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There are multiple business loans available for aspiring vineyard or microbrewery owners or those who are already running a successful operation. Consider this selection of business loan types to get started with financing.
To get your brewery or vineyard setup with the finest tanks, presses or harvesters, an equipment loan is likely the way to go. The loan is secured by what you’re purchasing, which means you’re likely to get approved for a lower rate than if you were to go for an unsecured loan.
But getting the right loan may mean having to work with a specialty lender or consulting with a specialist. And the lender may not finance 100% of the equipment, meaning you’ll have some upfront costs.
When you’re looking to cover a large, one-off expense a term loan can likely help. Amounts typically range from $5,000 to $5 million, and repayments are fixed and on a monthly basis. This allows you to easily plan around the cost of the loan.
Depending on how much your loan is for, you may have to secure it with an asset of the brewery or vineyard or a personal asset. Even unsecured business term loans often require a personal guarantee — which means if your business can’t pay back the loan, you’re personally on the hook.
Selling your brews and bottles to distributors is a great mark of business growth, but it can mean waiting 90 or more days for said distributors to pay their invoices. By using invoice financing, you can tap into part of those funds before you get paid — usually up to 80%.
Once you get paid by the distributors, or anyone else whose invoice you’re using to secure the advance, you repay the amount — usually minus a financing fee that scales based on how long it takes to repay.
It’s entirely possible that your sales tell a much more positive story than your credit history. If this is the case, a merchant cash advance could come in handy for financing up to $250,000.
You may be able to get the capital your brewery or vineyard needs to fill a large order, and often turnaround times are extremely tight — some as soon as the same day you’re approved. That means getting the funds you need when you need them.
But repayments can be daily or weekly instead of monthly, so make sure you’re able to budget well for them before signing up.
While loans are great for single purchases, they’re not the best for ongoing projects like marketing and commissioning labels for your new seasonal brews. A line of credit is similar to a business credit card in that you can draw from it when you need and only pay interest on what you borrow. It’s also typically less expensive than a credit card, and can come with a max limit of $1 million.
But lines of credit are still usually more expensive than other types of financing, and aren’t suitable for major purchases or long-term borrowing.
Though difficult to qualify for, Small Business Administration (SBA) loans can be a great option if your brewery or vineyard is well-established but your credit is still less than ideal.
Down payment amounts are typically low, as are interest rates due to these loans being government backed. Plus there are tons of programs to choose from, including one for buying commercial real estate.
Producing and selling wine or beer is a serious commercial undertaking, even at the smallest scale. You’ll need to factor in the costs of equipment, premises and licenses when considering a business loan.
The array of loan options can be confusing for both first-time business owners and those who have been in the industry for years. Consider your business needs carefully, consult with lenders and always read the fine print before you sign your loan contract. Your choice depends on multiple factors:
You can’t make and sell alcohol without the proper licence. Once you have your equipment installed and operating you can apply for a federal brewing permit with the Alcohol, Tobacco and Tax Trade Bureau.
You’ll also need to consider your state and local laws surrounding the production of alcohol. Other considerations include a retailer licence, liquor license and food production license to produce your own alcohol and sell it on the premises.
The US has taxes on the production of beer and wine whether you’re selling it locally or exporting it internationally.
For smaller breweries that produce less than two million barrels per year, the first 60,000 are taxed at $3.50 per barrel. As your business grows from 60,000 barrels to two million, the tax rate jumps to $16 per barrel. When business is booming, so are the taxes: Breweries that produce over two million barrels are charged $16 per barrel for the first six million, then $18 per barrel after that.
Wineries have different tax classes depending on the alcoholic content and the amount that is produced. This amount ranges from $0.07 up to $3.15 per gallon. The Alcohol and Tobacco Tax and Trade Bureau has more information on the specific types of wine and how they are taxed, so do your research when considering the taxes you may need to pay.
This doesn’t include county and state taxes. And as the tax codes change, so might these rates. Include a search on the Alcohol and Tobacco Tax and Trade Bureau in your research to get up-to-date rates.
Part of succeeding as a business is branding. If you create a distinctive, appealing and memorable label and name for your beer or wine, consider a trademark. Trademark applications are handled by the Patent and Trademark Office, a government body that oversees intellectual property matters. Trademarks can cost up to several hundred dollars, but when you’re building your business, they can be invaluable to making you stand out.
When getting a business loan, it’s helpful to know exactly what category and company type you have. Knowing this can give you a clearer idea about what type of financing you need. Here’s a breakdown of the common types of microbreweries and vineyards and how it could affect your costs.
Your business may benefit from a variety of loans, so consider:
Loan applications can be daunting, but the more research and preparation you do, the better your chances are of being approved. If your application is backed by expertise, experience, a solid plan and some assets, you’ll be able to negotiate better rates and financing options.
Here’s what you need:
You don’t have to let lack of capital stop you from opening or expanding your business. Vineyards and breweries take a lot of work to maintain, but by knowing what type of funding you’ll need, you can impress a lender and take your business goals to the next level. Consider all your options when trying to decide what business loans work for you.
Kellye Guinan is a seasoned financial writer with over 500 articles under her belt spanning all things loans from auto to personal to business and everything in between. With four years in the field and five years of research experience, she's able to make complex personal finance decisions easier for anyone to tackle. When she's not up to her knees learning about the latest trends in lending, she spends her time improving her own financial literacy and expertise — and maintaining a Duolingo streak of over 1,300 days.
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