Here Are Your Options
Bach Business Brokers
Starting a distillery or brewing company requires passion and plenty of capital. Most distillers start out as enthusiasts; they love the process of making and the lifestyle associated with it, and they have a strong vision for what will make their product unique.
But many distillers get stuck at the same point: when the business is more than a hobby, but not generating enough revenue to grow to the next level. When your business needs an infusion of cash, you have several options. Here are the pros and cons of each.
Debt financing means taking out a business or personal loan to grow your business. Lenders offer unsecured lines of credit to business owners, which don’t require collateral, but usually require a strong credit score, having a certain length of time in business, and meeting a minimum revenue threshold. You may also qualify for a personal loan, which has an average Annual Percentage Rate of around 9.34%, according to the Federal Reserve. Banks also charge borrowers an origination fee (usually about 1% of the loan amount) and may charge fees for early repayment.
An SBA 504 loan can be used for a range of assets that promote business growth and job creation. These include the purchase or construction of:
- Existing buildings or land, or new facilities
- Long-term machinery and equipment with a useful remaining life of a minimum of 10 years, including equipment or machinery for manufacturing products
- Consolidating debt under the conditions listed in 13 CFR 120.882(Link is external), or repaying or refinancing debt defined as “qualified debt”
Finding a strategic partner means finding another business willing to combine forces. Together, you may increase your production volume enough to qualify for better pricing from vendors or attract distributors. You may gain economies of scale by sharing your workforce or consolidating back office functions. You might find a partner with complementary resources, such as a canning line or a distribution outlet. Together, you may expand your product lines or access to specific markets.
It’s important that you vet your potential partner carefully. You’ll be in business together for years, and you’ll need to be confident that your work ethic, personalities, business practices, and goals are aligned. Be sure you understand and clearly define your roles and create a detailed plan for an exit strategy when it’s time to end the relationship.
Finding an investor usually means looking for Private Equity or Family Office Investment. These investors usually take less than 50% ownership in the business. They have the capital, but probably don’t have the expertise to brew your product. But as part owner, they will have a say in the way the company is managed. PE firms may bring in management, sales, or financial professionals to improve operations or grow the business. They will expect a return on their investment within a specific time period, but their team will work beside you to help the business grow.
Each of these options can be complex, and it takes some work to find the right fit for your business. That’s why I always recommend you choose to work with a broker who understands the industry and has the contacts to bring investors to you.
About the author:
He has been an entrepreneur and business owner for more than thirty years. As a spirits and beer-specific business broker, he is uniquely positioned to draw on this experience and help others retire or pursue other interests. He takes great pride in his concierge approach, which ensures a smooth transaction and lucrative exit
