Brewery Loans and Financing

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Starting and operating a brewery may be costly, with start-up expenditures exceeding $1 million or more. This is where brewery funding comes into play. To establish and expand your brewery, you’ll almost certainly need money.

We’ll talk about a range of loan possibilities for microbreweries, artisan brewers, and taprooms at GreenDayOnline.com.

Finance for Craft Breweries

There are about 8800 regional craft brewers, microbreweries, taprooms, and brewpubs in the United States, according to the non-profit Brewer’s Association. In 2020, the number of regional craft brewers decreased, but all other categories grew. A brewery is a part business opportunity and half realization of a dream for many small company entrepreneurs. But that desire necessitates money—and often a lot of it.

A brewery owner may need to fund a variety of products, including:

  • Purchase or refurbishment of real estate. Those slanted flooring aren’t cheap!
  • Construction, refurbishment, or expansion of a taproom
  • Kegs, boilers, fermentation tanks, and refrigerators are all examples of brewery equipment.
  • Bottles, labeling machines, and canning lines are all part of the bottling equipment.
  • Systems for waste treatment and disposal
  • Licensing and permissions, including a liquor license from the state

And that’s only the tip of the iceberg! It’s simple to understand how expenses might easily mount.

First, Build the Foundation

If you’re serious about starting a brewery, the first step is to ensure that your company has a solid basis. It’s not enough to manufacture a product that beer fans want; you’ll also need to ensure that you have processes in place to manage financial flow, keep your staff paid, and weather the ups and downs that all brewers face.

A business strategy is required, and it must include actual sales and financial estimates and pricing and distribution strategies. You’ll need to factor in a realistic schedule for getting your business up and running (or expanding), which might take anywhere from 4 to 12 months.

Ascertain that you have a business bank account that is solely used for business purchases.

If feasible, work with a CPA or accounting expert who has experience with this sort of firm. Maria Pearman’s book Small Brewery Finance: Accounting Principles and Planning for the Craft Brewer might also be helpful.

Tip: Make use of accessible materials provided by partners of the Small Business Administration. Your local Small Company Development Center or SCORE may assist you with your business strategy, marketing, and continuous mentorship for free.

Options for Brewery Financing

When it comes to financing, you have a few options to think about.

Bank Financing & SBA Loans

The SBA guarantees certain small company loans. A qualified start-up brewery may be eligible for some loans, but most banks and traditional lenders prefer to work with more established enterprises.

SBA loans, except catastrophe loans, are made by lenders who the SBA has approved. As a result, you may need to search around for an SBA lender who is suitable for your company.

The SBA 7(a) program, which provides loans of up to $5 million for working capital, real estate, equipment, and debt refinancing, is one SBA loan program that may be particularly useful for a brewery loan.

The CDC 504 loan program collaborates between a private lender and a non-profit Community Development Corporation that provides loans. These loans can be used to fund a new site, renovate or expand the real estate, or purchase or expand equipment for your firm.

Keep in mind that SBA loans usually need strong personal credit. Business credit may be examined for some SBA loans. (Find out how to get business finance here.) They’ll almost certainly need business tax records (if they’re accessible), up-to-date financial statements, and a lot of documentation. Approvals might take a long time. However, if you do qualify, the conditions are frequently favorable.

Finance for equipment

Breweries frequently have to spend a lot of money on equipment. Buying old equipment at a high discount might make sense at times. In other circumstances, equipment leasing may enable your company to receive the equipment it requires without having to make a significant financial investment. Depending on the lease form, leasing may also bring tax benefits.

You may either check with the equipment manufacturer to see whether they provide leasing (either directly or through a partner) or engage with a firm that can assist you in finding a lease through a third-party leasing company.

Investors & Crowdfunding

Investors may be able to help you raise some of the funds you need to get started, but doing so may require you to give up some ownership of your company. If you don’t have a lot of connections with people who can write big cheques, you might want to look into equity crowdfunding. It permits company owners to raise $5 million per year using online platforms authorized by the Securities and Exchange Commission. Reward crowdfunding allows you to raise an unlimited amount of money by offering prizes instead of shares in your business. It may be a t-shirt, a taste, or a craft beer named after a major sponsor.

Conditions for Vendors

You might be able to get trade credit from your suppliers. As a result, you’ll have more time to pay for those items, which will help your cash flow. Net-30 terms, for example, offer your company 30 days to pay after receiving an invoice.

Credit Cards for Businesses

While you’re unlikely to have credit limits high enough to fund a brewery, credit cards can provide you more time to pay for essential products in your firm and allow you to borrow money quickly at a lower interest rate than other methods of rapid small business financing. Start-up enterprises are frequently eligible for business credit cards, as the decision is generally based on the owner’s credit and total revenue.

The bottom line is that having the correct funding is an important part of running a successful brewery. Take the time to research your choices and, if possible, get finance before you require it.

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