Business loans for vineyards and microbreweries

What types of business loan should I consider?

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.

Equipment loans

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.

Term loans

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.

Invoice financing

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.

Merchant cash advances

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.

Line of credit

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.

SBA loan

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.

What expenses do I need to plan for when opening a vineyard or brewery?

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.

Consider your business first

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:

• Your business situation. If you’re starting a business from ground up you might face bigger funding obstacles. If you already run a microbrewery or vineyard you have more loan options because you can use your business, equipment or inventory as collateral and secure a more favorable loan.
• Your needs. Getting a loan to buy land and start a vineyard is a different prospect than getting a loan to purchase brewery equipment. A line of credit might be very helpful to cover fixed expenses for a few months but it probably won’t fund a major renovation to your microbrewery.
• Your assets and security. Do you own property? Do you have a significant amount of cash or other assets? If you have something you can use as security, your loan options begin to open up and you may even receive a lower interest rate than you would without collateral.

Basic startup costs

• Microbrewery
• Vineyard

Licensing costs

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.

Tax rates

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.

Brand trademarks

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.

How costs can vary for different types microbreweries and vineyards

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.

• Brewpub. A restaurant and bar that sells the beer it makes on premises. When applying for a loan, you should factor in kitchen, staffing and brewing costs.
• Microbrewery. A small-scale brewery that produces unique beers. Your microbrewery may sell beer directly to the public and offer tastings and food like a brewpub, or it may just brew beer for sale at local restaurants and markets.
• Small-scale vineyard. A vineyard that grows small batches of its own grapes for wine production. Your costs will be lower, and you may want to include a winery for tastings and sales to restaurants. Developing a strong product and brand is key.
• Microwinery. A microwinery isn’t attached to a vineyard, thus lowering the costs of running a full farm on top of the winery. These offer tastings to customers and sell wine within a small region.
• Vineyard with a restaurant. Some vineyards have restaurants attached to on-site wineries. The costs are higher, and like a brewpub, you should apply for a loan that covers the multiple aspects of your business.
• Tour-focused vineyard. The process of winemaking is fascinating to customers. One way of building your brand and creating demand for your wine is to open your vineyard up for tourists. You may need to hire extra staff for these tours.

How do I decide which loan is best for my business?

Your business may benefit from a variety of loans, so consider:

• The age of your business. Opening up a brewery will require lots of new equipment to start processing your beer, so an equipment loan is likely a great starting point for a new business. On the other hand, a vineyard that’s waiting for harvest may need a term loan to cover expenses until the grapes can be sold or processed into wine.
• Your revenue. A line of credit may be useful for a vineyard that receives the majority of its revenue from the bulk sale of grapes and needs a flexible flow of cash during the off season. A brewery that makes its revenue from the sale of beers to local restaurants may require invoice financing while it waits for its invoices to be processed.

How can I increase my chances of getting a loan approved?

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:

• A business plan. This is particularly important if your vineyard or microbrewery business is new. A detailed business plan reassures potential lenders you know what you’re doing, and demonstrates that your business can actually go from plan to profit. Some banks aren’t willing to extend loans to alcohol production because of variable market conditions, so your plan should also detail how market fluctuations are dealt with.
• Security. Having property, cash or other assets to use as security makes it easier to negotiate a better loan. This is especially true when you need to invest in an equipment loan. Because the lender can use your brewing system or wine press as collateral, your rates will likely be lower than an unsecured loan.
• Skills and experience. Lenders take into account your experience, skills and qualifications and how they relate to your business. If you’ve worked as a commercial brewer, you likely have the knowledge you need to run a microbrewery. Ten years of experience in the wine industry will impress a lender if you want funds to open a vineyard or winery.
• Financials. If you’ve been in business for a while, you’ll need to show a lender your financial records. These include tax returns, a balance sheet, a profit-and-loss statement and a cashflow statement. All of the documentation will serve as proof you can pay back your loan and have the income to cover future payments.

Bottom line

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.

Frequently asked questions