Posted: May 1st, 2015

Investing in a vacant lot to build a restaurant

Investing in a vacant lot to build a restaurant

Paper details:
A developer has approached you with a proposal to acquire a vacant property downtown and open it up as a themed restaurant/brew pub. Downtown is somewhat dead, especially at night, and this could certainly act as a catylyst in attracting other restaurant/entertainment uses and new employment opportunities. One city council member is very enthusiastic about the project, the other four have yet to express an opinion one way or the other.

Although the developer is very motivated and self assured he has never run a restaurant before and the bank has turned him down for a conventional loan, SBA will not guarentee the loan either. Would you make a loan out of city funds or not? When do you think the risk outweights the benefits?