[brewbaker]

There seems to be some companies out there that offer lease to own options for existing and new breweries. Does anyone have any experience with these leases? Are the a viable option for a start-up? Obviously, the lease is more expensive than buying the equipment out right, but how does a lease compare to a traditional business loan? Anyone in the middle of a brewery equipment lease and have any companies to reccommend?

[tschmidlin]

We are not leasing our equipment, but it can be hard to get a traditional business loan for a new business.  I would focus on the bank loan and figure out if it is even a viable option before going the lease route, getting a loan turned out to be much more complicated than it seemed at first.  If the equipment loan does not pan out, leasing or other sources or financing may be your only option.

[brewbaker]

Good advice, and one that will be pursued.

Ideally, it makes more sense to get a loan, buy the equipment outright, then pay off the loan at a reasonable rate. The lease is only attractive in that there is less risk for the company providing the lease, however it costs the end user more. With minimal personal assets to put up against a loan, this a traditional business loan will be hard to procure. Any advice there during your journey to get financed through a bank?

[majorvices]

We lease some kegs. It's a damn racket. Wouldn't advise it. But at the time it was the only option for us to get more kegs.

We ran a small hobbled together 3 bbl brewery for the first 18 months, established a financial record and a customer base before approaching a bank and getting our first loan. After we got the first loan we were able to get a second loan that allowed us to make a large jump on production.

[boulderbrewer]

We leased our first kegs because of cash flow, after that we started to buy our own. I think a lease might be a last resort if you can't get a loan.

For a loan, deal with a bank you have done business before with, even if it has been personal stuff. If they know you maybe they be willing to help you out. It works in small town American where you grew up not sure what happens in the rest of the country. FWIW.

[a10t2]

If the bank you're dealing with for the loan doesn't factor in the debt from the equipment lease, I'd look for another bank. I don't see anyone backing you without a full accounting of your business assets.

For a loan, deal with a bank you have done business before with, even if it has been personal stuff. If they know you maybe they be willing to help you out. It works in small town American where you grew up not sure what happens in the rest of the country. FWIW.

We had the opposite experience, FWIW. The local banks wanted nothing to do with what was by their standards a large loan, and the regionals saw it as just another restaurant in a market where they didn't have any experience. The only real interest we got was from a large national bank.

[majorvices]

We got love from a local bank, fwiw. Our banker has actually become a close personal friend and sometimes plays guitar at our tasting room.

[tschmidlin]

We've had good luck with local banks as well, but if you don't have collateral for a loan you are SOL.  The number they threw around was maybe 50% of the purchase price of the equipment with the equipment as collateral, since it should still be worth that much if we fail.  They did not seem thrilled about that as an option though, and we did not pursue it.

[anthony]

Are these local banks doing SBA on part of the loans or backing the entire loans themselves?

[tschmidlin]

We don't qualify for SBA loans because we have not been in business for 2 years.

[a10t2]

There are lots of different SBA-backed loan programs. The two most common (504 and 7a) are available to startups.

[tschmidlin]

There are lots of different SBA-backed loan programs. The two most common (504 and 7a) are available to startups.

True.  Unfortunately we were told we don't qualify for either of those programs.

[majorvices]

We don't have an SBA loan.

[Thirsty_Monk]

I do not have loans. Well I have loan from myself and then I volunteered for myself for 3 years.

[tschmidlin]

I would love not to have loans, but then I wouldn't have a 15 bbl system on the way either.