Brewery Loans
Loan Options for Brewery Owners
Brewing tasty beers is your thing and you're excited about the opportunities that the brewery business can bring. You’ve got all the knowledge when it comes to the art and science of crafting the perfect brew but need some help in the area of financing the business. I’m here to help you with this!
Not only can a loan be needed when starting a brewery, it can be a necessary route during or after hard times such as the pandemic we are currently facing. The good news is that there is no shortage of options for financing.
Questions to Consider
Before getting a loan, there are several important questions to consider to help you decide what type of loan you need.
What is your credit history like?
Check your credit report and know your score. If you see any errors in your report, contact agencies. If needed, take steps to improve your credit score.
How much money do you need?
Really think about this number and don’t take more or less than what you need. No one should have an unnecessary amount of debt, but you want to have enough cash to be successful.
What will you use the money for?
There are different loans for different needs, know exactly what yours are. You may be using the funds for real estate, equipment, expansion, emergency spending, refinancing, or partner buyout. This matters when choosing a loan option and the lender will ask.
Can you afford monthly loan payments?
This may seem like a given, but it’s crucial to have a plan for being able to make your payments each month. You can use a business loan calculator to determine your monthly payment based on loan amount, term, and interest before you sign.
Now that you’ve put some thought into several important questions, let’s look further into what your loan options are so that you can get back to the fun stuff: making beer!
SBA Loans
An SBA (Small Business Administration) Loan is supported by the government as a way to expand small businesses nationwide. This is a popular way to finance a business and the money is used for working capital, equipment, and real estate purchases. Given the current COVID-19 disaster, you can also find relief options here for paycheck relief, debt protection, and more.
Pros
Low interest rates: Lower rates equals a more affordable loan.
Long repayment periods: Repayment periods of 7 to 25 years means you have the option of smaller monthly payments.
A big capital amount: This could be just right for those who want to do something big in the world of business!
Cons
Paperwork, paperwork, paperwork: Ample time will be spent on paperwork such as a business plan, statement of purpose, and more.
Lower approval chance: Your credit score and history in business are taken into consideration. Those with less than 2 years in business will have less affordable options available to them.
Business Loans
Like an SBA loan, a business loan is used for funding a business. The big difference is that a business loan isn’t backed by the government like an SBA loan is. A new option specifically for breweries is the unsecured lines of credit.
Pros
Low interest rates: Rates can be as low as 5%.
Large capital amount: Since small loans are less profitable for banks, they tend to be more than willing to provide a large amount if that’s what you need.
Cons
Long application process: Their application process can take several weeks, so this may not be the best option if you’re trying to obtain a loan quickly.
Approval is based on several factors: You will likely need an excellent credit score, a profitable business, and collateral for approval.
Equipment Financing
If you’re looking to purchase equipment for your business, an equipment loan is all you may need. Lenders will loan you the money you need to purchase your new or used equipment. Check out more details on our brewery equipment financing page.
Pros
Low credit score is okay: If you don’t have the best credit history but need proper equipment, don’t fret! Because the equipment you’re purchasing is used for collateral, it can be easier to be approved for this type of loan compared to other loans.
Lower monthly payments: Many lenders are happy to work with you to offer lower monthly payments.
Cons
Higher interest rates: The interest rates for equipment financing can be 8% to 30%.
Loan use options are limited: As the name says, this loan is for equipment only.
Investors
Most of us know all about banks giving out money to be paid back, AKA a loan. Something many, including myself, may forget or not even know is that an investor can provide you with the cash you need to start up, expand, etc. and will also benefit from you.
Pros
Knowledge for your business: Since investors are typically previous business owners and may be specialized in your type of business, they will likely be useful to you in more ways than just financing.
Chance for additional funding: If your business does well and you end up needing more financial support, your investor could be willing to assist.
Cons
Smaller capital amount: Majority of investors will not provide you with as much cash as a bank.
They want something in return: Investors are looking for something in exchange because, well, they’re investing. This means you need to be willing to share equity.
Business Line of Credit
A business line of credit is a mix between a loan and a credit card. If you need some cash now and may need more down the line, this could be a good option for you.
Pros
Potential for less money towards interest: You only use the amount you need right now (say $1,900 of a $2,500 credit); therefore, you only pay interest on the amount you use.
More money later, if needed: When you’ve paid back the amount you’ve used plus interest, you get that money back to use again when and if you need to.
Cons
Chance for overspending: We all know someone, or have been that someone, to use a credit card when we shouldn’t. This is a possibility for a business line of credit, so use with caution.
Money can make things scary, but don’t let it scare you off from living out your dream... and giving the people what they want, delicious beer!