Chris –

Good luck with this. You seem to be pretty persuasive. One thing that might help others provide good information is a better understanding of the situation. 

Is the situation that:

a)       Your husband is on board with the need/value of expanding the business by taking commercial space; but isn’t comfortable with the idea of using a home equity loan to finance expansion, though he might be more open to other ways to find money for the expansion;

b)       He understands the value of expanding, but isn’t comfortable with taking on any kind of debt to do it;

c)       He’s not yet convinced that you need to take commercial space; OR

d)       I have no idea what I’m talking about.

HINT: More than one answer may be correct

Michael, the answer is "a". He understands the need to move the business and is open to other sources of funding, but gets nervous about getting our home involved. Another facet is that I am incorporated and I'm not even sure I want to get something personal tied up in my business at this point.

I'm just sort of looking at all of the options right now.

Hi Chris,

I've been self employed since 89 and have had several employees once upon a time.  I've done what your talking about, and I wished that I hadn't. 

I'll tell you what I learned even though others may not agree (that doesn't bother me). I wouldn't tap the equity again unless it was to either buy the commercial space to move my business into, or to purchase some asset for the business like a piece of equipment or something that would make the business money.  I wouldn't finance an expense (rent) with the equity.

Pay yourself rent for the space you use in your home.  I've been doing that since day one.  When you're profitable enough to pay yourself maket price for the space you want to move into, then go rent it.  But since the rent is simply an expense, I'd look at using your home equity to make a down payment on a commercial space/building provide you are able to make the mortgage payments with your business's revenue.  I would purchase it even if you had to subsidize the monthly mortage payment with some of your personal funds.  The value is going to go up over time, you'll be able to depreciate it, and you're not throwing rent money away.  You may want to purchase the space personally and rent it to your business. I'd suggest speaking with your accountant on that one. Anyway, it's an investment and one of the best moves you could make.

Anyway....just my 2 cents. 

Dave

Chris,

My first instinct goes along with Dave's comments above. Unless you're purchasing the building and/or equipment, I'd say find another way.

Do you have a plan written out for your growth and expansion? Based on the little I know from here at SuN and talking to you offline, I get the impression your Dippy Chick company is growing by leaps and bounds. Have you considered or researched a commercial food production facilty that does private labeling?

There are many commercial food production entities out there that could take your recipes and mass produce your products quickly and economically. It's just a matter of finding one you like and want to work with long term. This is what they do. They help take small home-based food product operations to the next step. They have the facilties, the equipment, the people, etc.

I know ... you may be thinking you would give up quality and control and such but this does not have to be the case. These people are professionals serving professionals. They don't stay in business long if they don't do things right and take care of their customers. Might be something to consider before putting your house on the line and trying to build an enterprise. I'm a big advocate of keeping the company structure as small as possible. And more employees equals more headaches - IMHO - For what it's worth.

R@

Thanks Dave and Rich,

You both make excellent points.

Rich - You know... I had planned on hiring a co-packer a while back and decided against it... but now I find myself in a different position and your post sort of rekindled that possibility. It's just really nerve-wracking to think of trusting a stranger with the quality of my products. I have heard horror stories. Also, there aren't any dry mix co-packers around here that I have found. I'm going to look again though. They don't exactly advertise a lot of the times.

Dave - You're absolutely right, and I was considering buying a space outright. It's just that there isn't much to choose from at the moment. Things happen for a reason though. I'm coming to realize that. So I'm not going to sweat it just yet. Either I'll hire a co-packer or find the right place and financing. It will happen. I just need to be patient.

Thanks so much! I'll keep you posted. I'd love to see some more action in this thread because I think it's a really good topic.

Chris - write your thoughts out - all of them ... knowing you, you probably have. Just a reminder

And don't be afraid of outside processing entities. It's big business and some have been around for a long time. It is very possible you may have to go outside of your local area but that does not have to be a negative. Remember, these people are in business to service people like you. Yes, in the beginning of the relationship it might require some travel and hopefully you can manage that but eventually, you could have the processing and packing and shipping on auto pilot freeing you to work more on the business rather than in it. Don't be afraid to think big.

R@