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Financing for Start-Up


JCNJDistiller

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Hi all,

I've reached out to a bunch of financing companies at this point now and haven't had much luck in getting the loan support I need to get my business up and running. I have talked to GE Capital, Brewery Finance, and a few local banks, but they all require that I have been in business for at least a year in order to be willing to provide a loan.

Do any of you have experience in working with lenders in the early stages of your business and can you offer any advice? I've already gone to friends and family and am looking for loans to cover the rest of my start-up needs.

Thanks!

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Really, rethink this whole endeavor, Borrowing money to start a business is nonsensical. Save up $200 to $400k make a business plan, focus on cash flow, who you will sell too. Then triple the time you think it will take and double the amount of money you think is needed.

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Really, rethink this whole endeavor, Borrowing money to start a business is nonsensical. Save up $200 to $400k make a business plan, focus on cash flow, who you will sell too. Then triple the time you think it will take and double the amount of money you think is needed.

I've heard this said multiple times, so I'm finally going to say something:

"Double what you think it will cost"

But that doesn't really help someone. We should try to point out areas that are commonly over-looked so that their number will be more accurate. I was conservative and did some careful planning and was less than 20% over what I had planned. Good thing I didn't double it...

To answer the OP we used a mix of our own money, investors money (friends/family) and used a local small bank. Smaller banks are more likely to take a risk with a small business than a bigger bank.

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True statement Doc, but so many start ups don't have a clue, to all the back costs. The problem is what you don't know, that you don't know you don't know, is what gets you in trouble. Unless one has built a distillery from the ground up or hired a consultant to guide you, the traps are many. Perhaps I'm a jaded, from the control state issues to the struggles and hours it takes to stay on top of things.

Well funded craft distillery's have a much higher chance of surviving, and thrive. Most importantly this is a tough damn business.

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I've heard this said multiple times, so I'm finally going to say something:

"Double what you think it will cost"

But that doesn't really help someone. We should try to point out areas that are commonly over-looked so that their number will be more accurate. I was conservative and did some careful planning and was less than 20% over what I had planned. Good thing I didn't double it...

To answer the OP we used a mix of our own money, investors money (friends/family) and used a local small bank. Smaller banks are more likely to take a risk with a small business than a bigger bank.

+1 for agporte. We too found that small local banks are more than willing to talk with us about helping finance our distillery. You will need a solid business plan, a comprehensive and realistic pro-forma, and a significant amount of your own skin in the game but it can be done. Good luck!

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Make sure you include post sales / production experiences. That's what is hitting me hard right now. Nice to finally have cash coming in but it ALL goes right back out to keep production moving forward and upward.

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Really, rethink this whole endeavor, Borrowing money to start a business is nonsensical. Save up $200 to $400k make a business plan, focus on cash flow, who you will sell too. Then triple the time you think it will take and double the amount of money you think is needed.

This is utter and complete hogwash.

A solid business plan and decent personal credit history will get you into an SBA loan with no trouble at all. Yes, some banks won't do SBA for < 2 years in operation but many will. Start with banks that have a local presence in your area. Also, US Bank is one of the big ones that is quite bullish on startups. SBA requires 15% owner equity for startups but that means you're good for $1M with only $150K in.

Of course, don't expect to be greeted with all handshakes and smiles with a 3 page vision statement. You need to know accounting inside and out, because the bankers sure will. They can sniff out unrealistic cash flow expectations in seconds and show you the door. My business plan was two years in the making and over 50 pages long. My full SBA package was well over 100 pages.

I also disagree with the classical "double it" budget mantra. That simply means the business plan was unrealistic from the start. Yes, set aside some budget for contingencies, but don't guess numbers. If you have to guess, go ask someone. I *do* agree with the double (or triple) the time needed. Like it or not, you'll be dealing with over-worked, under-paid government officials that have massive backlogs, from permitting to inspections, to licenses.

My best advice is "Don't quit your day job" until hooch is going out the door.

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I also disagree with the classical "double it" budget mantra. That simply means the business plan was unrealistic from the start.

I *do* agree with the double (or triple) the time needed.

If you think someone does not have the experience, information or ability to accurately estimate the time needed to open a distillery from scratch, and though it was a good idea to suggest they double (or even triple) their time estimates, why would the same not apply to the financial side of things?

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If you think someone does not have the experience, information or ability to accurately estimate the time needed to open a distillery from scratch, and though it was a good idea to suggest they double (or even triple) their time estimates, why would the same not apply to the financial side of things?

Because time is in many cases, out of your hands. In the not too distant past, A DSP was running upwards of 200 days. You could have a pissy city electrical inspector cost you 3 weeks because he's too busy to come out and sign off on your electrician's work.

With your (financial) business plan you can always ask or research real numbers. Guessing should be kept to an absolute minimum. Your banker isn't going to be impressed if your answer to "Where did this number come from?" is "I guessed."

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The level of experience of the individual will play a great role here.

The other day, here on ADI, some on asked for a startup budget and the conversation got nasty.

Anyone, asking blindly, does not have the experience to start a company on a shoe string.

Another poster said it could be done for $28k. That was also not a good reply. While individual "A" may have a going concern and paying his bills on a $28k bankroll, we've all seen "B" fail with a million dollar bankroll.

The experience level of someone who asks such questions in an open forum, would currently be a "B".

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I don't really think startup budget is something which people can use, as we all have different wants and needs.

I started for under $100k, but I'm also willing (and able) to not pay myself, work 18 hour days, work 7 days a week, not be in the coolest area of town, and not have employees.

This may or may not be feasible for others. Someone else may not have the desire or ability to hang around for a 150 gallon still to do a couple runs in a day, and they need a 400 gallon still running once a day. This is just the tip of the variable iceberg.

I think the more important question is "What are the expected and unexpected costs of opening up a X size distillery?" Just because I expected an expense, doesn't mean someone else also expected it. Did I expect to make 60 trips to Home Depot to buy needed odds and ends? Nope, but thankfully it's just a few blocks away and not 20 miles! (And even though some of those trips were for a $3 connector, 60 trips adds up really quick!)

As far as finding financing, one just needs to keep revising their budget, plan and meeting with lenders. Lenders have all kinds of people coming to them with business plans "guaranteeing" profit in all kinds of industries, and they have to be choosy about who they finance. There are lenders out there willing to finance a distillery, but it's going to take some work to find them and it's going to take some work to win them over.

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I think the more money that you have available the bigger the budget. I mean if you want to start with a 3-4k 25-30 gallon still 55 barrel fermentor that's great. If you want to start with a 10-15k 150 column then you should scale the same. Your budget should reflect the size you want to start at. But if you start small be ready to scale up, if you don't want to work 10 -12 hour days. I don't see what size you are looking at starting at ? what do you want your daily production to be ? Is this going to be your only source of income ?

I think you would get better responses if you shared your goals.

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RCHagemann, I agree with John D. You need to set your budget based on your goals. I have launched a few tech startups and have always been surprised by the unknown variables. So, you should always hope for the best but plan for the worst. As for loans, you should strongly look at connecting with a bank who can help you with a SBA for startups. The link below is a little outdated but should point you in the right direction. It's a list of banks who might be of help. The list is for the state of Arizona but a few of them are national bank names.

https://www.sba.gov/sites/default/files/Lender%20List%20AZ%20V16.3.pdf

Here is a list of the top 100 SBA lenders. https://www.sba.gov/lenders-top-100

I'm in the very early stages of planning for a new distillery with so many unanswered questions about this industry. I will be selling both of my tech companies & home. This will allow me to move to the northwest and get to work on growing my beard & making hooch. With that being said, my startup calculations put me close to 1 million, not including beard oil. Of course, this is based on my own personal goals. I believe it can be done for a lot less but not sure how well you can do it.

Just my two cents.

Take care,

Shawn Patrick

Insert Distillery Name Here

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  • 2 months later...
  • 5 months later...

Does anyone have any research or data to help guesstimate distributions sales.  We are starting a distillery that has a strong relationship wth what-I'll-call sister companies that can funnel more people than we can handle through the front door for tours and direct sales [which we luckily can do]. I have heard almost constant figures from a broad range of experts/owners/those-in-the know about what to expect of sales from my guests.  However, I don't have the first inkling of an idea as to how much I can expect to distribute assuming both our distributor and our entire team is hitting the pavement on a 25hour 8 day a week basis.  Any thoughts?

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We have recently had success getting lease financing for a customer that purchased one of our stills. So while it won't cover all startup costs, the market has become mature enough to where Lease Finance companies are willing to do these transactions.

Contact me if anyone is interested. 

 

James Morrison : james@tetondistillery.com

Grand Teton Distillery

New Equipment For Sale: Stills, Fermentation Tanks, Stainless Steel Barrels

http://www.tetondistillery.com/distillery-equipment

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