All You Need to Know About Financing for Breweries

Published March 14, 2019 by WC Team

In the last number of years, breweries have burst onto the foodie scene. Some breweries are large-scale commercial affairs, but many of the most popular craft beers are brewed by microbreweries, with brewers who are motivated by a love of beer.

Although the number of breweries is increasing, it still isn’t easy to get a business loan from your bank to start a brewery. The trouble with running a brewery is that you need to invest a lot of money to buy commercial brewing equipment, but it can take a lot of time and love before you start making a profit.

Don’t worry! You can still access financing for your power controller, brewing system, and element controller. You just need the right financing arrangements that will soon have you tapping a barrel of your own brew.

What Are the Costs to Start Up and Run a Brewery?

Along with other new businesses, breweries will need:

  • To rent or buy suitable premises
  • Capital to hire and train new employees
  • To pay fees for accounting and legal advice for your business
  • To pay the costs of licensing your business

But beginner breweries will also need specialty commercial brewing equipment and other items, such as:

  • A brewing system with parts from a reputable company like Blichmann, including fermentor, burner, carboys, element controller, and inline pump
  • Barrels
  • A truck or van to make deliveries and pick up supplies from the mill
  • Brewery supplies, including quality hops and malt
  • Specialty training for employees in the brewing process

Even once you’ve begun your brewery, your financing needs will continue. Established breweries need working capital to make sure that they can:

  • Buy supplies even when sales are low and cash flow is poor
  • Pay experienced employees so that they don’t lose their best talent during slow periods
  • Meet their overhead, including high electricity bills
  • Maintain their brewing system in peak condition
  • Upgrade commercial brewing equipment whenever relevant
  • Pay upfront for hops, malt, and other supplies, in order to get the best prices from the mill

If your brewery is successful and you want to expand, you might need to access more working capital to fund your expansion. Whether that’s buying additional fermentors, adding another employee to your team, or expanding your premises to hold more brewing equipment, you’ll be glad to know where to turn for reliable brewery financing.

Types of Funding for Breweries

Brewery owners have many options for funding their startup, establishment, or expansion. The most important thing is to choose the right type of funding for your financial needs. Here are the main types of funding for breweries, and information about the best purpose for each one.

Government funding and grants

Along with the recent rise in interest in craft beers has come a rise in the number of grants and funding options from research institutes. The Brewers Association is one organization that funds research into craft beer. It offers grants and funding for research into brewer-related issues and to support independent breweries.

Craft breweries can also benefit from grants from the USDA, which is eager to improve the marketing and distribution of agricultural products like craft beers. Brewers might be eligible for matching funds from the Federal-State Marketing Improvement Program, which supports developing new opportunities for farmers.

SBA loans

Loans backed by the government’s Small Business Administration (SBA) are ideal for brewery funding. There are three types of SBA loan, which could all be appropriate for your brewery, so make sure that you choose the SBA loan that’s best for your situation:

An SBA 7(a) loan is the best choice for leasing commercial brewing equipment, renovating existing premises for your brewing needs, working capital, or servicing existing debt. You can borrow up to $5 million through an SBA 7(a) loan. An SBA Express 7(a) loan is faster to process, but it has a cap of $350,000. This makes it ideal for working capital needs, buying quality supplies, and upgrading small equipment like barrels.

SBA 504 loans are intended for buying major fixed assets. Apply for an SBA 504 loan for up to $5.5 million, to buy new premises for your brewery, and invest in large equipment.

SBA Microloans offer up to $50,000 for certain purposes like inventory, supplies, working capital, small machinery, and equipment. You can’t use a microloan to service existing debt.

Business loans

Traditional term business loans can bring salvation for breweries as well as for other businesses. Short-term loans, with terms between a few weeks and 2 years, are ideal solutions to working capital issues like restocking supplies, sourcing barrels, and managing existing overheads; servicing existing debt; and actualizing short-term projects like training new staff. Long-term loans can have terms up to 10 or 15 years, which makes them suitable for buying new commercial brewing equipment, expanding your premises, or moving into new markets.

Equipment financing

Both new and established breweries can use equipment financing or leasing as a way of solving their funding issues. There are two types of equipment financing options – a lease arrangement, where you pay to use the equipment but don’t have ownership of it, and a financing deal where you own the equipment outright by the end of the program.

  • If you pay to own the equipment, you’ll end up with a fixed asset. You can keep on using it beyond the end of the term, and even use it as collateral for other loans.
  • If you just lease the equipment, you can upgrade it at any time. There is no risk that you'll end up with a depreciated item that is worth a fraction of the amount you paid for it.

Both equipment financing and equipment leasing offer ways to save your working capital for other costs such as payroll, training, and supplies, instead of tying it up in fixed assets. Look out for brewery equipment leasing deals which include the cost of delivery, setup, and training.

Private investors

Breweries are popular investment items these days, so why not float your craft brewery to private investors? Friends, family, or total strangers could be willing to give you money so that you can make the best beer ever. Private investors like ‘angel’ equity investors could seem like a gift from heaven – you won’t have to pay interest, and you don’t have to repay the loan within a fixed term. But be aware – private investors will demand to have a say in your brewery in exchange for their investment, which could cause friction. They’ll also take a share in the profits, which might affect the overall cash flow of your brewery business.

Business line of credit

Business line of credit is a pool of funding that you can draw on whenever you need. You’ll only pay interest on the money that you withdrew, not the total approved credit amount. Some business lines of credit are revolving, meaning that you can withdraw money again as soon as you’ve repaid it, while others require you to reapply to renew your credit limit. Business lines of credit are ideal for working capital needs like buying supplies, paying overheads, dealing with tax bills, and training new staff. If you have a business line of credit, you can wait without withdrawing any money and without paying any interest, but you’ll have the reassurance of knowing that you have funding in place if an emergency arises or a once-in-a-lifetime business opportunity comes along. It’s not the best option for large purchases like equipment or real estate.

Business credit cards

Credit cards have a part to play in every type of business, including breweries. Business credit cards give you immediate access to extra financing, which is ideal if you’re facing a sudden financial crisis, you need to cover a cash flow gap, or want to seize a special deal on quality hops. The downside to business credit cards is that they are among the most expensive financing option for breweries, with high interest rates and inflexible terms. You should only use your business credit cards when you can expect to repay the balance within the next month or two.

How to Get Brewery Funding

How to get a grant for your brewery

If you can show that your brewery is independent and original, or combine one or more research goals with your beer production, you could get a grant of undisclosed size. You’ll need to put together a detailed proposal, but there’ll be no interest to pay and no loan to pay back.

  • Average APR: None
  • Loan process: Several weeks to submit a proposal and wait for a response
  • Minimum credit score: Not relevant
  • Term: Not relevant

How to get SBA loans for breweries

To get an SBA loan, you’ll need to go to a bank or online lender that offers these loan products. You’ll need to prepare a detailed application form and present documentation that includes:

  • Personal and business tax returns
  • Profit and loss sheet
  • Your credit score
  • A business plan
  • A business debt schedule to demonstrate how you’ll repay the loan

All three types of SBA loans offer low rates and easy repayment terms, but it takes a long time for your application to be approved and funds to clear, even for a microloan.

  • Average APR: 5%-15%
  • Loan process: 3 weeks to 3 months
  • Minimum credit score: 680
  • Term: up to 25 years, dependent on the loan type

How to get a business loan for your brewery

Getting a business loan can be a long process if you go through your bank. You can expect to have to wait at least a few days, and up to 2-3 weeks, for funding to clear. You'll need to show your bank manager your previous business bank account statements, business and personal tax returns, a profit and loss sheet, and a detailed business plan that shows how you'll use the loan money as well as a realistic plan for repaying the loan.

For an unsecured business loan, the amount you can borrow and rate you’ll be offered will depend on your credit rating and your average annual income. If both of these are low, a business loan might not be the best option for you.

  • Average APR: 4% to 10%
  • Loan process: A few days to a few weeks
  • Minimum credit score: 600
  • Term: 3-18 months for a short-term loan, 1-15 years for a long-term loan

How to get brewery equipment leasing and financing

You can get equipment leasing and financing offers from reputable commercial brewery equipment suppliers and from some banks and online lenders. The best option is to turn to business lenders who focus on the needs of breweries and other small businesses. Equipment financing and leasing deals can often be arranged and closed on the spot. Your credit score isn't very significant for equipment leasing and financing arrangements, so it's a good option for brewery owners with fair or poor credit ratings. Because your funding is connected to a fixed asset and spread across a number of years, interest rates can be very low.

  • Average APR: 7% to 20%
  • Loan process: A few days to 1 week
  • Minimum credit score: 550
  • Term: Typically, 12 to 60 months

How to get private investors for your brewery

There are a few ways to find private investors. You could ask your friends and family, set up a crowdfunding page, or approach venture capitalists. It’s a good idea to hold a promotional event where potential investors can taste your product and learn more about your business. Be prepared to answer demanding questions about your profitability and business model, and to show your profit and loss statement, business plan, and possibly recent bank statements to serious potential investors.

  • Average APR: N/A
  • Loan process: A few days to a few weeks
  • Minimum credit score: N/A
  • Term: N/A

How to get a business line of credit for breweries

Most banks offer business lines of credit, as well as online and alternative business lenders. You can often get a business line of credit from peer-to-peer lending platforms or from equipment leasing companies.

It's generally easier to qualify for a business line of credit than for a traditional business loan, and the process is faster too. You can get a business line of credit even if your credit score is poor or you only have 6 months in business. You will need to complete and submit an application form and share basic business documents such as your recent tax returns, bank statements, profit and loss sheets, and credit history, although some online lenders use a streamlined algorithm to gather the details from your linked bank account.

  • Average APR: 5%-25%
  • Loan process: Same business day or up to 2 weeks
  • Minimum credit score: 600
  • Term: 6-12 months

How to get business credit cards for breweries

There are dozens of options online for business credit cards for breweries. You can easily choose between a rewards business credit card, a cash back business credit card, or search for a business credit card with the lowest interest rate. When you apply, you’ll need to share information about your average monthly or annual revenue, how many employees you have, and how long you’ve been in business. You’ll also be asked how much you expect to spend on your card each month. Most online applications get a response in minutes, and your card could arrive as soon as the next day.

  • Average APR: From 19.99% and up
  • Loan process: online approval can be arranged in minutes
  • Minimum credit score: 700+ for the top rates
  • Term: Monthly billing

Where to Find the Best Equipment for Your Brewery

If you’re starting a new brewery, you’ll need to buy all of the equipment you need from scratch. Even established breweries need to upgrade and replace their brewing systems, fermentors, and inline pumps on a regular basis. Here are a few ways to get the brewing equipment you need:

  • Online marketplaces. Popular marketplaces like Amazon and eBay can be great sources of competitively-priced items like carboys and fermentors. You’ll do best here if you’re shopping for small parts and items that need to be replaced frequently.
  • Established equipment companies. Major brewing names like Blichmann are the best source of large commercial brewing equipment and specialist items like an element controller or power controller. This way, you’ll get a reliable warranty, expert installation advice, and good customer service if anything goes wrong.
  • Second-hand items. There is no reason to turn your nose up at slightly used brewery equipment. If the items are under 10 years old and in good condition, you can save a lot of money by buying second-hand.
  • Equipment leasing companies. Experienced financial institutions that offer equipment leasing or financing deals often work together with reputable brewery equipment dealers. Ask your preferred financing source who they recommend for brewery equipment.

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