Alcoholic beverage companies often have difficulty finding financing for growth
There is a new breed of wine, craft beer and distilled beverage maker in the United States. They share a number of common characteristics.
Many are virtual. They are passionate about a specific type of beverage and with the help of many outsourced services bring it to market. They use flavor experts to help them develop a specific taste. They use contract marketing folks to help them build their brand and labeling. Experienced wine makers like Crown Valley Winery near St. Louis co-pack their product and often provide other services. The new breed of beverage companies have very few employees and low fixed costs of operations.
Traditional financing sources don’t want to finance these companies because of a number of factors. First, most types of government insured loans are not available to companies that derive over 50% of their revenues from sale of alcoholic beverages. Second, commercial banks shy away from these “virtual” beverage companies because they typically don’t have hard collateral like equipment and real estate. Lastly, time in business is usually not long enough to interest traditional financing sources. Lastly, if a bank needs to foreclose on an alcoholic beverage company, they don’t have a liquor license to be able to sell any inventory that is left.
It often takes alcoholic beverage company a year or more to perfect their taste and enter the market. The second year is usually break-even at best. It typically isn’t until the third year from inception that an alcoholic beverage maker starts showing profits.
Alcoholic beverage companies are very attractive to a certain type of commercial finance company.
Business Finance Solutions, along with several beverage co-packers and put together a financing program that turns the negatives of traditional financing methods into positives.
We can help with:
- Financing inventory (some conditions apply).
- Financing raw materials, even those coming from outside the United States.
- Financing glass bottles, caps, and other materials.
- Finance accounts receivable from distributors and retail establishments
Helping alcoholic beverage companies overcome seasonality.
We currently finance a number of alcoholic beverage companies that have a high degree of seasonality. For premium wine distributors the high season is October, November, and December. January and February are their lowest two months. Some types of beverages sell best in warm summer months and slow down in the Winter. Our financing program helps alcoholic beverage companies smooth out cash flow while allowing the financing to rise and fall with the natural sales cycles of your beverages.
Our staff of finance experts understands the alcoholic beverage industry. If you would like to know more about our various programs and how they can be customized to your specific business, please call us @ 512-990-8756 or complete our online form. One of our staff will contact you as quickly as possible.