SBA vs. TTB

[HOBWI]

I'm starting a small micro and well along in terms of planing and at the point of having almost all of my portion of the capital raised. I have a "Committment Letter" from the SBA for a loan (meaning I'm prequalified barring any major snags). During a conference call today with my SBA banker, he informs me that they will need to see my permit prior to disbursing any funds. I nearly choke because, because as you probably know, TTB wants to see your operation nearly up and running prior to issuing the permit.

I put in a call to the TTB today to find out how far along they will want me to be prior to issuing the permit, and they are looking into it - same with the SBA. I wish the two goverment agencies could speak to each other, but so far, neither appear interested in doing so.

My questions are: 1. Anyone out there ever run into this situation and what did you do?

2. How far along were you required to be prior to getting your permit?

Thanks,
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House of Brews, LLC
Madison, WI

[einhorn]

Maybe the state license will suffice (which probably will go faster), as opposed to the federal TTB license.

[HOBWI]

Wish that this was the case, but they want to see "all necessary permits", as well as insurance, bonding, etc.

[tsewong73]

We got an SBA loan as well and they never required any licenses at all prior to loan approval or disbursements. In fact, we used part of the loan disbursement to pay for our state license application. This was in 2007.

License approval was our very last step. The TTB's stated policy was that the premises had to be inspected by a TTB agent with the brewing equipment in place before they could proceed with license approval. Same with our state agency. We were able to convince both agencies to skip the inspection because our equipment was arriving two months late and neither the government agencies nor we wanted to delay the approval process. In any case, license approval will likely be one of your very last items in the start-up.

You're just gonna have to make the bank understand that. I suggest you come up with a plan to present to the bank and the SBA. Lay out exactly how the whole start-up process will go including the approval process for your licenses.

If they're not satisfied, then you could offer some clause in your loan agreement that stipulates that you must have license approval by a certain time or...else. Whatever. Perhaps offer to give them a weekly update on where you are in the license application process. Keep in mind that the bank most likely wants to lend you the money, so you'll probably be able to come up with some agreement that gets the ball rolling. This shouldn't be a deal-killer.

On the other hand, they got this here recession on....

[schlosser]

SBA vs. TTB

We are in the middle of our project that is largely being funded by a SBA 504 Loan. The SBA wants the same from us, but if your loan is like ours it is not a problem.

For our 504 program loan, the bank loans us 50% of the money, the SBA takes 35% and we cover the 15% with our equity. The first step was that our loan was closed and the bank takes out their 50% note and they also carry the SBA's 35% on an Interem loan. Once our project is totally complete and licensed, then the SBA will come in and take over the bank's interem note for their 35% (if you have done all your paperwork right!).

So if your loan is structured like ours the SBA's refusal to close their portion until you are fully licesnsed shouldn't be an issue.

If you have any questions feel free to give me a call.

Dave Schlosser
585-705-4469

[HOBWI]

Thanks for the replies. With a little pressure on my part the SBA Banker (read at the bank level, not Fed. Admin level - which they were not letting me know at the time) backed off a bit and now will only hold back the last 25K out of the working capital budget until I get my permit. FYI I'm getting a 7A loan, not a 504, so I don't know if there are differences there that led to this problem.

I also talked to a pretty nice agent at the TTB who kind of explained the where the gray area lies between being completely ready to go and being able to issue a permit is (whereever the hell they want it to be ). So, now I'm mostly capitalized and moving on to finalizing the lease negotiation and then taking on investors.

Now, off to the CBC on Thur - perhaps I'll meet one or more of you there.

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