Craft Brewery Cash Flow Loan

Cash flow is the net change in your breweries cash position from one period to the next. If you take in more cash than you send out, you have a positive cash flow. You have a negative cash flow if you have more cash outflow than inflow. Cash flow is a key indicator of financial health. Even with the fanciest brand name, marketing gimmick, or the best tasting craft beer, without a healthy flow of cash, no craft brewery can survive.  Having a solid cash flow is not just about managing a healthy craft brewery, it’s a matter of life or death. Though it may sound extreme, craft brewery owners must pay attention to their cash flows on a regular basis.

Cash is King

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.

A cash flow loan may be used for any brewery expense, but some common uses are:

  • Working capital
  • High ROI short-term opportunities
  • Purchasing highly-discounted inventory
  • Payroll
  • Marketing
  • Brewery expansion
  • Expand distribution
  • Hire additional brewers
  • Buildout a brewery taproom

Points to consider when determining if a cash flow loan is right for your craft brewery:

  1. Will it help you take advantage of inventory discounts? Imagine you have an opportunity to buy bulk inventory at a discount. A cash flow loan can help if you don’t have the money to make the purchase.

  2. Will it help you say “yes” to distributing larger quantities of craft beer? To jump on the opportunity, you’d need to hire a few more brewers, and you don’t have the cash. A line of credit or short-term loan could allow you to say “yes.”

  3. Are you entering a slow period? Another example: Perhaps your brewery is in a ski resort town and summers are slow. Ideally, you’d budget for this by saving more in the winter months, but a cash flow loan could get you through in a pinch.

  4. Do you have outstanding invoices from your distributors? Many craft breweries experience uneven cash flow because their distributors pay invoices weeks or months after receiving their beer. If you’re in this situation, a short-term brewery loan could bridge the gap, but consider invoice financing instead.

Short-term cash flow loans are best used for short-term projects that would divert money from day-to-day expenses but ultimately grow your brewery, like taking on a big contract with a major distributor or adding extra seating in your taproom. If you need cash fast to fuel your craft brewery, a cash flow loan may be your lifeline.

LVRG Funding is one of the nation's largest and most trusted resources for craft brewery finance and specializes in cash flow brewery lending. Want to know if a cash flow loan is right for your brewery, give us a call (855) 998-LVRG. We're here to help!