Brewing a detailed business plan helps tea lounge win backing: lender reads beyond lack of collateral to back venture.

Seventy-four rejections. Lenders weren't just rejecting Jesse Jacobs' loan application for a San Francisco tea lounge.

In 2002, any restaurant venture was considered risky: The triple whammy of reduced tourism, a recession and the dot-com collapse was forcing dozens of Bay Area restaurants to close.

For Jacobs and partners Paul Fullarton and Robert Sandler, the disheartening answers meant one thing: There was still one more bank to call on the list of Small Business Administration lenders their adviser had given them.

That last stop was the source of a $160,000 loan they poured into their dream of a tea lounge in a bustling neighborhood.

Today, the founders are celebrating the one-year anniversary of Samovar Tea Lounge. With $600,000 to $800,000 in estimated annual revenue, the care has been growing nine months ahead of projection and is winning praise from restaurant critics.

In its first six months, staffing increased to 18. The e-commerce component of its Web site went live in March. Its catering ventures included spring galas at the San Francisco International Asian Film Festival.

Jacobs, a former technology consultant who worked his way through college in the restaurant industry, had been nurturing his tea-lounge idea for awhile, when he signed on his partners in spring 2002.

"There wasn't a place for me to go on a Friday night that wasn't a bar or a coffee place. ... Tea pretty much bubbled up," Jacobs says.

By that winter, the partners had developed their concept, including using organic suppliers, supporting local businesses and promoting fair trade.

They pooled their savings and collected private investments. Yet creative ideas, sweat equity and cash weren't enough. None of them had owned a restaurant before and they lacked collateral that commercial lenders demanded.

On the advice of Jacobs' grandfather, the partners approached the SBA San Francisco office. The SBA referred them to its local Small Business Development Center, which matched them with consultant Colleen Meharry, past president of the Golden Gate Restaurant Association and owner of the 50-year-old Miz Brown restaurant.

The SBDC offers counseling and training to small-business owners and those who want to start a business.

"I do have to squelch a lot of illusions and dreams on what the restaurant business is really like," says Meharry, who saw more than 100 SBDC clients last year. The worst offenders come in with little more than a chicken recipe from their grandmother. That wasn't the case with Samovar Tea Lounge partners.

"They knew their market. They knew how much it was going to cost. They knew how long it would take to get their market plan out. They knew their product inside and out," she says.

She helped them scout a location, fine-tune their loan application and handed over the list of Bay Area banks that work with the SBA.

For Jacobs, eavesdropping proved as helpful as the free consultations and resources at the SBDC. "There are people coming in expecting the SBA to do all the work," he says, but the SBA is "neutral, even a little pessimistic ... Having spent a lot of time there, I don't blame them. You really see the spectrum of people and ideas."

During the next five months of paperwork and planning, the partners called lender after lender.

"No landlord will let you sign the lease unless you have the cash. The SBA won't approve the loan until you get the site," says Jacobs.

Then came lender 75.

"The guys had a great concept, and they had a good business plan," says Mark Decius of Greater Bay Bank in Redwood City. An SBA guiding rule is that, all else being perfect, lack of collateral isn't a deal-breaker.

Besides, Decius saw something else: "character, determination, all the intangible things you have to judge," he says. "Once I get a belief that these people are really dedicated to what they want to do, and I have a faith that these people will succeed, then it's my job to sell it to the bank."

In June 2003, Samovar Tea Lounge opened. Its ambience appeals to sight, smell and sound and mixes old-world classicism with modern relaxation. Teas offered cover the map from Asia to the Americas. Menu items include ginger waffles, chai spice cake and grilled sandwiches. High tea, Russian style, is available weekdays.

The 60-person lounge is already a gathering place and community center (it hosted polling machines for the mayoral election) but it's also a spot where one can be left alone.

Samovar's success has impressed the SBDC so much that it wants it to be a model for other entrepreneurs, says SBDC director Albert Dixon. That might be awhile, as the partners already plan to add more locations.

SAMOVAR TEA LOUNGE

Jesse Jacobs, Paul Fullarton, Robert Sandier

498 Sanchez St., San Francisco, Calif. 94114

[phone]

www.samovartea.com

Year founded: 2003

Annual revenue: $600,00 to $600,000

Number of Employees: 18

SBA-backed loan amount: $160,000

SBA loan terms: prime plus 2.75

About this program ...

What: SBDCs offer one-stop assistance to small businesses. There are 63 centers with a network of more than 1,000 service locations. They served more than 650,000 clients in fiscal 2003. The SBA provides 50 percent or less of the funding with one or more sponsors, such as local and state governments, universities and community colleges, providing the rest.

Services: Counseling, training and technical assistance to small businesses, such as assisting with financial, marketing, organization, engineering and technical problems and feasibility studies. Special programs and economic development activities include international trade assistance, technical assistance, procurement assistance, venture capital formation and rural development.

Eligibility: Assistance is available to current or potential business owners who cannot afford a private consultant.

First step: To find the nearest SBDC, visit www.sba.gov/ sbdc/sbdcnear.html.