liquor store financing

The liquor industry is one of the largest and most profitable industries in the United States. Between 2020 and 2024, the industry is expected to grow by approximately $64 billion, a massive expansion to an industry that already witnesses $250 billion in alcoholic beverage sales a year.

Indeed, whether it’s a big-box chain retailer or a popular local shop, millions of Americans visit liquor stores every year to purchase their favorite brands of alcohol for their homes, gatherings, and large events. This makes liquor stores an incredibly appealing option for prospective small business owners assessing their options for the type of business they would like to own and the industry they would like to operate in.

The liquor industry is also essentially immune to recessionary times – with provides financial safety and security for their owners. During economic recessions, alcohol sales usually go up. Plus, the barrier to entry for startup liquor stores is relatively low, typically requiring around $75,000 to $300,000 in initial investment depending on size and location. Financing is also relatively easy to achieve for inventory since the alcohol itself serves as collateral. Should a business default on its payments, alcohol isn’t overly challenging to liquidate.

To keep these stores running, liquor store owners rely on funding like a business line of credit, term loans, and other financing options to maintain their cash flow, purchase the real estate their store operates on, maintain inventory levels, and tend to other general business funding needs. In this article, we’ll cover the best liquor store financing options for individuals looking to either start their own operation or buy a local liquor store.

Challenges of Operating a Liquor Store

As can be seen, liquor stores have a lot going for them in terms of their startup costs, financing opportunities, and the recession-proof nature of the alcohol industry. However, before we dive into the details of liquor store financing, we should talk about some of the challenges liquor store owners face.

To begin with, the liquor industry is heavily regulated, both by the state governments and the federal government. Liquor stores are required to operate under and abide by stringent liquor laws – failure to do so can result in fines and penalties that could easily put you out of business.

Obtaining a Liquor License

Acquiring a liquor license can also be challenging. States often have a series of regulations surrounding liquor licenses, and they don’t just hand them out. You will have to apply for a liquor license and be approved before you can even begin selling.

Additionally, in order to receive a liquor license, you will typically have to acquire other permits and document other important information before you can even be considered.

Other Difficulties Faced by Liquor Stores

Independent liquor stores are notorious for having cash flow issues. High overhead, government regulations, expensive inventory, and relatively low margins mean that liquor store owners have to work diligently to maintain a profitable business.

Over the past few years, smaller liquor stores have faced serious difficulty competing with large, mega-retailers. These retailers are typically able to operate with super low margins on account of the volume they do in sales. The result is they are able to offer pricing that smaller retailers simply cannot compete with. This means smaller liquor stores either have to slash their own margins or begin offering niche products that large retailers may overlook.

Developing a Business Plan and Assessing Your Market

Before opening a new liquor store or buying a current operation, your first impulse should be to build out a business plan and conduct in-depth market research.

Market research is incredibly important for any prospective business idea, however, it is vital for liquor stores. For starters, you will need to identify the demographics and spending habits of those in the area. Is it a higher-income area with individuals looking for higher-end products like craft beers and expensive wines? Or is it a lower-income area that tends to buy nationwide brands like Miller Lite?

Then, you should focus on identifying who your competitors are and what products they are selling. Is there a local big-box retailer selling at incredibly low prices? Odds are you won’t be able to compete with them in terms of pricing, which means you either shouldn’t open a liquor store in this particular area or that you will have to focus on something their business is not selling. For example, you might opt to open a liquor store that sells high-end wines and craft beers because the big-box retailer isn’t offering these products.

Market research isn’t the only aspect of a business plan, however, along with your financing plan, it is arguably the most important part. After all, the last thing you want to do is invest heavily in a business that – even if run and operated with skill and precision – never stood a chance of succeeding simply because of the surrounding market conditions.

A business plan is also crucial for acquiring the different funding options we are about to discuss. Lenders need reassurance that you are serious about your business and have a solid plan of action before they will give you a bank loan. You can’t just walk in and tell them you would like to open a liquor store. You have to prove you have what it takes to operate a profitable business that will be able to pay off a loan in the coming years.

The Best Financing for Liquor Stores

The U.S. Small Business Administration

One of the best routes for liquor store financing is through the United States Small Business Administration (SBA). The SBA provides small businesses all across the country with loans that are backed and guaranteed by the federal government, allowing lenders to take on loans that are riskier than they would otherwise be comfortable with. Liquor stores are just one of the many business types the SBA is willing to lend money to, but we’ll focus on liquor store loans specifically as we discuss the following SBA loan options. Remember, the SBA does not give out loans directly but through approved SBA lenders.

SBA has 7(a) Loans

The SBA 7(a) loan is one of the most popular SBA loans available. The option is particularly great for providing small businesses – liquor stores included – with access to working capital and cash flow, however, it can be used for many purposes.

Borrowers can apply for SBA 7(a) loans of up to $5 million, depending on their financial track record.

Buying a Liquor Store or Expanding: SBA 7(a) loans are one of the best business loan options for individuals looking to purchase an independent liquor store that is already operating. As part of this process, you’ll need to provide the financial history of the existing liquor store to whatever SBA-approved lender you are working with, as well as information about your own credit score and financial history.

SBA 7(a) loans can also be taken out by existing liquor store businesses that are looking to expand. This could be an expansion that involves opening another location or simply building out your current store. Whatever the need is, SBA 7(a) loans are great for realizing your expansion goals.

Refinancing: SBA 7(a) loans can also be used for refinancing. This is especially useful for businesses that are already operating successfully and profitably but were unable to get good loan terms when they initially began operating. It is not uncommon for small business owners to end up with costly loans because of their lack of credit history and business experience. As such, SBA 7(a) loans can be a great way to refinance and consolidate loans after a few years of operation. This can not only make your business more profitable but can also help improve cash flow and working capital levels.

Buying Inventory: Another area SBA 7(a) loans can assist with is purchasing inventory. Inventory is not cheap, especially for liquor stores that often offer high-end, expensive alcohol.

Working Capital Injection: Whether is paying employees, paying for rent, paying the mortgage, or purchasing inventory, liquor stores need cash. Since the liquor business can be cyclical (you are going to sell a lot more liquor around holidays and other special events in the area), working capital crunches are not uncommon. You will have to plan accordingly in managing your cash flow to ensure you are able to meet your financial obligations each month. A loan from the SBA can help smooth out your working capital in times of need.

Traditional Lenders

Obtaining financing from traditional lenders can be difficult sometimes for liquor stores. Because of the rise of big-box retailers and the strain that this has put on smaller independent liquor stores, the business model has become riskier and riskier in the eyes of traditional lenders like brick-and-mortar banks. However, this does not mean that a traditional loan from a traditional lender is out of the question. If you have a convincing business plan or are purchasing an existing liquor store with consistent annual revenues and profits, there is still a good chance that you can find the right lender to provide you with a small business loan.

Business Line of Credit

A business line of credit is an open loan that allows you to borrow money at any time up to the line’s maximum loan amount. Then, once you repay the amount borrowed, you can borrow that amount again. These lines often have reasonable interest rates and they are a great way to shore up cash flow. Plus, since they can be held in perpetuity, you don’t have to worry about rushing out to get a loan at the last minute in an emergency. You will already have a source of cash.

A business line of credit typically will not be large enough to acquire a business or start one, but it is a great ongoing resource for small businesses and something that can assist in covering many of the opening costs associated with starting or taking over a new operation.

Term Loans

Term loans (also known as conventional business loans) are a great option if you are thinking about starting a business. Long-term loans can be acquired for large amounts with great financing options. In particular, long-term loans can be extended out for many years, giving borrowers ample time to pay them off. This breaks up an otherwise large expense into manageable payments.

That said, the credit rating and personal finance requirements on term loans tend to be fairly stringent, which can put them out of reach for those without a strong financial track record.

The terms of such loans are fairly straightforward. You borrow a specific amount of money for a stated purpose (this is usually stated in the terms of the loan). Then you pay back the loan over time at a fixed interest rate.

The application process for these types of loans can be very long and drawn out since brick-and-mortar banks and traditional lenders take a long time to do their due diligence and assess their risks.

Interest rates on these loans typically range from 7% to 30%, and terms are typically three to five years (though this can all vary depending on your credit profile). You may also need to put up collateral to minimize the lender’s risk.

Seller Financing

If you don’t qualify for a traditional loan or an SBA loan program, seller financing is another option that you can pursue. Some sellers are actually willing to sell their business via loan terms, which means you will pay them back over time at a set interest rate. You would provide a certain amount of money as a down payment (depending on the terms of the agreement), and then work to pay off the rest of the business over time.

The terms and requirements of loans done through seller financing are highly variable since the seller and buyer are free to set them up however they deem appropriate given the circumstances of the sale.

Since this is usually an option of last resort, the seller will probably require a hefty interest rate, since selling you the business will be seen as a considerable risk if you were turned down for other more traditional financing options.

Alternative Lenders

​Another option you can pursue is acquiring a loan through an alternative lender. Non-bank lenders like Biz2Credit, Kabbage, and OnDeck provide small businesses with loans all across the nation. These loans are typically able to be approved on an accelerated basis compared with traditional lenders and can come in amounts ranging from $2,500 to $250,000. The terms are usually 3 to 18 months, with interest rates starting at 10%, so while they can be a good option for getting money in your pocket to get the process of buying a business rolling, you will probably need to seek out longer-term financing down the road.

Check out how this entrepreneur was able to build four thriving liquor stores thanks to Biz2Credit’s fast funding.

Because non-bank lenders are taking on considerable risk compared to traditional lenders, interest rates are higher. However, non-bank lenders are known to take on riskier clients than traditional lenders, meaning those with credit profiles that are not very strong may still qualify for a loan.

A Word of Caution When Buying a Liquor Store

Purchasing an existing liquor store can be a great way to get into the industry without the pains and hassles of building one from the ground up. You will already have inventory, a built-out infrastructure, and an existing customer base. However, whenever you are purchasing another small business – especially a liquor store – you have to be extremely careful and diligent to ensure you are not overpaying.

Small businesses, and liquor stores particularly, are well-known for being terrible bookkeepers with very little financial acumen. Many liquor stores – and other small businesses as well – will take cash payments and not record the entirety of them in order to illegally dodge taxes. This means their annual revenues may appear deflated on paper while the owner will try to convince you that they are doing a much higher volume in sales. Unfortunately, if they are taking cash under the table, there is no way to verify how much they are making. You should only ever pay a valuation that is based on the recorded annual revenues. Never buy a small business based on what an owner claims they are really making.

Additionally, we highly advise talking with a certified public accountant (CPA) before any small business acquisition. Finding a CPA who specializes in small businesses will allow you to have someone who is experienced analyze the business for you. They will be able to give you concrete information, data, and analysis as to what is the appropriate amount for you to be paying for the business.


Running a liquor store can be an incredibly profitable endeavor if done with a proper business plan that can be executed effectively and efficiently. However, all businesses typically need funding and loans of some kind, so it is a good idea to start thinking about financing options early on. As such, taking steps now to understand the small business financing landscape, you’ll be putting yourself in a prime position for success down the road.


At Biz2Credit, we are constantly working to provide our readers with the latest up-to-date content on small business lending and news across the country. So, please be sure to keep checking back here at our Biz2Credit Blog for the latest timely and relevant small business news!

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