It’s 2021, we’re optimistic, so here are five tips to financially prepare your brewery for expansion

Well done to us!

The global health crisis caused by the COVID-19 pandemic has disrupted our economy in unimaginable ways, but hey, let’s not dwell. Instead, let’s move on. While foot traffic to taprooms and breweries was hit hard in 2020, COVID-19 has not had a completely detrimental effect on the beer industry (packaging and offsite have skyrocketed , for example).

If you’ve arrived in 2020 and now 2021 with even the slightest notion of expansion (new canning line, second location, winterizing outdoor spaces), let’s make those plans financially – even as a fun exercise. Because it’s a new year, so let’s dream a little. With a little flexibility and creativity, you might be surprised at the new ways you can take your craft brewery. The following tips can help you prepare to apply for financing from a lender.

1. Evaluate yourself

Start with an assessment of your personal finances. Your personal cash reserves, net worth, and cash flow are all critical pieces of information that the bank will look at to determine your qualification. They will also want to collect information on debt securities and outstanding loans. This information will be useful in determining whether you and your brewery have the capacity to take on additional debt and whether you will be able to repay what you have borrowed.

Trust is one of the best tools you can rely on when applying for a loan from a bank because it helps you build a mutually beneficial relationship. Be prepared to put all your cards on the table and maintain an open line of communication with your lender. Trying to hide or cover up financial indiscretions from your past could cost you the loan, so remember to be completely transparent, even if the numbers aren’t pretty.

Identify your primary goal for this business. Is expansion just a desire or will it help you achieve your long term goals? Will a second location allow you to expand distribution or start boxing your products? When you fully understand the positive impact of this decision on your business, you will be better equipped to express this vision to your lender.

2. Organize your material

many hands with a bottle of beer

Applying for a loan can take a long time and you might get frustrated with all the moving parts. The best thing you can do to help minimize obstacles along the way is to stay organized. In addition to information about your personal finances and your lender’s request, you will need to provide a comprehensive business plan that includes details about your brewery brand, how you plan to set yourself apart from the competition, a management profile, and a financial forecast for your loan. . It can take you up to three months to create a complete business plan.

Check and double-check your work before submitting your application. You might even consider someone who specializes in reviewing business plans to proofread your work to ensure accuracy, consistency, and fluidity. You would be surprised how many applicants forget to make sure their track record is really balanced.

3. Be realistic

Forecasting is tedious, but accurate projections are critical to success. Be as realistic as possible and be sure to include data that explains how you arrived at your estimated numbers. The bank is looking for a truthful prediction of growth, not bright numbers that are unrealistic.

Also make sure your income goals are realistic. Factor in all of your expenses – business and personal – and make sure you have enough money left over for you and your family to live comfortably. Perform a break-even analysis and if you find that a break-even point cannot be reached, go back to the drawing board and consider different scenarios until you reach a point where the income equals all of them. business costs. This could include downsizing, increasing your prices, or working with cheaper suppliers.

4. Don’t forget the working capital

Given the effects of the current environment, there are a number of unique factors to consider when it comes to working capital. In addition to accounts receivable and payable, you need to have cash on hand in the event of another restaurant shutdown – or complete closure – in your city. If that happened, you could use your money to bulk buy cans, rotate to wrap the sale only, and keep your business alive. But this is the worst case. It might also be a good time to make small investments that could be easily covered, such as heaters to encourage guests to gather outside, live performances, or other amenities that allow guests to get together safely while respecting the rules of social distancing. These investments would be minor but could pay huge dividends.

5. Ask for feedback

beer retro suit cartoon seller business drawing

It would be wise to share your plan with others in your area or a professional trained to help small businesses before submitting it to your lender. Small business development centers and financial consultants can actually look at your numbers to make sure everything is going well, and other brewery owners can give advice on projected growth and issues the industry is facing. confronted. You may also want to consider getting in touch with a banker who specializes in craft drink lending, as they can provide you with expertise unique to your situation, as opposed to a general lender who might not know the ins and outs of the business. industry.

While there are months of recovery ahead of us, the economic outlook is positive and a rebound is on the horizon. If you had considered an expansion, reconsider your ideas and see if it is possible to start your plan now. With the right planning and the right flexibility, you may well emerge from this crisis stronger than ever.

Jason Sleeman is Vice President of Craft Beverage Loans for United Community Bank. His nearly two decades of banking experience has mainly been devoted to community banks. Contact him directly on [email protected]

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