Whether they’re known for their food, flights, or tours, breweries of all sizes and specialties can face funding challenges and opportunities. Craft beer production has steadily grown in the U.S., with industry-wide average year-to-year growth reaching 3.9% between 2016 and 2021. However, in recent months, the brewery industry has lost revenue for several reasons, including adhering to public safety measures that limit or altogether do not allow sit-down, restaurant-style brewery spaces.
Whether your brewery is weathering the storm or struggling to pivot, small business loans for breweries can help. Below, learn all about your low-cost funding options.
Financing Options for Established Breweries During the COVID-19 Coronavirus Pandemic
In March 2020, Congress and the White House passed the CARES Act, which introduced the Paycheck Protection Program (PPP). This Small Business Administration (SBA) loan program helps small businesses stabilize or expand during the COVID-19 economic crisis.
In January 2021, a second round of PPP applications opened following the first round’s end in August 2020. This second round is the result of the December 2020 Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which stipulates that second-round funds can be used to cover expenses beyond payroll costs, which were the first round’s focus.
To read more about the second round of PPP loans, you can visit the following SmartBiz Loans pages:
- Paycheck Protection Program 2021 Guide
- Expanded Use of Funds for the Next PPP Loan Program
- Small Business Loans & Resources in Times of Coronavirus (COVID-19)
- How To Get a 2nd PPP Loan
Funding challenges and opportunities for breweries
If your brewery’s revenue comes predominantly from its sit-down food and drinks service, you may face several formidable challenges obtaining small business funding. For starters, lenders often feel less inclined to fund borrowers from struggling industries. To compound this challenge, you may be earning significantly less revenue from your usual operations, which means you have less money for business purposes in the first place.
Your situation might look different if beer production and store sales more strongly comprise your revenue. With storefront alcohol purchase rates up, you can present a compelling case to lenders that your business is primed for growth, thereby making you an ideal borrower. Alternatively, if your brewery currently earns more revenue from sit-down operations, you can present a compelling business plan for pivoting to production and store sales.
In either case, small business loans for breweries can help you get moving on your future plans. Below, learn all about several available funding options.
Funding options for breweries
Small business loans for breweries are available either through the SBA or non-government sources. No two funding options have quite the same rates, fees, and other terms, but the below guidelines should give you a general rundown of what to expect.
The SBA 7(a) loan program
Business finance experts often view low-cost SBA 7(a) loans as the best small business loan option given their low monthly payments, low rates, and long terms. You can use your SBA 7(a) loans to:
- Acquire Working Capital – Working capital, which is perhaps the single clearest indicator of your brewery’s financial health, is the difference between your current assets and your current liabilities. Alternatively, your working capital is your total available business cash. A negative working capital value means you should grow your assets by hiring employees or buying equipment. SBA 7(a) loans can be used for both these purposes.
- Consolidate Your Debts – Use SBA 7(a) debt consolidation loans to refinance your brewery’s merchant cash advances, short-term business loans, daily or weekly payment loans, and high-interest business loans.
- Buy Commercial Real Estate – SBA 7(a) loan proceeds can cover owner-occupied commercial real estate purchases or the refinancing of your existing commercial real estate mortgages.
Advantages of SBA 7(a) loans for breweries
SBA 7(a) loans are often seen as the small business loan “gold standard” due to their:
- Wide use of funds
- 10-year terms (25 years for commercial real estate loans)
- Affordable monthly payments
- Lack of prepayment penalties
- Low rates
- Availability in all 50 states
Requirements for breweries to apply for SBA 7(a) loans
To qualify for SBA 7(a) loans, you must:
- Be at least 21 years old
- Be a U.S. citizen or lawful permanent resident
- Have no foreclosures or bankruptcies in the past three years
- Have a personal credit score above or equal to 650
- Be on-schedule with all government-related loan repayments
Additionally, your brewery must:
- Be at least two years old
- Be based in the U.S.
- Not have tax liens, recent settlements, or outstanding charge-offs
- Be on-schedule with all government-related loan repayments
Some lenders institute additional requirements – for example, it is not entirely uncommon for lenders to ask for business plans. However, SmartBiz Loans does not require business plans for SBA 7(a) loan applications.
How to apply for an SBA 7(a) loan for breweries
Step 1: Confirm that you and your brewery qualify for SBA 7(a) loans as described above. If not, then, for now, you will need to consider non-government funding options instead. Learn more via the SmartBiz Loans guide to SBA Loan Requirements for Existing Businesses.
To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also recommends ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.*
Step 2: If you qualify for SBA 7(a) loans, collect all your required paperwork before applying. Doing so can be onerous, so it may help to have your bookkeeper, accountant, or another financial expert assist. Learn more via the SmartBiz Loans Guide to SBA Loans.
Step 3: Decide on a lender. Make your decision based on the following:
Look for a clear interest rate and APR in your loan terms. If you cannot easily find these figures, your lender may prove unwilling to fully detail your loan, so if you agree to borrow from this lender, you could be stuck with terms that actually cost you more in the long run.
Obvious loan terms
Clear interest rates and APRs are just the start – your loan’s fine print should be perfectly clear as well. That’s because unfavorable terms can be hidden in the fine print. Don’t hesitate to ask your lender about potential prepayment penalties, payment frequencies and amounts, total loan amounts, and collateral requirements. Vague or unhelpful answers may be a sign to choose a different lender.
SBA 7(a) loans typically include repayment fees and interest fees, but they should not contain many other fees. If they do, you should consider a different lender. You should also confirm that all loan fees are due during your loan’s lifetime and before your loan’s funding.
Look through all potential lenders’ Consumer Affairs, Google, and TrustPilot reviews. Check that you’re reading actual customer reviews, and look for other brewery owners among the reviews.
Your lender should pair you with an account representative who knows your application, company, and the brewery industry. You should have no trouble reaching this representative via phone or email during standard business hours.
The SBA 504 loan program
Small businesses such as breweries that qualify for the SBA 504 loan program can use their loans to cover expansion or modernization costs such as opening new locations, hiring new employees, or upgrading equipment. If your brewery meets the public policy goals of your local community development corporation (CDC), your SBA 504 loan can cover as much as 50% of your project costs while your CDC covers up to 40%. This arrangement leaves you to cover 10% out of pocket immediately.
The SBA microloan program
If the SBA defines your brewery as a very small business (a.k.a. microbusiness), you can apply for the SBA Microloan Program. SBA microloans are no more than $50,000, and you can use them to cover all expenses besides debt payments and commercial real estate purchases.
Non-SBA loans and other funding options
Although SBA loans are ideal for small businesses, not all companies qualify for them. That’s why other options exist, though often, these options have larger payments, shorter terms, and higher rates. They include:
Bank term loans
Bank term loan funding is often available as quickly as SBA loan funding, but bank term loans typically have shorter terms, higher rates, higher prepayment penalties, and lower amounts. You can use them to obtain working capital and refinance your debts.
Business lines of credit
A business line of credit is a revolving credit line of a maximum amount directly proportional to your credit score. However, this amount will usually be lower than what you could obtain through a bank term loan. Business credit lines and bank term loans also differ in that the former does not require you to use all the funds you receive, and you’ll only pay interest on the funds you do use.
You can tap into your business line of credit as often as you need to until you fully deplete it. In most cases, you’ll also be able to forgo putting up collateral to obtain a business credit line. You can learn more about business lines of credit via the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.
Business credit lines may resemble business credit cards, but only business credit cards sometimes include spending rewards. Additionally, business credit lines can not be reused once you reach your funding maximum and repay your loan, unlike business credit cards. Learn more about business credit cards more via the SmartBiz Loans blog Finding the Right Credit Card for Your Small Business.
Merchant cash advances
If your brewery takes credit or debit card payments, you can apply for a merchant cash advance (MCA). Through an MCA, a card provider will give you a loan that you repay by funneling a small amount of all your card transactions back to the provider. If this arrangement does not work for you, traditional installment-based plans are also available. No matter how you set up your repayment, you’re likely to face extremely high APRs. Learn more about MCAs via the SmartBiz Loans blog What You Need to Know About an MCA.
Brewery Funding Success Story
David Hawley is the owner of The Beer Cellar, a Chicago-area craft beer shop. David came to SmartBiz Loans as his business began growing so rapidly that he needed more space for inventory.
Through SmartBiz Loans, David secured a $100,000 SBA 7(a) loan. With his loan, David says, “We added more space, more inventory and more volume.” He continues, “We now have eight rotating taps so you can drink a beer or two while you browse.” Expanding has also allowed him to take his first vacation in a while: Although “for the first 3 years, we didn’t go anywhere,” he says, “We actually took a cruise last year.”
Why Choose SmartBiz Loans?
Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing. About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.
*The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.
**We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.