decided to wipe 18 billion Euro´s worth of mortgages off their books, i.E. cancel the credit treaties and make the lenders pay back immediately or sell these mortgages on to equity funds.

They are effectively telling 20% of their customers to get lost. Mind you, this is a healthy bank which makes enough profits, and most of these lenders are well-off Bavarian home owners and small businesses. They have always paid their rates in time and there is no sign that´s going to change. How stupid can you get?

You are $140 k in debt and the building is worth $ 230 k. Everybody expects property prices to fall, that is why they are too nervous to lend you another $ 40 k.

A few hints which could help you:

- Bankers indeed don´t know what a "hostel" is. But bankers usually have kids who go to college. Ask your bankers if they have offspring who went travelling abroad. Tell them to ask these where they stayed (hostels!) and what sort of impression they had of these places. Were they run-down ratholes or well-equipped venues apparently making enough money to keep the house in shape and buy the owner a 4WD? Exactly that did the trick in our case.

- Get another person involved as business partner. It doesn´t matter how broke that person is. The banker might be worried that you get sick and the whole business goes down the toilet. Two persons owing you $ 40 k is better then just one.

- Your business plan lacks mind-boggling spreadsheets. Make them up - the bankers are not supposed to understand them, they should just make them think you´re good at math and you have thought of everything. The more hot air, the better!

- You put the break-even at 15% occupancy. That looks implausible. Include your own costs of living and the cost of one staffer in your overall costs, so that the break-even is somewhere at 50%.

- Your idea to focus on musicians is good. As a matter of fact, we have often bands staying here. The bankers will misunderstand that, though. They will think broke dudes who *think* they are undiscovered guitarists will stay for ages but never pay. Make it clear you have good contacts to concert promoters and club owners who need a cheap place to stay for bands.

- A hint about your floor plan: In my opinion, it would be better to have ALL the common space on ground floor and ALL the rooms on the upper level. The double room should have its own bathroom (and be a tad bigger) and I would split the 20-bed dorm into two or three smaller rooms.

Good Luck!
Klaus