Timing is everything is such a dumb lead, but god damn it, it keeps proving to be true, so hacks like me will keep writing it before getting to their point. The point: Five to 10 years ago, craft brewers had to really make their case in order to get a startup or small business loan because, I mean, what is it? Like a restaurant? Restaurants are risky and fail a lot. But then, we learn it’s more like manufacturing and retail, and hey, more and more craft breweries come along, headlines are generated, and then, what’s this now? A craft brewery wants a loan? Sure! Hell, give ’em two! These things can’t miss. After a few years of that — when an industry count goes from 2,000+ to 5,300+, suddenly the tide turns back to — I don’t know, a craft brewery? Aren’t there too many of these things?
Get that business plan into the right hands one year, and it’s gold. Wait a year too late, and you may be shown the door. Especially if the perfect neighborhood you picked out suddenly sprouted four or five breweries where there once were none. There’s a fine line.
This excellent feature from the Michigan Business Journal hints that the craft brewery loan pendulum is beginning that swing back to “risky!” because of market saturation concerns. To be sure, lenders are still excited about craft beer, but the environment is much tougher than a few years ago.
From the Michigan Business Journal:
Lenders are not necessarily steering away from the industry, but instead are diving deeper into areas such as revenue and cash flow projections. If a craft brewer is not selling directly, for instance, it needs to detail whether it has distribution agreements in place and how it will access retail shelf space that’s “so hard to come by these days,” Parker said.
“We’re really going to want to dig into those projections and make sure they’re better than average,” Parker said. “The questions are the same. It’s just to what level are they meeting the norm.”
Despite concerns about market saturation, craft brewing remains a “pretty hot” sector for lenders that work with the SBA, said Mark Williams, president of the Lansing-based Michigan Certified Development Corp. that handles 504 loans.
For those looking to still snag some of this cash while the getting is good, the article notes that lenders are really relying on federal SBA loans that require 10 percent down and splitting of the risk on their end. They involve more red tape, but it would be in your best interest to go that route.
Also, if you are a Michigander, first, sorry for calling you a Michigander if that’s not what you’re called. Second, you may want to check these eight steps for opening a microbrewery in your state.
