Probably the single most common method for funding craft brewery growth is by obtaining a short term craft brewery loan, brewery expansion loan or brewery line of credit. However, there are a number of different options that come with craft brewery loans, and in order to choose the right one, you need to understand which loans work best with what type of brewery. You should take into consideration the type of operation, size of the brewery in terms of staff and assets, and overall monthly or yearly return. Craft brewery loans can be either long-term or short-term, and each have their particular uses. Short term craft brewery loans are very reliable, making them a great option for brewery owners in need of a quick burst of cash flow.
The importance of strong cash flow is aptly stated in the common expression "cash is king." The premise of this is that having cash puts you in a more stable position with better buying power. While you can borrow money at times, cash affords you greater protection against loan defaults or foreclosures. Cash flow is distinct from cash position. Having cash on hand is critical, but cash flow indicates an ongoing ability to generate and use cash.
Even if your craft 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. Perhaps you are ready to expand your distribution network or open a taproom. You options are limited without proper cash flow. Uneven cash flow is one of the biggest challenges of craft breweries across the country. In a perfect world, you’d walk into your local bank and walk out with a business loan long before you wound up in a cash crunch. Well, those days are few and far between. If you haven’t been in business at least two years, or lack good credit and collateral, chances are a traditional bank loan is never going to happen.
In order to deal with this shortfall, a cash flow loan to fuel your craft brewery may be your best option. For this type of brewery 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. Craft brewery cash flow loans 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.