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We have had the benefit of speaking with some very smart people prior to beginning our search for a location back in June. Since then, we have had a hell of a time finding the right facility - across six municipalities in North Carolina. Though state and municipal governments are business friendly and eager to have us join their community, finding the right facility has proven rather elusive.

In some towns, it's zoning laws. We've found two that have actually changed their zoning laws to try to attract us. Within those two towns, finding a facility that meets fire code is the trouble.

Our most recent building candidate has a lot of promise (fire inspector it meets code for our use - evidently F-1 use), but the electrician says he doesn't think the wiring is up to code (a 10,000+ expense), and we will need to do a fit up to put an electrical panel in the room where we want to do our distilling. We'll also need to route a water source. Both of these actions would trigger a review of the building by the trade and building inspectors.

Two questions for you - 1: is my quest to find the right facility reminiscent of yours? 2: Any advice for continuing this search if this building doesn't work out? One option that would be a good solution - throwing more money into real estate - isn't an option. We'd prefer to use our money for marketing once we are up and running.

Let me know what you think. Thanks for weighing in.

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I'm building. I wouldn't discount the option, to be honest. SBA 504 is only 10-15% your money, and you'll probably drop that in retrofit anyway. You'll have exactly what you want and the payment will probably be lower than rent.

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Dogwood, I could write a book on finding the right location. After a couple failed locations, we think we've found the perfect place. You're exactly right that the local municipality is the driving factor in the success or failure of your building. We finally found a city that is really welcoming to our endeavor. We made it a point to reach out to all relevant local authorities and share our vision for our distillery. We have received support across the board and our zoning permit and building permit were granted without any drama.

If you lease, make sure that your landlord is free and clear of any involvement with any other liquor licenses. That is a big red flag for both state liquor folks and the feds.

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As to the landlord being free and clear of any involvement with any other liquor licenses, your federal application is not going to be affected by that. Some states would object; other states would not. The state tied house laws vary a great deal. However, in the matter of a possible federal objection: (1) TTB will never know that the landlord has a liquor license. They do not run a check on that. (2) Even if they did, there would be no reason to deny based on the involvement per se. See 27 CFR 1.24:

1.24 Qualifications of applicants.


The application of any person shall be granted and the permit issued by the appropriate TTB officer if the applicant proves to the satisfaction of the appropriate TTB officer that:
(a) Such person (or in case of a corporation, any of its officers, directors, or principal stockholders) has not, within 5 years prior to the date of application, been convicted of a felony under Federal or State law, and has not, within 3 years prior to date of application, been convicted of a misdemeanor under any Federal law relating to liquor, including the taxation thereof; and
(B) Such person, by reason of the person's business experience, financial standing or trade connections, is likely to commence operations as a distiller, warehouseman and bottler, rectifier, wine producer, wine blender, importer, or wholesaler, as the case may be, within a reasonable period and to maintain such operations in conformity with Federal law; and

© The operations proposed to be conducted by such person are not in violation of the law of the State in which they are to be conducted.

There are no other grounds for denial of the permit. The registration would not be affected by the ownership of the building as long as the owner consents to use as a DSP.

TTB could conceivable find a violation after approval, if the lease contained language which obligated the landlord to buy your products for sale at retail under the license it held. TTB could also object on the grounds that you paid too much for the lease as a way of inducing the landlord to purchase your products. Any straight lease deal that does not involve a requirement or some inducement beyond a legitimate payment for rent is not going to lead to any violations, which, again, occur only after the landlord is required or induced to buy your product to the exclusion in whole or in part of similar products offered for sale by others in interstate commerce.

Do you think TTB will want to take a bite of that apple over a lease between a small time craft distiller and a landlord who also happens to have an interest, either directly or indirectly, in a retail license. As someone who made more than a few trade practice investigations, let me assure you that I would not have been interested in such an arrangement. There are too many elements to make a small time deal worth proving and there are far bigger fish to fry.

States, however, can be very strict about such arrangements. They are becoming less consumed by three-tier arrangements with each passing year, but they can still be draconian in their interpretations. If in doubt, ask the NC ABC about their position on the matter.

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We finally found our place. Took forever and it's rather pricey, but it's done. Now just waiting on the permit and praying we can keep the doors open long enough while we wait.

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Good luck.....

It's easy to underestimate how hard location finding will be.

Fire, zoning, neighbors, size, electrical, landlords, local officials, state officials...all can make it hard to find the right place.

I know in some cases (including ours), you have to compromise on location until you get going. Then put it in your 5 year plan to find the perfect place. It's a lot easier to sell a town council on a profitable business that can hire right away (rural esp.) versus asking them to take a risk on you with a zoning change.

This was number one variable cost in our business plan...and we decided to reserve $$$ for marketing and development rather than taking higher risk for an expensive location. That will also cost us $$$ in terms of traffic, exposure, etc.

Be prepared to compromise was the lesson for us. Having a number in your plan does not make the location materialize...A couple of charming brick buildings seemingly begging to have a distillery were in the wrong neighborhood (zoning)...In one case....only one block away.

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I'm building. I wouldn't discount the option, to be honest. SBA 504 is only 10-15% your money, and you'll probably drop that in retrofit anyway. You'll have exactly what you want and the payment will probably be lower than rent.

I make those 504 loans in CA, Nevada and Arizona. You are correct that it would be 10% or 15% down and it will also be lower interest than would a conventional bank loan if you could find one. One thing about the 504 though, is that it is not for startups... although startups are eligible. Generally for a startup to qualify you would need more down and possibly need to pledge assets like a home as collateral. The SBA 504 can also be used for equipment loans. The size of the total project financed can be $10 million or more. However, the most important thing is a really good plan with well done financial projections and assumptions. Look up "Certified Development Company" in your area and talk to a CDC loan officer to help you out.

There is another SBA project called the 7a that banks participate in. These can provide real estate loans, equipment loans, working capital. Lastly, there is the Community Advantage loan. CDCs provide those and they can go as high as $250k. That product is a good one to consider for equipment financing. You would probably need to put down 20-25% if unsecured, but the terms would be much better than using 10-20 credit cards.

The bottom line is that there is financial help out there if you have your act together.

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Perhaps it's different in those states Patio29Dadio, but there's no special hurdles for a 504 over a 7a here. In fact, for new construction and capital equipment, a 504 has some distinct advantages, one being your primary residence CANNOT be attached as collateral, for the CDC portion at least. The bank portion of the loan is negotiable, of course. A CDC is typically NOT involved in a 7a. All funds (and the loan terms) are provided by the offering bank and the loan is guaranteed by the SBA. 7a is more flexible in that it can be used for anything - construction, operating cash, whatever. Rates are usually higher than for a 504.

It does take some work to find a bank willing to work with startups, but they're out there. SBA loans are particularly low risk and a good way for banks to build up their investment portfolio. Have a good business plan and hit the pavement. State SBA offices or even talking with the CDCs will give good clues on what banks are currently working SBA loans.

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I have been searching for a suitable property for over a year and a half. The biggest hurdle in finding a property is the finances, by far. I am a low budget start up, so I have been trying to find a suitable location with some of the work already done. The first building I was leasing had very little done, and after adding the numbers, talking to architects and the city, it would have been a $50-100k renovation cost for a 1300sf production space. Of course, I terminated the lease on that location. Now I wised up and lowered my standards on a few things, per say. The big things I am looking for is zoning, location, price and sprinklers. I would think less about floor drains, plumbing, electrical service, HVAC, etc. Finally, I think I found the perfect location, but will have to bring in an angel investor who wants a share of the ownership. I was not planning on the latter, but sometimes your ideas and skills do not bring to the table the financing needed for a start up in this industry. If I wasn't passionate about the actual brewing and distilling processes, I would have quite a long time ago and started a pub.

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This is an older thread, but I am not sure where to put this query other than here. 

In slecting a location I thought that I read somewhere that you have to be at least 150 feet from a residence. In going through CFR 19 I can't find that restriction, and yet anecdotal information from someone I met on a tour and another forum seem to suggest just that.

Is this a matter of law, an agents interpretation, or part of the IFC?

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I think distance from ??? is a state and local issue.  California is 600 ft from schools and churches.  But even that is subject to review and exception. 

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I've recently addressed the issue of residences and DSP's in another thread and won't go over that again here.  I'll address distance here.  Distance does matter to TTB.  

There is no published TTB rule re separation.  All you will find in the regulations (and the law) is that you can't establish a DSP in any structure that is in a yard that is connected to a residence.  "Connected" matters.  To get approval, you have to establish that the proposed home for your DSP is  not "connected"  to the home (residence) of any person.  If the home is on the same tract, but two miles from the proposed DSP, arguing that the two are not connected is pretty easy.

But it is not a matter of distance alone.  TTB takes distance into consideration along with other matters.  I was told that 200 feet was sufficient to approve without a fence or other barrier between them, but listen, that is one person in Rulings and Regulations, who are charged with making recommendations on such things, who was addressing a specific situation and who was making an informal, i.e. non binding, comment.  That is not enough.   I want a letter from R&R stating that they would not recommend denial based solely on the location of the proposed premises under the circumstances that we have described to them.  They make a recommendation, because the decision is not theirs to make.  Approval authority is delegated to the Director of the NRC.  But in my experience the NRC goes along with Rulings and Regulations' recommendations.    

Now,  I don't care what anyone else in TTB tells me, or what someone on ADI's forum says, and neither should you.  Individual TTB "agents" will sometimes claim that TTB will never approve collation.  That is flat wrong.  And if they can be wrong, just imagine how wrong people posting to this forum can be.  That includes me.  But I can tell you that I've gotten approval in at least five instances.  So I do speak from relevant experience.

So, we have to argue, from the acts attendant to the particular case, that the DSP and residence are not connected within the reasonable meaning of that term as it is used in the law and regulation.  It takes me two to three hours to gather the information, construct the arguments, and write the letter.  It's one of the things I do as a consultant.  But I'm willing to give away the "trade craft" here.  I just can't tell you everything you might need to know about "curtilage" and how it applies to your situation.  That, by the way, is a very big clue to where you have to go if you are going to get TTB approval, even if your letters never mention the word.  

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On June 24, 2016 at 3:51 PM, twadomikwadios said:

 

I didn't mean to be misleading twadosmikwadios, those 4 things can definitely give you hell. But if it is zoned right and has sprinklers, you can be sure that heavy power is nearby. Getting them to your space can be extremely expensive, but most likely if it is industrial zoned and has sprinklers, it was used for something similar in the past (not just cold warehouse).

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