Brewery Financing & Loans

Brewery Financing & Loans

Brewery Financing & Loans

Starting and running a brewery business can be expensive, with start-up costs that can easily top $1 million or more. That’s where brewery financing comes in. You’ll likely need financing to start and grow your brewery. Here we’ll discuss a variety of lending options for microbreweries, craft breweries and tap rooms. 

Craft Brewery Finance

According to the nonprofit Brewer’s Association, there are over 8800 regional craft breweries, microbreweries, taprooms and brew pubs in the U.S. While the number of regional craft breweries declined in 2020, all other categories continued to grow. For many small business owners, a brewery part business opportunity and part fulfillment of a dream. But that dream requires dollars— and often a lot of them. 

There are many items a brewery owners may need to finance, including:

  • Real estate purchase or renovation. Those sloped floors cost money!
  • Taproom construction, renovation or build out 
  • Brewery equipment, including kegs, boilers, fermentation tanks and refrigerators
  • Bottling equipment including bottles, labelling machines, and canning lines
  • Waste treatment and disposal systems
  • Licenses and permits, including a state liquor license

And that’s just scratching the surface! It’s easy to see how costs can add up quickly. 

Build the Foundation First

If you’re determined to build a brewery business, your first job is to make sure you create a solid foundation for your business. It’s not enough to create a product that beer lovers clamor for; you’ll have to make sure you have systems in place to manage cash flow, keep your employees paid, and survive the ups and downs that all brewer owners experience from time to time. 

A business plan is essential and it must contain detailed sales and financial projections, pricing, and distribution plans. You’ll need to build in a realistic timeline for getting up and running (or expanding), which can easily take 4-12 months or longer.

Make sure you have a business bank account and that you use it exclusively for business purchases. 

Work with a CPA or accounting professional with experience in this type of business if at all possible. The book Small Brewery Finance: Accounting Principles and Planning for the Craft Brewer by Maria Pearman can be a helpful resource as well. 

Tip: Tap into free resources from Small Business Administration partners. You can get free help with your business plan, marketing and ongoing mentoring from your local Small Business Development Center or SCORE. 

Brewery Financing Options

There are a number of options you may consider when it comes to getting financing: 

SBA Loans & Bank Financing

The SBA guarantees certain small business loans. Some of these loans may be available to a qualified start-up brewery though most banks and traditional lenders prefer to work with more established businesses. 

Except for disaster loans, SBA loans are made by lenders approved by the SBA. That means you may need to shop around to find the SBA lender that’s a good fit for your business. 

SBA loan programs that may be particularly helpful for a brewery loan include the SBA 7(a) program which provides loans of up to $5 million that may be used for working capital, real estate, equipment and refinancing debt. 

The CDC 504 loan program offers loans in partnerships with a private lender and a non-profit Community Development Corporation. These loans may be used to finance a new location or to rehab or expand real estate for your business, or to acquire or expand equipment. 

Keep in mind that SBA loans typically require good personal credit scores. For certain SBA loans business credit may be checked as well. (Learn how to establish business credit here.) They will likely require business tax returns (if available), up-to-date financial statements and a significant amount of paperwork. Approvals can take several months. But if you do qualify, the terms will often be excellent. 

Equipment Financing

Breweries must often invest heavily in equipment. At times it makes sense to purchase used equipment at a steep discount. In other cases, equipment leasing may allow your business to obtain the equipment it needs without a significant cash outlay. Leasing may provide tax breaks as well, depending on the structure of the lease. 

You can check with the equipment manufacturer to learn if they offer leasing (either themselves or through a partner) or work with a company that will help you find a lease through a third-party leasing company. 

Crowdfunding & Investors

Investors may be able to provide some of the capital you need to get started, though that also means giving up some equity in your business. If you aren’t well-connected to those who can write large checks, you may want to investigate equity crowdfunding. It allows business owners to raise up to $5 million a year using SEC-approved online platforms. Reward crowdfunding allows you to raise any sum of funds, but instead of equity in your brewery you’ll provide rewards. It could be anything from a t-shirt to a tasting to a craft beer named after a top backer. 

Vendor Terms

Your suppliers may be willing to give you trade credit. That means you’ll have extra time to pay for those supplies, which can improve cash flow. For example, net-30 terms will give your business 30 days from the invoice to pay. 

Business Credit Cards

While it’s unlikely you’ll have credit limits large enough to finance a brewery, your credit cards can give you extra time to pay for essential items in your business, as well as to borrow money quickly at a relatively low interest rate compared to other types of fast small business financing. Business credit cards are often available to start up businesses, as the decision is typically based on the owner’s personal credit and income from all sources. 

The bottom line is that the right financing is one essential ingredient in the recipe for a successful brewery business. Take the time to investigate your options and whenever possible line up financing before you need it.

This article was originally written on May 7, 2021 and updated on May 10, 2021.

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ABOUT AUTHOR

Gerri Detweiler

Education Director for Nav

Gerri Detweiler is Education Director for Nav. Known as a financing and credit expert, she has been interviewed in more than 4000 news stories, and answered over 10,000 credit questions online. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has testified before Congress on consumer credit legislation.

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