Even with the fanciest brand name, marketing gimmick, local craft beer awards and the best tasting craft brews, without a healthy flow of cash, no local brewery can survive. Having a solid cash flow is not just about managing a healthy brewery; it’s a matter of life or death for a craft brewery. Though it may sound extreme, but craft brewery owners must pay attention to their cash flow on a regular basis; or risk falling into a cash crunch.
Why do small craft breweries and microbreweries need to pay close attention to cash flow?
Imagine, for example, a large, stalwart 500 pound beast walking along a well-lit, fruitful jungle. It is happy and satiated, until an unexpected and unprecedented ice age arrives. It must sustain life with much less food and shelter in the frigid environment. Because of its sizeable build and capacity, however, the beast can go on for weeks, even months in the cold. Now think of the same situation for a small 5 pound animal. It would be lucky if it were to survive the first few days. Similarly, many big organizations can power through several (though not perpetual) negative cash flow quarters because of their economies of scale. They have bargaining powers and access to massive amounts of capital, which is not the case for local craft brewery owners. For reasons of pure survival in economic downturns, adhering to your cash flow is important. But there is more to cash flow than enduring difficult times.
Cash flow is also extremely important for times of growth. Paradoxically, especially for craft brewery owners, great opportunities can turn out to be disastrous occasions when cash flow is not carefully considered in advance. It’s imperative that you diligently study your cash flow statement and cash cycles prior to committing to the opportunity. In order to deal with a shortfall of cash flow, a cash flow loan for your craft brewery may be a viable 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.
Unless you can count toothpicks like Raymond in the “Rain Man,” it is essential to sit down and take the time to calculate or retrieve accurate accounting cash ratios for your brewery prior to undertaking a growth opportunity. Too many intelligent craft brewery owners make the mistake of visualizing cash flow or counting numbers in the head. Learn about your quick ratios, current ratios, inventory turnovers, net working capital, and average payment days. Invest time and resources to build an accurate financial picture of your brewery, especially regarding your cash flow. Then, look for capable and easy to work with craft brewery finance companies such as LVRG, that will help you sustainably reach your goals. LVRG Funding is one of the nation's largest and most trusted sources of cash flow loans to fuel brewery growth, and we do so with speed and transparency. Want to know if a cash flow loan is right for your brewery, give us a call (855) 998-5874. We're here to help!