What is a small business line of credit and will it make sense for my craft brewery, taproom, microbrewery, or brewpub?

Q. What is a Business Line of Credit?

A. A small business line of credit (LOC) allows a craft brewery, microbrewery, taproom, or brewpub owner to draw against a lender-specified amount of financing on an as-needed basis. The advantage of a business credit line is that you only pay interest on the funds you actually draw, so you’re not stuck paying interest on capital you don’t have an immediate use for.

Q. What's the Difference Between a True Small Business Loan and a Business Line of Credit?

A. Although some companies use the terms interchangeably, the two are quite different. True business loans, lend the full amount upfront so you can put the capital to work immediately.

With a business line of credit, you can “draw” on your account whenever you need the capital, whether that need is tomorrow, next week, or next month.

Q. How long does it take to apply and how much does it cost?

A. It depends on the company providing you the credit and the amount of your line. With LVRG, application for a small business line of credit to fuel your brewery is as fast as 10 minutes. 

Q. What does repayment look like?

A. A business line of credit requires payments only as you draw on your account. For example, though your brewery, microbrewery, taproom, or brewpub may maintain a business line of credit, your balance will remain at zero until you make withdrawals. However, once you draw on your account, repayment can be weekly or monthly. 

Q. Will it build my business credit?

A. Yes. Business lines of credit help increase your company’s creditworthiness because providers report repayments back to credit bureaus. 

Q. What are common uses of a brewery line of credit?

A. If you want your brewery to be successful, you have to produce quality beers and provide a welcoming atmosphere. Your ingredients, recipes, and equipment all play a huge part in how well the brewery will do. A business line of credit for your brewery, brewpub, microbrewery or taproom can help you acquire brew kettles, fermenters, beer tanks and other brewing equipment, as well as provide the capital necessary to thrive and grow. While true business loans are ideal for immediate capital needs, business lines of credit are designed for capital needs in the foreseeable future since you can draw on it when you need.

Examples include managing your breweries cash flow, supporting accounts receivable, taking advantage of special deals on inventory, or buying or repairing equipment.

Q. Are there different business line of credit options?

- Traditional Line of Credit:
The traditional line of credit is typically meant for experienced brewery owners with proven business models. Which makes sense since the credit maximums are sizable, the rates are lower, and the requirements demand higher credit scores and annual revenue reporting. If you’re a brewery owner taking out a line of credit, you’ll be spending that flexible cash on seasonal business expenses, payroll and other operational costs, insurance against emergencies and for sudden opportunities. In other words, as a capital cushion. It’s there for you when you need it. GET STARTED

- Short Term Line of Credit:
The difference between a short-term line of credit and a traditional line of credit is more or less the same as the difference between your typical short-term loan and conventional bank or longer-term online loan  Therefore, a short-term line of credit has a higher interest rate, lower credit maximum, faster turnaround time and looser application requirements. Unlike the traditional line of credit, the short-term line of credit is generally offered by alternative lenders rather than by banks. The point isn’t that one is better or worse, they appeal to different groups of brewery owners. Those with lower credit scores, smaller annual revenues, or newer businesses might only qualify for a short-term line of credit. And although the short-term line of credit tends to be more expensive, its value lies in giving younger small businesses the opportunity to maintain a flexible pool of capital. A small business line of credit provides flexibility that a regular business loan doesn’t. With a small business line of credit, you can borrow up to $100,000 and pay interest only on the money borrowed. You then draw and repay funds as you wish, as long as you don’t exceed your credit limit. Need to manage cash flow? Buy inventory? Pay for a surprise expense? Then a business line of credit makes sense. PRE-QUALIFY

- Invoice Line of Credit:
The basic idea behind invoice financing (also called accounts receivable financing) is that, sometimes, customers take a long time to pay you back -- but you might not be able to wait. Instead of relying on short-term loans to cover operating costs, or digging into your savings, you could just get those invoices paid right away -- although you’ll have to shoulder the costs of that speed and efficiency. An invoice-backed line of credit follows the same logic. The value of your invoices determines your credit maximum, and you can draw capital as needed instead of relying on your customers to pay on time. And as your invoices increase, you’ll typically have access to more cash from the line of credit as well.

Whether you have a large commercial brewery or small microbrewery, LVRG can provide you with the funding you need to be successful. Craft breweries, microbreweries, brewpubs and taprooms throughout the U.S. are thriving and growing thanks to LVRG, let us show you how easy it is to get brewery financing. Don't go bank to bank searching for a lender who doesn't understand your industry. Deal direct with an entire lending team laser focused on craft breweries and find out why we lead the way. We're here to help! Call (855) 998-LVRG or click below to get started.