Understanding Small Business Loans for Breweries: A Guide for Craft Brewers

Small business loans for breweries can provide capital for working capital needs or to grow and develop your brewery business into a long-term, successful operation.

We'll explain how small business loans for breweries work. You'll also learn about different types of loans available to you, what lenders look for, and what options are best for both new and growing businesses. We'll also answer common questions about brewery startup financing and business loans.

What Small Business Loans for Breweries Can Do For Your Operations

Very few brewery business owners are fortunate enough to have enough personal savings or financial help from family and friends to invest in their businesses. Small business loans for breweries are designed to meet the unique needs of brewery owners.

Brewery startup funds are useful when you are just beginning to establish your company. It can be used to pay for a brewhouse and all the equipment required to brew the best possible batches of beer, including malt mills, fermenters, kegs, vessels, a lauter tun, etc.

Financing can also cover leasing and restoration costs, as well as purchasing commercial property for your business headquarters. Loans also pay for staffing-related expenses, utilities, permits, advertising, and delivery trucks.

Brewery loans to pubs can also benefit established craft beverage businesses by offsetting losses during slow periods. You can also use brewery financing to increase production of your most popular ales or open a second location.

Small business loans for breweries ultimately provide the financial resources you need to build a profitable enterprise for many years to come.

Types of Brewery Business Loans and Alternative Financing

Operating your brewery or pub will take lots of capital to keep your business moving forward. At different points in time, you may need to upgrade equipment, hire extra staff, open a second location, or even increase production to meet increased demand. There's also the chance you'll need extra capital to make up for a slow season.

There are several types of small business loans and financing solutions for breweries to choose from, and the right one depends on your business needs, its financial history and health, and how quickly you need financing.

Small Business Administration (SBA) Loan Programs

SBA loans are a popular financing option with brewery business owners. This is due to the fact that SBA loans tend to have better repayment terms for qualified applicants than other types of small business loans for breweries. Typically, you'll have longer to repay the loan and lower interest rates that reduce the overall cost of the loan.

The federal government guarantees SBA loans issued by SBA-approved lenders. SBA lenders can be banks, credit unions, or even online lenders. Because the guarantee removes some of the risk from lenders, they're more likely to approve an SBA loan than they would with standard underwriting.

• Best for: Larger business expenses like renovations, purchasing commercial real estate property, or equipment purchases
• Pros: Usually has low interest, and gives you a longer time to pay off the loan
• Cons: Need decent credit to qualify, and depending on the lender, the application process can be lengthy and time-consuming

Business line of credit

Think of a business line of credit in the same way you do a credit card. A lender approves you for a maximum credit limit. Then, you can borrow from the limit as needed and only pay interest on the amount used. Once you pay on the line of credit, the limit goes back to the original credit line. A business line of credit can help manage ongoing expenses or emergencies that come up.

• Best for: Cash flow gaps, seasonal sales changes, or short-term financing needs
• Pros: Gives flexible, fast access to money, and is great for building business credit
• Cons: Can end up costing more if charged a higher interest, and the credit line isn't repaid quickly

Term loans

Term loans are small business loans for breweries that provide borrowers with a lump sum loan amount. After loan funds are disbursed, the borrower repays the loan over time with equal, fixed payments. This type of brewery financing can be short or long-term.

• Best for: Expanding operations, adding staff, launching a marketing campaign, and multiple business purposes
• Pros: Provides predictable payments, is easy to budget for, and is offered by most lenders
• Cons: Often requires a solid credit and financial history, and is more difficult to qualify for than other types of small business loans for breweries

Equipment financing

Breweries require a lot of specialized equipment to make the perfect craft beer. Equipment loans are designed for this purpose. An equipment loan provides cash for purchasing or leasing the equipment your brewery or pub needs. Since the equipment is collateral for the loan, it's usually easier to get loan approval.

• Best for: Buying or upgrading equipment
• Pros: Easy to qualify for, often doesn't require perfect credit
• Cons: Only finances equipment and can't be used for other business expenses, and you must be careful that the loan term exceeds the useful life of the equipment

Revenue-based financing

This type of business financing is offered by online or alternative lenders. You receive a lump sum of cash upfront. But rather than paying it back with fixed monthly payments, you repay it with a percentage of your brewery business's future sales and receipts until it's paid off.

Revenue-based financing is great for buying ingredients or inventory ahead of a busy season, boosting production to meet increased demand, or expanding your taproom to accommodate more guests.

• Best For: Breweries with steady monthly sales, business owners who want to avoid large monthly payments, and businesses that need quick funding
• Pros: Payments adjust based on your business's revenue, and fast approval
• Cons: Can be more expensive than traditional financing, not ideal if you have low or unpredictable sales

Tips for Getting Approved for Small Business Loans for Breweries

Before issuing small business loans for breweries, most lenders want to ensure that your brewery business is financially stable and will be successful in the long run.

Here are some key factors they'll consider, along with some tips to increase application success.

Credit score

Your personal and business credit histories reflect your reliability as a borrower.

• Strive for a personal credit score of 680 or higher for traditional loans, such as SBA or term loans
• Some online or revenue-based lenders accept lower scores, but rates will be higher

Tip: Check your credit reports for errors and pay down debts to improve your score before applying.

Business plan

A clear, professional business plan should convince lenders of your brewery's potential. Include:

• An executive summary
• Information about your target market and a competitor analysis
• Your experience in the industry
• Strategies for marketing and growing your business
• Financial projections

Tip: Your business plan should reflect current market trends and convey your brewery's unique brand story to set it apart.

Financial records

Lenders usually want to have a comprehensive view of your financial records, including:

• Tax returns (business and personal)
• Balance sheets
• Income statements
• Business banking statements
• Business licenses

Tip: Hire an accountant or use accounting software to keep your records organized and up to date at all times.

Revenue and cash flow

Most lenders prefer consistent revenue of at least $100,000 to $250,000 a year, depending on the loan type.

• Positive cash flow increases your approval chances
• The longer you can wait to show more revenue, the easier it'll be to qualify for a loan

Tip: Organize your financial statements from the past 12 to 24 months. If you have less revenue than $250,000 a year, consider applying with an online lender, as most traditional lenders have higher revenue requirements.

Time in business

Lenders usually want to see one to two years in business.

• Newer breweries can still qualify, but might need to apply with an alternative lender
• Lenders might require more collateral or down payment with less time in business

Tip: If you're an entrepreneur needing startup financing, focus on delivering strong projections and a solid business plan. Consider applying for an SBA loan, as you'll have a better chance of getting approved.

Conclusion

A small business loan can help you achieve your brewery business goals, no matter where you are in your business journey.

The key is selecting the loan product that best fits your brewery's needs and submitting a loan application and business plan that shows lenders you're serious, committed, and prepared.

Understanding what lenders look for in loan applications can improve your chances of getting approved. Sufficient capital and a solid growth strategy will help you stay competitive and successful in a booming craft beer market.

Small business loans for breweries can help you stay on tap for success, whether you're brewing your first batch of craft beer or getting ready for your next business venture.

FAQs About Small Business Loans for Breweries

1. How long should it take for my brewery to earn a profit?

It can take time for a brewery business to turn a profit. Taprooms sometimes see a return on investment within a year, but it will vary.

2. What's the easiest brewery startup financing to get approved for?

Your results will vary based on your credit profile and other factors.

3. Can bars and pubs get small business loans for breweries?

Bars and pubs fall within the brewery industry. You can apply for a standalone loan to boost cash flow and meet operational expenses, buy a facility, or purchase equipment, or you can expand your operations and become a brewpub to add brewing capabilities. Either way, a small business loan for breweries can finance your business needs.

4. What is the minimum credit score needed for a brewery business loan?

The SBA, banks, and credit unions require minimum credit scores of at least 680 to 700. Many online lenders have funding options for brewery entrepreneurs with credit scores in the high 500s.

5. How long does it take to get funds from small business loans for breweries?

A traditional bank loan can take weeks, whereas an online loan can provide the funds you need within a day or two, in some cases.

Frequent searches leading to this page