As one of the nation's top funding sources, and resources for America's craft breweries, you can imagine we speak with countless brewery owners. Interestingly, they all pretty much have something in common, as it relates to growth. In fact, roughly 80% of America's brewery owners experience the same, yet overcomeable, challenge...
So, what is this commonality shared with thousands of brewery owners throughout the country? Access to capital. And it really doesn't really matter which end of the spectrum you're on (bankable or unbankable) it's always the same challenge.
This situation can go one of two ways:
#1. Over 80% of America's craft brewery owners do not, and never will, qualify for bank financing for one reason or another. This may be due to time in business, lack of collateral, poor credit, poor credit history, lack liquid cash flow to inject into an SBA loan, etc. Documentation Needed for SBA Small Business Loan Application
#2. Roughly 20% of brewery owners who are bankable and have institutional financing, or SBA loans in place, require additional capital along the way which their bank will not provide. Many breweries that we look at are cash flowing nicely, however, due to outstanding debt, their cash flow & debt ratios are unbalanced. Banks want to see roughly 1.10% - 1.25% debt service ratios, which is pretty unusual to see in a brewery under 3 years old. So, many brewery owners find themselves in a "chicken or the egg" scenario. They can't scale because they don't have the capacity to brew more beer, and their bank won't provide additional capital due to unbalanced cash flow & debt ratios.
Bottom line, if you want to sell more beer, you need to brew more beer. How do you brew more beer without upgrading your facility, or scaling your equipment? Simple. You don't! How do you open a taproom to sell more beer without being capitalized? That's pretty simple as well. You don't! The art and craft of brewing beer may be compared to rocked science, but the financing component sure isn't. Owning a brewery takes a constant flow of capital, and without being capitalized, you are going struggle. It's really as simple as that.
Expanding your brewery, adding on a taproom, purchasing brewery equipment, and evening out cash flow can all be managed with the right type of brewery financing. Can you bank on bank financing? Not nowadays! Bank loans do not provide the short-term influx of cash flow necessary to sustain and grow craft breweries; not to mention, they're near impossible to obtain. LVRG is the Nation's go-to source for brewery financing and provides opportunity capital to brewery owners nationwide.
What are some of the financing options LVRG is able to provide craft brewery owners?
Brewery SBA Bridge Loan:
For brewery owners of all sizes in need of capital, an SBA loan or traditional bank loan can be a wonderful solution. There is no denying the fact that institutional financing offers the best rates and terms, assuming you qualify and are prepared to undergo a very grueling few months. Unfortunately, many brewery owners often face obstacles throughout the SBA financing process that may require immediate financial support, including:
- Limited Cash Flow
- Extremely Slow and Cumbersome Loan Processing (typical SBA time frame is 2-6 months)
- Costly Requirements (expect up-front fees, and be ready to inject up to 30% cash of the total SBA loan amount)
If you are in need of instant capital to keep your brewery flowing while going through the SBA loan process, LVRG Funding's SBA Bridge Loan can be the smart and simple solution. A short-term infusion of capital will allow you to pay off tax liens, replenish cash-depleted by the loan process, or simply assist you with managing your brewery in the interim. Let us help you bridge the gap of the loan waiting process with our Brewery SBA Bridge Loan Program.
Revenue Based Financing:
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 brewery owners 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?
Brewery Business Cash Advance:
A brewery business cash advance 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 breweries 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 brewery owner on a daily, weekly or monthly basis until the obligation has been met. Brewery business cash advances are a great option for brewery owners who may not have strong credit but have lots of credit card activity, or constant revenue and need financing quickly.
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 Brewery Financing, or Brewery 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 brewery 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, brewery cash advance, 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 brewery cash advance or fast working capital loan.
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. This is where LVRG comes in and could be your lifeline. Revenue based brewery financing, cash flow loans and working capital solutions from LVRG 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 financing options are the perfect solution for brewery owners looking to take advantage of growth opportunities. So there you have it, a few quick, efficient and “obtainable” brewery finance options. Revenue based brewery financing, cash flow loans and brewery 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!