The prospective new business owner approaching a lending institution should keep in mind the “five c’s of credit:” character, cash flow, capital, collateral, and (economic) conditions. Character consists of the borrower’s integrity, experience, and ability; particularly close attention is paid to a borrower’s credit history, which is a matter of record. Should you decide to try to fund a startup through a commercial lender, the remaining criteria are addressed in the loan request.

The loan request should include a credit application, financial information such as tax returns and personal financial statements, and a brief business plan emphasizing projected financial performance of the new venture. The plan should demonstrate how the business will generate sufficient cash flow to repay the loan, specify collateral, and show the borrower’s personal investment.

In addition to servicing the loan, cash flow should also cover operating expenses, and provide for some re-investment for the increasing financial demands of a start-up venture. As collateral, banks will often lend up to 80% of the market value of real estate, and up to 50% on business assets such as equipment, inventory, and current accounts receivable. Lenders and investors often require that the bulk of start-up monies be provided by the business owner. This assures these stakeholders that the owner is committed, and has confidence in the financial projections.

When the entrepreneur can not meet the requirements of commercial lenders, and does not have a favorable arrangement with partners or other investors, the remaining options are difficult and expensive. These options include public-sector guarantees, finance companies, and the venture capital market.

Even where the start-up investment consists largely of other people’s money, the amount of financial risk for the entrepreneur is beyond what most can responsibly handle. For many with the financial means, the stress of bearing complete responsibility for the company’s direction and performance is the discouraging factor.

Once the venture is off the ground, a new set of challenges faces the entrepreneur. A recent survey showed their major concerns, named by more than half of respondents, were: “getting new business/clients;” “managing my time;” and, “promoting my business.” Another interesting question was what they missed about the corporate world. The top three responses were “company-paid health insurance,” “a regular paycheck,” and “retirement plans.”

Various estimates have been made for the failure rate of business start-ups, based on various concepts of failure and of appropriate survey methods. The consensus seems to be that less than half of new businesses survive the start-up “trauma.”

Perhaps, a major reason for what seems to be a high failure rate is that it is so easy to start a business. There is no institutionalized check of qualifications in the U.S.; on the contrary, our tax dollars fund the Small Business Administration and other agencies and programs that encourage business formation.

Another survey showed that over 80% of entrepreneurs would take a pay cut if that is what it took to keep the business going. Just over a third would sell the business, even if a good price were offered.

John B. Vinturella, Ph.D. has almost 40 years experience as a management and strategic consultant, entrepreneur, author, and college professor. For 20 of those years, Dr. Vinturella was owner/president of a distribution company that he founded. He is a principal in business opportunity sites jbv.com and muddledconcept.com, and maintains business and political blogs.

But before you collect your coffee maker and take out a lease on a quaint corner retail spot, you may want to take a moment to consider what it really takes to start a successful coffee shop.

Of course, the first requirement for a potential coffee shop owner is to have the passion for coffee. Sure, any top graduate from a business school who has more passion for business than coffee can put up a coffee shop, but it is often the personal touch of a coffee fanatic that can spell the difference among customers.

It is important to remember, however, that a coffee shop business does not run on passion alone. It seems that a best shop owner is one who is both passionate over coffee and a hardy dose of business acumen. One critical step, before you begin, is to have a solid and well thought out business plan.

A plan will help you clearly chart your business’s profitability for you and your investor. It will also explain why you want to have your own shop and where you want to go. Your plan will also help identify your possible market and their needs. A good business plan should be extremely thorough. Remember you may need financial assistance to fund inventory, equipment and marketing. And, if you can’t convince the bank why you need a loan and how you are going to pay for it, your coffee shop business will be toast from the beginning.

Once your business plan is completed, you need to turn from strategy and financial issues to functional aesthetic considerations. What are you going to do with all that money when you have no idea what a coffee shop should look like? A coffee shop can’t just be any place or any room. At this point, it’s a great idea to secure the help of an architect or someone with restaurant design on your team. Without such an expert on your side, you may have to study and think up the physical placement of your furniture and equipment yourself. You should consider such things as counter placement, dimensions and space allotment for your equipment. It may help to do some research and to observe successful coffee.

The next step after securing the financial and physical aspect of your coffee shop business is to kick your lust for coffee “up a notch”. Don’t be an absentee owner. Get yourself elbow deep into the details of everything about coffee. As the resident connoisseur you shouldn’t just love the taste of coffee; you should also be an expert in coffee beans, roasting recipes, and unique coffee products. Your diligence will rub off on your employees and attract customers in droves.

The road to the opening and success of your coffee shop is not an easy one. However, with careful planning, a can-do attitude, and most of all – your passion, the road to success can be an enjoyable and prosperous one.

Stan “The Ideas Man” Smith is the author of the popular “Billion Dollar Marketing Secret” eReports and a passionate devotee to the”Glory of the Bean”. Check out his directory of local coffee shops at http://www.localjava.org

You will need to have industrial sized coffee pots in place so you can have plenty of it fresh and ready to go. Most people will ask for regular coffee but make sure you have a couple of fresh pots of decaffeinated as well. It can take several minutes for a pot of coffee to brew so always be prepared. As you get low make sure more is started so there is always a continuous supply.

Coffee grinders are essential if you plan to offer your own freshly ground coffee. This can definitely improve the quality of it and gain you more repeat customers. Should you decide to use coffee grounds instead make sure you get them from a supplier known for the best tasting coffee products.

Don’t forget the espresso machine for your coffee business as it will give you the ability to make plenty of specialty drinks. Espresso machines can be tricky to operate though so look for those that are user friendly. Automated espresso machines ensure the right amount of ingredients are dispensed each time. Spend plenty of time training employees on how to operate the espresso machine so you won’t have any issues.

While searching for your basic equipment to run the coffee business, you will need to take many factors into consideration. You will find there are several different sizes of coffee shop equipment too. This is going to determine the amount of power you need to operate the equipment as well as the amount of space you need. You don’t want the work area to be cramped. You also don’t want the power to shut down during a rush because you are draining too much at one time.

Always think about the possible scenarios that can result with your coffee shop equipment. Are you going to be able to fix it should it break down? Will the manufacturer take care of it and give you a loaner so your business doesn’t suffer? These are things to prepare for well in advance. You will definitely pay more for new coffee shop equipment but with the right warranty and coverage you can benefit from it.

You definitely need to have a work station set up that is effective. You want your coffee shop to have volumes of business each day, so make sure the lines keep moving. Streamline operations as the lost time in transit really will add up over the course of the day. If you are limited in space you may need to get creative to make it work well for you and your employees.

The equipment you invest in for your shop should provide you with the confidence to open your doors. Don’t rush into buying any equipment until you have read reviews about it and found out how it operates. You want to weight your decisions carefully as all new equipment can put you deeply into debt before your coffee shop business has seen one cent of profit.

Karyn Lewis writes about the ups and downs of the coffee shop business. Avoid the rookie mistakes many new operators make when they buy a coffee shop and read more coffee related articles at her site.