The number one need for breweries looking to start up or expand operations is capital for equipment purchases. From tanks and vessels to kegs, pumps and filters, specialty equipment is an essential component for launching or growing a successful beer business. Other related expenses include lighting, refrigeration, kitchen equipment, and packaging and software systems. So, how do you plan for these expenditures and keep cash on hand for other business needs?
Equipment leasing can be an ideal option for breweries that want to invest in the necessary resources to grow their business while not becoming over-leveraged. Leasing essentially transfers the risk of owning that equipment away from the business owner and onto the third party. At the end of a lease term, business owners have several options, including purchasing the equipment outright for fair market value, renewing or extending the lease, or simply returning the equipment and upgrading to newer models.
This kind of flexibility can be key for brewers who need to upgrade equipment regularly, add or remove items as business ebbs and flows and position themselves for growth opportunities in the marketplace.
Here are three quick tips for seeking commercial financing:
- Understand your short-term and long-term needs and research the specific equipment that will increase productivity
- Be prepared with a business plan and other requirements, including financial statements (P&L) and a description of the desired equipment and supplier
- Seek out lenders that not only understand small business but have specific knowledge of the beverage industry
Our recent experience with two Evergreen-based breweries resulted in successful financing processes. One of them, Lariat Lodge Brewing, was in need of a hood for their kitchen. Owner Anders Ruikka came prepared with the necessary information, including financial statements, equipment specifications, and supplier information, which allowed us execute a flexible financing solution for their equipment purchase without tying up working capital and no large initial outlay of cash for the business to assume.
“They stepped in and helped when the limitations of other financing partners stopped progressing,” says Ruikka.
The end result was a 48-month capital lease (otherwise known as an equipment finance agreement), allowing the brewery to purchase the equipment they needed to expand operations.
Commercial financing is available and accessible for every stage of growth and there are many options for making the necessary business improvements. Financing these types of capital expenditures allows you to not only manage for growth, but improve operations and keep your cash reserves on hand.
Alex Gish is business development officer for Dynamic Funding, Inc. She works with local businesses to obtain commercial financing and growth capital with a specific focus on the beverage industry. Contact Alex at 720/305-6225 or gish@dynamicfundinginc.com.
