Find out how you can get brewery funding

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The top 4 brewery loans (pros and cons)

The chart below shows you the pros and cons of the top 4 types of brewery loans.

Pros
	Equipment Financing	Short-Term Financing	Lines of Credit	SBA Loans
Flexibility	Offers flexibility in equipment choices and customization	Provides flexibility for specific financing needs	Flexible access to funds as needed	Flexible funding options and loan programs
Cash Flow Management	Helps preserve cash flow with manageable monthly payments	Provides immediate access to funds for short-term expenses. Ability to renew or refinance.	Flexible access to funds as needed.	Can provide long-term financing with lower monthly payments
Collateral	The equipment itself serves as collateral for the loan	Collateral requirements may vary based on the financing terms	Collateral requirements may vary based on the terms	Collateral requirements may vary based on the loan terms
Repayment/Remittance Terms	Offers longer repayment terms, spreading out the loan payments	Typically has shorter repayment/remittance terms	Revolving credit with ongoing availability	Long repayment terms with lower monthly payments
Rates	Interest rates can be competitive based on creditworthiness	Rates may vary based on the merchant’s credit and other factors	Interest charged on the amount borrowed	Competitive interest rates with SBA-guaranteed loans

Cons
	Equipment Financing	Short-Term Financing	Lines of Credit	SBA Loans
Overall Costs	May have higher overall costs due to interest charges	Shorter terms may lead to higher interest/factor rate costs	Rates vary based on business and personal financial profile	Potential administrative fees and long processing times
Long-Term Commitment	Involves a long-term financial commitment up to several years	Repayment/remittance period is comparatively short; up to 18 months	Ongoing financial commitment	Involves a long-term financial commitment up to several years
Application Process	Requires a thorough application process and documentation	Application process is simple and fast	Application process is simple and fast	Stringent documentation and reporting requirements

Small Business Administration (SBA) loans for breweries

Let’s start with Small Business Administration (SBA) loans. These types of loans have emerged as a popular financing option for craft brewers looking for capital to fuel their growth, overcome financial hurdles, or expand on their real estate.

Pros: SBA loans offer several advantages, making them an appealing choice. First, these business loans often have lower interest rates and longer repayment terms compared to traditional bank loans. This means you may have a more manageable monthly payment structure. Additionally, SBA loans above a certain amount may require down payments, but these down payments are typically lower than what traditional banks require, easing the initial financial burden for breweries.

Cons: However, it’s important to note that SBA loans require thorough documentation, and a detailed application process, which can be time-consuming. Furthermore, it can take anywhere from 36 hours to 10 business days for the SBA to respond to your application and it can take anywhere from 30-90 days from completing your application to getting funds in your account. Meeting the eligibility criteria, such as demonstrating a solid credit history, financial stability, and a well-structured business plan is crucial to secure an SBA loan for your brewery. Despite these considerations, if you meet these qualifications and you can afford to wait a longer time to get funds, SBA loans are a great choice.

Equipment financing for breweries

Brewery equipment financing is another good option that holds a lot of appeal for craft breweries seeking to upgrade or purchase new equipment. Equipment financing allows you to get the necessary brewery equipment like fermenters, kegs, canning or bottling lines, and other specialized brewing equipment without depleting your working capital.

Pros: Brewery equipment loans offer flexible repayment terms and competitive interest rates, tailored to suit the unique needs of breweries. What’s best is, once you pay off your brewery equipment loan, you’ll become the outright owner of your financed equipment, in contrast to equipment leasing. (With brewery equipment leasing, while you take on less of a financial burden in terms of equipment insurance, maintenance, and repairs, you must return the equipment at the end of the agreement.) Lastly, equipment financing can help you preserve cash flow by spreading the cost of equipment over the financing term with monthly payments instead of with a large upfront cost.

Cons: Equipment financing typically involves a long-term financial commitment, ranging from several months to years. You must make sure you can consistently meet loan payment obligations or else you could end up with late fees, your equipment being repossessed; and if you consistently are late in payments, your business credit can be negatively impacted. Interest rates may also be higher than SBA loans due to the fact that equipment loans have less rigorous eligibility criteria than SBA loans (and thus may be riskier for lenders).

Lines of credit for breweries

Lines of credit are a popular financing option for breweries, providing flexibility and access to funds when needed.

Call-out box: While both lines of credit and credit cards are a form of revolving credit that allow borrowers to access funds up to a certain limit, lines of credit are typically used for larger purchases while credit cards are typically used for more day-to-day purchases.

Pros: A line of credit provides breweries with flexibility in managing their cash flow and addressing short-term financing needs. It allows them to draw funds as necessary, up to the approved credit limit, without having to reapply for a new loan each time. Lines of credit may also be revolving, meaning that as you repay the borrowed amount, the available credit replenishes. This feature allows you to reuse funds as needed, making lines of credit suitable for ongoing operational expenses, inventory purchases, marketing campaigns, or addressing unforeseen challenges.

Cons: While lines of credit are very flexible, they have their drawbacks as well. Interest rates on lines of credit are typically higher than SBA loans, equipment financing, or term loans. And because funds are readily available, there is a risk of overborrowing and accumulating excessive debt.

Short-term financing options for breweries

Short-term financing is another good option for brewery finance. The two popular choices for short-term financing are: working capital loans and merchant cash advances. Both are typically sought after for their quick time-to-funding and less rigorous eligibility requirements.

Pros: As mentioned above, short-term financing provides small businesses with access to funds, fast. The time to funding, from a completed financing application to receiving funds in your bank account can be as fast as one business day. The financing application itself is also less time-consuming to fill out. Short-term financing is usually less stringent in terms of eligibility requirements than SBA loans or lines of credit. All this means easier access for the funds-strapped brewery owner.

Cons: As the name suggests, short-term financing options have shorter repayment or remittance terms which means that you will have higher monthly financial obligations to fulfill. There may also be personal guarantees depending on the provider.

How to Qualify for a Brewery Loan

Now that we’ve gone over the top brewery loan options available, let’s get into how you can qualify for them. The requirements below are general guidelines. However, in order to understand the exact requirements for your business, we do recommend that you speak to an SBA-backed lender, an equipment financing lender, or an online alternative lender who can help you prepare for a small business loan.

Financing Type	Qualifying Requirements
SBA Loans	– Must meet SBA’s definition of a small business – Must be for-profit business – Must do business in the United States – Owner has invested his/her own time or money into the business – Loan proceeds must be used for a sound business purpose – Business cannot get funds from any other financial lender – Ability to repay the loan from projected operating cash flow – Good character and management skills – Collateral may be required – Tax returns and full business financials are typically required
Equipment Financing	– Good credit score – At least one year in business (requirements may vary by lender) – Positive cash flow and ability to repay the loan – Must know the specific piece of equipment desired for financing
Lines of Credit	– Strong credit score – At least one year in business (requirements may vary by lender) – Positive cash flow and ability to repay the line of credit – Collateral may be required depending on the size of the line of credit
Short Term Financing	– Flexible credit score requirements – At least six months in business (requirements may vary by lender) – Steady cash flow and cash flow management – Ability to repay/remit financing in a short period of time

Getting a Brewery Loan With a Bank vs. Alternative Lender

There are different sources for brewery loans: traditional banks, online alternative lenders or equipment financing companies to name a few of the most common.

Equipment financing companies can help you obtain financing, but the use of funds will be limited to getting specific equipment. If you’re in need of funds due to cash flow stressors, expansion projects, marketing campaigns, or getting more inventory, equipment financing companies may not be the best fit.

Traditional banks may serve as a good starting point to obtain financing. They generally will provide lower interest rates, longer repayment terms and larger loan sizes. The downside is that it can be difficult to qualify for their financing due to more stringent requirements like a higher credit score, needing collateral, and requiring the business to have been operational for a certain number of years. The time from completing an application to getting funds in your account can also be slow and time consuming.

Online alternative lenders may be the preferred choice for breweries who may not meet the requirements of traditional banks and are looking for small business loans, fast. Alternative lenders tend to have an easier application process and a faster approval and funding process, often able to provide financing in 48 to 72 hrs. They are also less stringent with financing requirements, and can tailor financing packages to fit your specific needs.

Conclusion

At the end of the day, there are many financing types available for your brewery. Our recommendation is to work with an alternative lender or traditional bank because they will be able to provide you with a variety of options to fit your specific business.

Let’s raise a glass to the possibilities that lie ahead and embark on this financial journey together! If you’d like to learn more about whether or not brewery equipment loans make sense for your brewery, brewery franchise, or small business, our financing experts are a great resource!