Recipe for Success : Buying Building Paid Off for Restaurateurs
After laboring for a year to open a second restaurant, Claudia and Alejo Castro didn’t want to risk higher rents when their landlord put their building up for sale. Instead, they got a loan to buy the building themselves, and they ended up saving $2,200 in monthly payments. Claudia Castro was interviewed by Karen Kaplan.
When we opened the first Alejo’s Italian restaurant in Marina del Rey, my husband and I worked 12 to 18 hours a day. After we became successful, we knew we needed a bigger place. So we opened a second restaurant in Westchester.
After a year, our landlord in Westchester told us he needed to sell the building. We were afraid a new owner would see how successful the restaurant was and raise our rent or threaten to kick us out. It’s hard work to open a business and it makes you very tired. We didn’t want to have to go through all of that effort again.
We didn’t think we had the money to buy the building. I went to the bank and when they asked me how my business was doing, I told them there was a problem. The very next day they called me to talk about getting a loan.
We had some money for a down payment, but we still needed to get a loan for about $360,000. My bank loaned me half and I got the other half through the Small Business Administration through a certified development corporation, which is a nonprofit corporation that loans money to small businesses.
The SBA required all kinds of paperwork, but they worked with my bank, so it wasn’t that complicated for me. They explained everything very clearly and they spoke to me in Spanish. That was very helpful because there are a lot of technical financial words that I don’t know in English.
We stopped buying clothes and eating at restaurants in order to save money for the down payment. We also cut back on Christmas presents for our employees that year, but we wanted to give them something so that they would still be happy to work for us. We decided to share our profits with them for the entire month of December.
I have a good financial record, and I always paid all my bills on time. I know that helped me to qualify for the loan.
Our rent used to be $5,434. Now that we own the building, our monthly payments are only $3,211. Since it’s so much less, I pay extra so we can pay down our principal. I also use some of the money we saved to hire an accountant so that I could do less work and relax a little more.
Before we got approval for the loan, I was very nervous that they would say no. It was a very stressful time.
Now we can do everything we want. This year I made a lot of improvements on the restaurant, like putting in a new counter. I wouldn’t have done that if I thought we might be gone in five years. Now we can invest in the building because we know it is ours. We want to keep everything in good condition. I’m very, very happy.
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AT A GLANCE
Company name: Alejo’s
Owners: Claudia and Alejo Castro
Nature of business: Italian restaurants
Year founded: 1991
Number of employees: 30
Annual sales: $1.5 million
