I'm in the process of laying the ground work to start up a retail business and I'm looking for some opinions from some people who aren't trying to collect a commission on closing a loan.

I'll give some details about my business and personal situation....

Personal:

I'm gainfully employed at a current full time job making about 60K per year. My wife works per-diem so I don't consider her income when making financial decisions.
I owe just shy of 59K on my house  and have one loan for 14K on the wife's car. I have no other debts that I don't pay off monthly - credit cards etc...
I have about 70k in a SAR/SEP and another 10K in a Roth IRA.
I have just shy of 8K in savings.

Wife and I don't live a fancy lifestyle. We are in our early 30's and have been paying off debt like mad. Sort of doing the Dave Ramsey thing.

Business:

The company I'm employed at is a family business. I came in 10 years ago and started up a separate division of the company that played a support role in their current business model. I was able to reduce their operating costs and open it up to the public to make decent source of income at the same time. The owners backed and paid for 100% of everything and I just collected a paycheck for my labor.

Recently I've enquired about growing the end of the company I'm involved with by starting up a retail section so supply the company with the needed materials to operate. This would allow it to purchase materials at wholesale for it's own consumption as well as sell at retail to some of the current clients that we serve already. I've crunched the numbers and met with distributors. This venture would be profitable. Currently we are working on an average GP of 25% and our GP would increase to 40% by doing this.

The owners are looking at retiring within the next 10 years. They would like to offer me the opportunity to take over the company. They are suggesting that I come up with 10% of the funds needed to purchase the inventory for the company and use it as a way to buy in and get started. They are willing to fund the other 90% of the inventory and sell it off to me over an agreed upon timeline.

I would be able to keep my current paid position at my current wage but the operation of this area of the company would be an added responsibility on my end. So, my income wouldn't be affected other than having to repay the start up loan that I will be taking out. The business should take care of the rest of it obviously.



My question pertains to obtaining the 10% required to invest. I'm going to need about 40k.  I feel that I have 3 options.

HELOC - Home Equity line of credit - Market value on my residence is in the 120k range - obviously an appraisal would be needed
Cash out Refinancing on my home

Lastly, I'm considering a business loan and using the inventory that I would be purchasing as collateral on the loan - If I can get a lender to agree to it.



I'm open to suggestions, opinions, and any wisdom you would have to share would be appreciated. Thanks!

Skip the HELOC and refinance the home, provided you can get a good rate still. Or at least compare the rates. 5 or 10 years from now you may need the cash to buy them out, then use the HELOC for a down payment. Sounds like you have a golden opportunity there, get the 40 and some extra to handle the unexpected. Money is cheap, use it.
Dont let this deal pass you by. Those folks must think the world of you, use it for all you can. They will feel better if what they have worked for so long go's to someone they are happy to see succeed, this is your chance in life to own something great. Win-win for everyone. Good luck, keep us posted.