I never wanted to open a restaurant," says Julia Battaglini of River City Cellars. Wait a minute. What exactly is that place named Secco next to her shop in Carytown that she's been working on for the last two years?
"I hitched my wagon," says Battaglini, "to a man who at 85 was still chasing [the dream]. And while he's chasing it, he likes to bring other people along."
Let's back up for just a moment: Battaglini went to the Service Corps of Retired Executives, a volunteer arm of the Small Business Association that offers free advice to small business owners, to find out how best to raise capital for her wine shop. Cash flow was a problem, competition was ratcheting up and Battaglini was afraid her business was about to sink.
Bob Tanner, a volunteer assigned to her case, is a retired banking executive. He thought long and hard about her problem. He consulted friends here and in New York City. His answer astounded Battaglini: "You need to expand."
"What?" Battaglini said. "No."
Tanner wasn't at all optimistic about the success of her business as it was. ("You're sinking," he said.) About the wine, he told her matter-of-factly, "You have to put it in a glass."
She needed to take River City Cellars' 500-plus bottles, he said, and sell them in a more profitable way. In Virginia, however, to serve alcohol, you also need to sell food to comply with ABC regulations.
That sounds a lot like a restaurant. A 504 loan from the SBA seemed like Battaglini's best bet. The loans are designed to help small businesses build and/or buy real estate in order to expand. So she went looking for a building. The only problem was that the commercial property on the market at the time was priced around the million-dollar mark — way, way out of her price range. She looked everywhere for something more affordable.
Affordable proved elusive. In the end, her landlord offered her the space next door, and she took it. That left a big hole in her financing plans, because the 504 loan was tied to real estate. "I didn't try commercial banks," says Battaglini, "[there was] no point since they rarely fund restaurants even in good times." Her next plan was to refinance her house and use that money to get the restaurant off the ground, but, she says, "I was turned down by three different lenders even though my house was assessed at twice [what] I'd paid for it 10 years earlier."
Finally, she decided to sell her house. She put it on the market and it sold — even in this bad economy — right away. Still, Battaglini had been paying rent on an empty space for almost two years and was financing the re-fit of the space out of her own pocket. Selling her house wasn't quite enough to get the doors of Secco open.
"My staff said, ‘Let's have a fundraiser!' And that's how I found out about crowd funding." Crowd funding, an outgrowth of crowd sourcing, is a recent development in raising capital. Similar to micro-financing, crowd funding is a way to ask lots of people to lend small amounts to help an endeavor that might not be able to obtain ordinary financing.
"Essentially, I borrowed the money from my customers," Battaglini says. She told them, "Hey, I need cash to get Secco going." She asked for a loan of a thousand dollars from each person and, astonishingly, was able to raise $22,000 in two weeks. Along with Tom Brickman and another equity partner, Battaglini finally got to the point where opening her doors was no longer an impossible dream.
Her chef, Tim Bereika, waited patiently in the wings. Formerly at Amici Ristorante, Bereika and his wife, professional organizer Sara Bereika, had a baby in the meantime. "Yes," says Battaglini, "Tim managed to have a child while waiting for this place to open." A culinary-school graduate, he's also done externships in charcuterie and pasta-making in Tuscany. Secco's handmade pasta will not only be on the menu, but next door for retail customers as well. "Tim is calm, thoughtful and passionate about food," Battaglini says, "Everything you need in a chef."
Restaurant owners have always needed to be inventive when figuring out ways to raise capital, and with banks seemingly reluctant to make any loans at all, that kind of creative problem-solving might be the only way to get the plates on the table and the wine in the glass in this economy.
"It's the middle of a recession, and a thousand dollars is a lot of money," Battaglini says. "It shows that people really do want [Secco]."