Question:
Dear Steve,
10 years ago, my brother lost his job. After 35 years, the company moved out of state.
We decide to buy an adult movie theater where I was working.
The owner offered us a loan of over 7000.00 a month.
We are trying to pay off the promissory note down to 120,000.00 with a lower payment.
Where to get a loan?
No one will give me a loan because it’s an adult business.
Gilberto
Answer:
Dear Gilberto,
Well, there is a question nobody has ever asked me. Challenge accepted.
Seller financing is the best and easiest form of financing for such a purpose. I have no idea what the interest rate is that the seller is charging you, but at $7,000 a month, the loan could be fully paid off in a couple of years or less.
There was a time that the adult industry was considered to be recession-proof but the 2008 Great Recession proved that wrong.
Back in 2008 Wired wrote, “This recession is a little different, though. It’s been extremely challenging for adult filmmakers, who are not only wrestling with anemic consumer spending, they’re also competing with a nearly infinite supply of free, amateur videos from countless user-generated sites, not to mention a glut of traditional inventory.”
So let’s assume revenue is an issue right now, and you can’t afford the $7,000 a month payment.
Your business is a theater that makes it even more challenging with coronavirus pandemic health impacts and closures.
Where to Get an Adult Business Loan
The most likely place to look for funding would be from an alternative adult business loan network.
Angel Investor – You can start hunting for someone that would be willing to lend you the money based on your business plan and current revenue. Don’t be surprised if they ask for a percentage of business ownership as well.
Crowdfunding – Typically crowdfunding sites do not allow for adult industry loans. For example, GoFundMe prohibits using the service to raise money for “pornography or other sexual content.”
Small Business Administration Loan – It would appear that an SBA loan would be possible. The SBA says an eligible business must:
- Operate for profit
- Be engaged in, or propose to do business in, the U.S. or its territories
- Have reasonable owner equity to invest
- Use alternative financial resources, including personal assets, before seeking financial assistance
If your business is operating legally in your area, then this SBA exclusion would not apply, “Firms involved in illegal activities that are against the law in the jurisdiction where the business is located. Included in these activities are the production, servicing, or distribution of otherwise legal products that are to be used in connection with illegal activity, such as selling drug paraphernalia or operating a motel that permits illegal prostitution.”
If you were running a strip club or sold “live adult entertainment services” you would not be eligible for an SBA loan.
To find an SBA lender, click here.
Interestingly, under the Paycheck Protection Program (PPP) loan program to help businesses with covid, the courts found the SBA could not exclude adult businesses from access to PPP funds.
Merchant Cash Advance (MCA) Loan – An MCA is often the final nail in the coffin for a struggling business. The daily payments on the loan can be too much to pay. I would stay away from an MCA loan.
Your Local Bank – If you already have a banking relationship with a local bank. Ask them. Also, ask local credit unions if they can help. After all, you are a community member. The worst they can say is no.
Microlenders – If you search microlenders in your area or state, you may find some. A microlender helps make legitimate loans between people and borrowers. I’m in North Carolina, so a quick search found this microlender as an example.
Microlenders that offer microloans specialize in businesses that have difficulty accessing financing through traditional lending sources.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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