Funding Problems....Experience?

[saaz]

I have been working with the SBA on financing for a loan to open a distillery. They came back and said they where worried that neither my self or my partner does not have any experience in the liquor industry. We both have a very impressive back ground in business just not in the liquor industry.

Talking with many people, going to ADI and visiting distilleries it sounds like there are many people that started up with no liquor experience. Did you get a loan? Had no experience with liquor? How did you over come this hurdle with the company that financed you? Looking for suggestions?

James

[Scott @ Twenty2Vodka]

Avoid the SBA. As soon as you convince them that you have enough experience, they will think of another thing to throw in your path. And the paperwork they require of the lending institiution (because the SBA is only guaranteeing the loan i'm assuming) is epic as well. We walked down the SBA 504 loan path early on. But ultimatly changed the design of our setup, requiring less funds, and eliminating the SBA's role from the equation. I'll never forget the look on my lenders face when I laid out my new plan, it was a look of utter relief that we no longer had to deal with the SBA to make this thing work and to get this thing moving forward.

I understand that "avoid the SBA" is not really advice. So here's my advice. Spend less so you don't have to borrow with the SBA on board. That might mean building a fancy tasting room in year 10 instead of month 10. This strategy has worked for me.

Best of luck,

-Scott

[Scott @ Twenty2Vodka]

Also, RE experience. Neither mysellf nor my wife had any real world distilling experience prior to getting our federal DSP. We laid this fact out first and foremost in the interest of full disclosure. This lack of experience was not a barrier to raising capital, though we did the majority of our fundraising through the sale of shares of our S-Corp.

-Scott

[Sherman]

Many of the new startups add the expense of a consultant to get them up and running. A week or so with a good consultant can get you to the point where you can do the technical part well. The sensory perception is a time learned thing that can be taught to you easily with a good consultant. Proofing, bottling and marketing are another thing. There are agencies out there that can do all that.

[Denver Distiller]

How did you over come this hurdle with the company that financed you? Looking for suggestions?

I went out and got the experience that was needed. Then we applied for the loan.

Best of luck to you.

[Jedd Haas]

Asking if you have experience is a standard thing that any loan officer will ask you as a matter of course. I'd suggest answering the question like a politician: instead of talking about experience you don't have, talk about the experience you do have, and how it's applicable to your business.

Regarding the SBA, I looked into that. There were around $5,000 in fees for the loan, which drove the cost up to the point of being a non-starter. As Scott noted, there's also a lot of paperwork to fill out. If you're determined to get a loan, a home equity line of credit (HELOC) is probably a better bet, as the interest rates are generally very low, relative to commercial loans or lines of credit.

[Michael B]

Also, RE experience. Neither mysellf nor my wife had any real world distilling experience prior to getting our federal DSP. We laid this fact out first and foremost in the interest of full disclosure. This lack of experience was not a barrier to raising capital, though we did the majority of our fundraising through the sale of shares of our S-Corp.

-Scott