Working Capital for Breweries and Brewery Loans. Craft Brewery Financing Made Simple!

Craft Beer as an industry is experiencing a BOOM like no other! 2015 Craft Beer in Review from the Brewers Association Reveals Historic Number of Breweries in U.S.; Most Since 1800's. As of the end of November, there are now 4,144 breweries in the country, topping the historic high of 4,131 breweries in 1873.

Quick Craft Beer Brewery Facts:

  • Brewery openings now exceed two a day.
  • Fifteen states are now home to more than 100 breweries: California, Washington, Colorado, Oregon, Michigan, New York, Pennsylvania, Illinois, Texas, Ohio, Florida, Virginia, North Carolina, Wisconsin, Indiana.
  • IPA remained the top style sold by independent craft brewers, and continues to grow faster than the overall craft category.
  • Data shows that “locally made” is important to over half of craft beer buyers.

Similarly, knowing that the beer is made by a small and independent brewery is important to a majority of craft drinkers in their purchase decision. #DrinkLocal

With the astonishing facts mentioned above, there’s never been a better time for craft brewery owners to access capital. Well, depending on where you look. Expanding your brewery, adding on a craft beer taproom, purchasing additional craft brewing equipment, and evening out cash flow can all be managed with the right type of Brewery Finance. Bank loans from traditional financial institutions may seem like the common place to go for capital, but often times they do not provide the short-term influx of cash flow necessary to sustain and grow local craft breweries. Additionally, banks don’t typically write loans under $350,000 or loan money to breweries under two years old. This leaves a HUGE gap in the market and one of the reasons why LVRG is so valuable and indispensable to brewery owners throughout the country. LVRG Funding has become the nation’s go-to source for Brewery Finance and for good reason.

Today’s brewmaster and craft brewery owner is constantly on the lookout for growth opportunities and must move quickly to take advantage of them. What if you need a quick injection of capital to buy a craft brewery bottling machine, canning system, or brewhouse? An opportunity for an acquisition or expansion can arise suddenly and needs an immediate response and immediate cash. And of course, there will always be emergencies and cash flow gaps that need to be quickly managed with working capital.

That’s why short-term business loans, cash flow loans, revenue based loans and merchant cash advances are the fastest growing credit instrument among small microbreweries, local craft beer breweries, all the way on up to large commercial breweries. They’re the contemporary solution for brewery owners needing quick capital to fuel or accelerate growth.

Traditional business loans through banks and approved SBA lenders are often made for as long as 25 years and require mountains of documentation and financial statements. And then there’s the waiting period, for both an approval and for funding, which is typically 2-4 months. Unfortunately, among financial institutions, the credit turn-down rate for craft breweries is rather high and doesn't show signs of improving significantly. There is no denying that SBA lenders and banking institutions offer more favorable rates and terms than alternative lenders, the issue is most people simply don't qualify for those options for one reason or the other.

Just to give you an example, the following numbers are averages as it relates to SBA loans that get approved under $350,000. Again, these numbers are just an average.

SBA Loans $30,000 - $150,000: 

  • Average Revenue $346,000. EBITDA $42,000. Liquid credit 175. FICO 711. Years in business 9 years. 
  • Median Revenue $600,000. EBITDA $61,000. Liquid credit 176. FICO 713. Years in business 12 years. 

SBA Loans $150,000 - $350,000:

  • Average Revenue $867,000. EBITDA $82,000. Liquid credit 177. FICO 713. Years in business 6 years.
  • Median Revenue $1.5MM. EBITDA $114,000. Liquid credit 175. FICO 713. Years in business 10 years.

The averages listed above are not meant to discourage you, however they are shown so that you don’t get discouraged if you can’t get approved for a bank or SBA loan. Based on statistics, you have roughly an 80% chance that you will be declined a bank or SBA loan through a traditional lending institution. Don't worry, we've got you covered! Because of this shortfall, the rise of alternative financing emerged. Alternative lenders and resources such as LVRG have many advantages over traditional bank financing, including these three reasons:

1. Less Likely To Be Denied

Historically, banks have shied away from small business owners and entrepreneurs. This tendency to deny loans only increased after the 2008 depression, leaving many business owners without a way to gain extra capital necessary for growth and expansion. Small businesses and craft breweries often find themselves in a catch-22, where the brewery company must spend money in order to make money, but are denied a loan by the bank due to lack of collateral or credit issues. Many alternative lenders will work around this paradox to help you get the funding you need to grow.

2. Niche Markets Such As Craft Beer Are Better Understood

Small business lenders understand how it feels to be denied a loan. They also understand the unique financial challenges that many craft brewery owner’s face, from constant need of upgrading equipment to ordering more inventory to keep up with production. Whether you need to update your brewery, or brewery equipment, a company like can help assess your financial standing and perceived growth based on your breweries individualized qualities.

3. Credit Scores Not The Only Factor

Most banks look at credit scores first, which means your brewery may be denied immediately. If you don’t have excellent credit and a stellar credit history, you are NOT getting approved for a bank loan or SBA loan. There is no getting around that fact. Alternative lenders are much more likely than banks to review your loan request on a variety of factors, not just your credit score. In addition, there are many options for alternative funding, so it should be easier to find the right loan option for your brewery.

This is where LVRG comes in and could be your lifeline. Short-term business loans, cash flow loans, revenue based loans and merchant cash advances on the other hand; are tailored to the needs of small and medium-sized breweries. As a result, offer distinct advantages:

  • They’re made for shorter terms, usually 6 to 48 months.
  • They require relatively little paperwork and a simple application to start.
  • The underwriting and approval process are designed to provide brewery owners quick answers.
  • Once approved, brewery owners have their funds in as little as 24 hours.
  • Repayment terms are favorable.
  • Poor credit is not a deal breaker and often times not even looked at.

The key here is growth and our brewery funding options are the perfect solution for brewery owners looking to take advantage of growth opportunities. So what are some of these Brewery Finance options?

#1. REVENUE BASED LOAN: 

A revenue based loan could be your breweries lifeblood and provide it with several financial benefits. When your brewery is growing, chances are you'll need an injection of cash to continue its growth. Bank loans are often times too restrictive and near impossible to obtain these days. In this situation, a revenue based loan may be the best solution. If you use it wisely, a revenue based loan could do wonders for your brewery. Without being capitalized, chances are you will wind up in a growth stalemate. Here are three ways that revenue based loan can save your brewery.

- Helps Grow Your Brewery

If your brewery is under 2 years old and starting to scale, you obviously want to ride the wave. You cannot do this without a dependable source of capital. Bank criteria is typically a minimum of 2 years in business, strong cash flow, positive ratios and near perfect credit. However, a revenue based lender will fund newer breweries, with less stringent credit requirements and use of capital restrictions. This type of loan will give you a shortcut to cash since it only requires a few months of business bank statements; whereas banks require 2 to 3 year business and personal tax returns, income statement, balance sheet, personal financial statement, debt schedule and countless other documents to complete loan package. Many times, your bank statements are enough to demonstrate to a revenue based lender that you can repay your loan. 

- Get Cash Quickly

You're busy brewing beer and running a business, you don't have to time to compile overly detailed loan packages and chasing after loan sources. All you know is that you need cash quickly and even if you could get approved for a bank loan, is it really worth all the trouble? A revenue based loan will provide cash quickly with a very short turnaround time. If you are prepared to apply for a revenue based loan and have the appropriate supporting documents ready to go, you may be able to get funding in a matter of days. Compare that to a bank loan where the loan process is on average 2 to 4 months. This is one of the main advantages of a revenue based loan. Some businesses actually consider this a lifesaver, and will go this route over a bank loan any day.

- No Lingering Debt

A revenue based loan will not weigh you down with long-term debt. When you obtain a revenue based loan, you will not be looking at 5 to 10 years to repay a loan for money that you're using today. Think about it, why would you want the headache of paying off a 2015 marketing campaign all the way into 2025? Not to mention, having this type of long-term loan could hurt your chances for getting funding in the near future, which all breweries will need if they plan to scale. With a revenue based loan, you will pay it off in roughly 6-12 months, which makes more sense for short-term expenses. Additionally, lenders are usually willing to replenish the loan after roughly 50% is paid down, so you can continue getting more capital along the way. One more point to mention, going the bank route you'll also have to be aware of up-front fees, equity injections, referral fees, packaging fees, guarantee fees, and closing costs.

As you see, the preceding three steps show you how a revenue based loan could be advantageous for your brewery. It helps you grow your brewery quickly and it does not saddle you down with long-term, highly encumbering debt. It gives you the cash that you need quickly, to grow your brewery your way. What more could a growing brewery need? 

#2. MERCHANT CASH ADVANCE or BREWERY CASH ADVANCE

 A Merchant Cash Advance (MCA) can provide brewery owners with an upfront fixed amount of cash in as little as 24 hours. The funding amount is based upon a percentage of the businesses credit card receivables or daily cash balances using historical credit card receipts and bank statements to determine the initial advance. The business pays back the advance, plus a percentage, often referred to as a discount factor, from a portion of their credit card receivables or cash available plus a percentage which is often referred to as a discount factor. The remittances are drawn from the business customer on a daily, weekly or monthly basis until the obligation has been met. An MCA is not technically a small business loan and as such MCA's are not limited in what rates they charge or what terms they establish and therefore often have high interest rates. For this reason it is very important for a brewery owner to be completely aware of how the MCA product works and how it could affect their brewery. MCA's are good options for brewery owners who may not have strong credit but have lots of credit card activity and need financing quickly.

#3. CASH FLOW LOAN

Even if your brewery is growing, you may find yourself needing extra cash to cover day-to-day expenses such as payroll, rent and inventory, or to pay for short-term projects that could grow your revenue in the long run. Uneven cash flow is one of the biggest challenges of breweries throughout the country.

For this type of business financing, lenders provide you funds and use your future expected cash flow as collateral for the loan. You’re essentially borrowing from cash that you expect to receive in the future by giving the lender the rights to a predetermined amount of these receivables. These are primarily used for working capital or take advantage of short-term ROI opportunities. Your credit scores will usually be checked, but they play less of a role. As the name indicates, the lender is more concerned with inspecting your cash flow (usually bank statements) to approve your application. Turnaround time is another great feature of a cash flow loan, as funding usually takes place in a matter of days.

What are the benefits of a Cash Flow Loan, Revenue Based Loan, or Business Cash Advance?

  • Much quicker approval times from LVRG than a bank. This translates to faster cash-in-hand, allowing you to take advantage of current market prices.
  • Whereas business loans from a bank require you to have collateral in order to gain favorable consideration, LVRG requires you to be subject to a limited amount of conditions.
  • A cash flow loan or revenue based loan is also much more beneficial to the cash flow of a brewery since it does not require any monthly payments or upfront fees that are characteristic of long term SBA loans.
  • There is no limitation on how the funds acquired from a cash flow loan, MCA, or revenue based loan can be used. Funds that are loaned through a financial institution must be used for the stated purpose by the business. As a result, money from a business loan has a very narrow scope of action as compared to money that comes from a cash advance or fast working capital loan.
  • No UCC-1 is required for either a revenue based loan, cash flow loan or UCC-1

So there you have it, 3 quick, efficient and “obtainable” brewery finance options. It’s important to point out that all brewery financing options mentioned above along with the SBA are viable options, they just all serve a different purpose. We are not knocking bank loans or SBA loans in any way, we are simply providing the best alternatives if you are not able to qualify for conventional financing. Cash Flow Loans, Revenue Based Loans and Merchant Cash Advances from LVRG have helped hundreds of craft breweries just like yours, not only turn the corner, but pull ahead in the race. We not only love craft beer, but we are passionate about growing craft breweries across the country. LVRG Funding is the nation’s go-to source for Brewery Finance and we are here to help you put your stamp on the craft beer map. Call us today toll free for more information (855) 998-5874 or click the banner below to get started!