What Comes First - The House or the Business?

Gen Y Entrepreneurs Facing Catch 22 in the Hospitality Industry

Australia’s young and growing hospitality start-ups are frustrated with traditional financiers and the unachievable expectations placed upon loan applicants. Criteria are restrictive and indicate the only applicants likely to be successful are those who own a house – but what comes first, the house or the business?

Gen Y’s starting out in the hospitality industry are unlikely to have accrued an extensive asset base or credit history when trying to get their business over the line. Labeled the generation that expects to ‘get rich quick’, this is becoming increasingly difficult with banks demanding applicants have a strong equity backing and minimum two years trading before they will be considered for a loan.

“The banks are too demanding,” says Murat Coskun, General Manager of Sunshine Kebabs, an up and coming kebab franchise offering health conscious Queenslanders a wholesome alternative to the traditionally greasy kebab. “I think the banks actually encourage failure because the criteria are so tough. We get Gen Y’s wanting to buy a franchise, but they’re uncomfortable because the banks want them to put their parents’ house on the line.”

Contrary to popular belief, increasingly high numbers of young entrepreneurs entering into the hospitality industry each year suggest Gen Y’s actually do understand the importance of working hard to achieve business success. However they face a ‘catch 22’ due to the Banks’ financial criteria and are left confused about how to break into the industry and start a business. Income from business helps build up their asset base; however banks are unwilling to provide them a loan unless that asset base is already in place.
If you take into consideration the spiraling cost of housing, it is a wonder any Gen Y’s can get a start at all.

“I’ve got family who helped me out,” said Ricky Rosen, owner of Simply Cocktails, a popular cocktail bar situated in the Sydney suburb of Fairfield, “but if I didn’t, I definitely would have run into trouble. I’m 21 years old….banks aren’t willing to talk to young people and entrepreneurs because they don’t have extensive credit histories.”

Luckily, there is a solution for Generation Y entrepreneurs. Silver Chef Limited provides equipment funding solutions that enable Gen Ys to achieve their full potential – Silver Chef has provided equipment funding for both Sunshine Kebabs and Simply Cocktails. Their unique Rent-Try-Buy® Solution keeps business owners’ options open – there are no Director’s Guarantees required and ‘home ownership’ is not a pre-requisite.  One of the main goals of The Rent-Try-Buy® Solution is to help assist entrepreneurs in preserving their cash to grow their business.

“Assisting young entrepreneurs to get a start is one of the core philosophies that underpin our business,” says Mr Allan English, Managing Director of Silver Chef, “We also know that if we support a business when they are young and growing, they will show us loyalty in coming back again and again.”