The good news is that starting a catering business doesn't have to cost a tremendous amount of money. If you find a licensed commercial kitchen to work in, you'll only need to purchase a limited amount of equipment. Budget several hundred dollars to build a Web site and to print up business cards. Set aside some funds for filing permits and buying accounting software, but huge amounts of cash aren't necessarily required. Client deposits will pay for up-front ingredient costs.
Remember, different corporate structures allow different numbers and types of investors, so choose your corporate structure carefully based on the amount of financing you think you'll need.
Try to use savings for your start-up costs. Borrowing money from your credit card is not a good choice. You'll end up paying exorbitant interest rates varying from 18 percent to more than 25 percent. If you have trouble making payments, you'll negatively impact your credit score. If you don't have enough in savings, borrow from friends and family. If the person expects to be paid back, type up a simple loan agreement that you'll pay back the loan X amount per month after the first year with X amount of simple interest added. A 6–8 percent simple interest rate should be satisfactory.
Bartering your services with others is a great way to save on start-up costs. If you can find a Web page designer or attorney who'll accept your catering services in return for professional help, then you'll save cash. Bartered agreements need to be spelled out in writing and need to be equivalent in dollar amounts for both parties.
The IRS requires that the fair market value of goods and services exchanged must be included in the income of both parties. Each party must file Form 1099-B. While there are some exceptions explained on the IRS Web site, you and your client need to record barter transactions on your books.
Small Business Administration
The Small Business Administration (SBA) guarantees loans made by banks. Find a bank in your area that is certified by the SBA or a preferred SBA lender. The SBA has a Micro Lenders program that lends small businesses relatively small amounts of money. The maximum amount is $35,000, and the average loan size is about $13,000. Apply through your local bank. Loans must be paid back within six years, if not sooner, and interest rates vary from 8 to 13 percent.
The SBA also has many helpful resources for entrepreneurs on its Web site,
Small Business Development Centers
These entities are usually affiliated with universities. They employ professionals, experienced volunteers, and talented students. SBDCs offer help to small and start-up businesses and can assist business owners with writing business plans, marketing ideas, developing new products, and exploring finance options. SBDCs help students get entrepreneurial and consulting experience, and in return, local small businesses can get some valuable free or low-cost help.