I have always wanted to start my own goumet cupcake and cookie business, and recently came across a deal I can't refuse. I have found a complete kitchen for rent on the main road where I live(High Traffic Area), for $700.00 per month, including water. This kitchen has 2 ovens, 6 gas burners, 3 compartment sink and has already passed inspection. It was a bakery about 3 years ago(She retired), then it was a caterer/personal chef(who was never available to his customers) so that business failed. I am thinking about taking out a home equity loan, because I know I can get it quickly. Or, should I take the time and try to get a small business loan. I don't want to miss this opportunity, but I don't quite know what to do. thanks for listening. Angie
Take the home equity loan. You can get it easily, it will probably be at a lower rate, and it will be tax deductible. You can then shop around for an SBA loan or grant, and if you manage to get one, you can pay back the home equity loan with those funds.
If at all possible, I would try for the small business loan or better yet a grant if it is a female or minority owned business. It may be possible to get the small business loan fairly quickly especially since already have a plan in mind.
How do you get information on grants?
Unless you are in an "enterprise zone" , usually an urban area with economic woes, or are in an area effected by hurricane katrina, there are virtually no grants given to "for-profit" enterprises.
The exception may be local " community block development" grants and that too, is unlikely, unless you are a minority in a poor urban area, which would not be a particularly wise place to locate a luxury cupcake business.
If you don't have the financial security to take out the loan, then you should probably find some other way to pursue your dream.
I agree with txkat because a small business loan or a grant will take some time to get. You have to have a full business plan in order to apply for this type of money. If you're hoping to make a move soon, I would go with the home equity line and continue pursuing a loan or grant and pay off your equity loan at that time. Good luck! I wish I could find something that cheap in my hometown.
If you're wanting to move on this fast, I would go for the Home equity loan - usually you can secure those within a couple of weeks, dependent on how much you are wanting, and what the bank you are using requires for an appraisal. A business loan is a good option, however usually the rates are a bit higher. I didn't hear what the Feds had to say today, but apparently the rumor is that they are going to lower interest rates, which mostly affect consumer loans. Rates in my area for a HELOC are about 6.99%, which is .50-3% lower than most business loans. Once you have your business up and running, you can always apply for a business loan, and pay off your HELOC. If you go with the Home Equity line of Credit, usually you are paying interest only for the first 5 years, so that's definitely a benefit to get things moving. These are just typical rates, etc for the bank I work for here, so where you are located, it might be a bit different. Good luck - very exciting stuff!
think very carefully --- this is your house your talking about
I took out a home equity loan out for college for kids
5 years ago at 4.99%
thought-- Oh I could pay that off in no time
well the interest started creeping up now at 8.0%
then unexpected things happened and still havent paid it off
hopefully next year I will able to make a dent in it
if the interest does not go up
just something to think about
How exciting, the prospect of a new business. I agree with those who are cautioning you about the home equity loan. If you were to look into a business loan, they would require a study of the need in your area for your business plus a business plan. I think even if you decide to take out a home equity loan, you need a plan. Do not scrap the idea of a business because it could take time but don't rush in to anything that later on makes you wish you would have planned more, not meaning your business wouldn't make it but that it could have been easier or more efficient or cheaper!
Thanks everyone for your advice. I ran into the realtor today(whom I've known for a couple of years). They really want someone in there and they are willing to give me 2 months free, No rent until Dec. 1st. But they want an answer by the end of the week. OMG. Now I'm really confused...
There is a book you can read (I just found it available on Google books!) called
"How to Open a Financially Successful Bakery" by Sharon Fullen
Have a look. It may have some answers or advice you can use. Click the link and you can actually read a portion of it (a large preview) on Google Books! I was amazed it was available there!
http://books.google.com/books?id=gwT6RtfkLeEC&dq=&pg=PP1&ots=mj0tprvYpG&sig=n8ryjWz3es8zyuZ3-FRy9Nq68og&prev=http://www.google.com/search%3Fsourceid%3Dnavclient%26aq%3Dt%26ie%3DUTF-8%26rls%3DGGLG,GGLG:2005-20,GGLG:en%26q%3DHow%2Bto%2BOpen%2Ba%2BFinancially%2BSuccessful%2BBakery%2B%2Bby%2BSharon%2BFullen&sa=X&oi=print&ct=title
Take a deep breath, I'll bet they will wait for you past the end of the week. The offer to give you free rent is just the bait. Take a look at your community, how many other bakeries or food related businesses are in the surrounding area. Within a 1 mile radius and then a 3 mile radius. If your business will attract more business, they will be anxious to close you. Also they are several types of community agencies that will be willing to help you sort through everything with little or no cost to you. Call your local Chamber of Commerce and ask for them. Also look into business organizations based on minority groups and even gender that focus around business. They can be a wealth of information. Good Luck, Keep us posted and remember we too are here for you.
Some cities have a small business development program that can offer free advice and counseling services (business plans, marketing, where and how to get a loan/financing, etc).
If you do opt for a home equity loan, get a fixed rate and not an adjustable rate. Steer clear of subprime lenders!!
I attended a loan seminar recently given by Superior Financial Group. They provide small business loans from $5k - $12.5K. Now I can't seem to find the presenter's business card but the phone number is 925-296-0500, if you'd like to call and get more info.
Anytime you go into business you are at risk. Listen to txkat. She just went thru all of this and I view her as the resident expert on this topic.
Contrary to popular belief, there are NOT people out there just waiting to write grant checks to women in business. Work with your Economic Development Dept, but if you're not offering full time jobs (lots of them) WITH BENEFITS, then they may blow you off.
The Econ Devlp I worked with told me there was no money available for "food industry" jobs because they tend to be part time, low paying and no benefits, and explained that's the way it was because that's how the state set it up. (Even tho' when I asked "What do you consider a HIGH paying job?" and they told me the range, I told them, "Huh..... that's funny because that's what *I* pay!")
Get the home equity if you want this fast. My bank told me they would not underwrite an SBA loan to start a business in the food industry until I'd been in business for 3 years. (check THAT logic!).
My husband didn't want to do the home equity for that reason: "I just dont' want to put the house at risk". I told him, "The house is ALREADY at risk, because if either of us loses our full time job, the other one doesn't make enough to make the house payment."
A few months later, I lost my full time job. Thank GOD I had put these things in place so we didn't even miss the income ..... and the house was no longer "at risk" (per se).
If you get hit by a bus, the house is at risk. If you suddenly have major medical and can't work, the house is at risk. If, like in Indiana, the property taxes increase 500% (there are some homeowner's whose property taxes went from $2500 to $15,000!!! House payments went from $800 to over $2000 a month!!!) and your income doesn't increase with it, then your house is at risk.
When I signed my lease, I got 3 months free rent AND I also negotiated that they are paying for the flooring, the A/C upgrade and installing a new back door. The free rent is not "bait" .... it's pretty standard. You should be worried if they DIDN'T offer any free rent.
All in all, it sounds like a great deal. Definitely check it out and jump on it!
They should give you AT LEAST three months free rent. Because we are rehabbing an historic building, which takes longer to upfit than a strip mall "box", we were able to negotiate no rent until the entire upfit was done and all permits were granted. We also pay no " caps" which covers insurance, taxes, and common area maintenance. That is about $250 a month alone.
Don't let them push you. If the want an offer by the end of the week, tell them you'll pay 700, and see what they say. They are the ones that are desperate, not you.
(Even tho' when I asked "What do you consider a HIGH paying job?" and they told me the range, I told them, "Huh..... that's funny because that's what *I* pay!")..............
All in all, it sounds like a great deal. Definitely check it out and jump on it!
And that my friends, is another secret to indy's success. I ran a food business for 15 years, I did it all. From breakfast to wedding cakes and everything in between. My first rule going in was you get what you pay for. That holds true for ingredients, equipment and especially help. I never EVER looked at the tips as being part of my staff's wages. It wasn't coming out of my pocket, so in my mind it did not exhist.
Take that for face value. Don't put all your blood, sweat and tears into starting a business and nickle and dime the help. They can make or break you. They can be your best allies!
Sorry.. got a bit off track there!
I have inquired about grants, and there are none available for "food Industry". I think I will go with the home equity loan, but go ahead and do all the research I would need if i was going to get the small business loan(ex. business plan, researching competition, insurance, industry reports, and so on). I really want this, but I think by rushing in I might end up hurting myself in the long run.
I think that personally I would look more into grants and loans for business women. I would hate to take out a loan that is tied in with my house. That just scares me.
You could always put in a call to a financial adviser (a realtor can point you towards one) and just ask them what they can help you out with as far as getting qualified for a loan and how long it takes. You can also talk to your Chamber of Commerce about businesses that help woman starting a business.
Just some things.
GL with your decision. Keep us posted!
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