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Starting a brewery can be an exciting thing to do, but you’ll need the right equipment if you want to succeed. Tools for craft brewing can get expensive, even if you’re planning to run a microbrewery that produces small batches. If you’re struggling to come up with the necessary funds, brewery equipment financing can help.
Understanding Brewery Equipment Financing
Any business, including breweries, need some essential equipment to operate. Machinery financing lets you borrow money to buy the essential brewing supplies and tools that you need to get your business off the ground.
Financing will reduce the upfront cost of acquiring equipment, helping you start a company or expand one more quickly.
What Equipment is Needed for a Brewery?
Breweries need a variety of equipment before they can start producing alcohol.
Some of the basic tools you’ll need include:
- Grain mills
- Mash tanks
- Heat exchangers
- Fermentation systems
- Brite tanks
- Cooling systems
- Hoses and valves
- Packaging systems
How Does Brewery Equipment Financing Work?
Equipment financing in the brewing industry works much like a traditional secured loan. You decide on what equipment you need to buy, apply for a loan, and use the funds to make the purchase.
A major advantage of brewer equipment loans is that the equipment you purchase serves as collateral for the loan. That can help you secure lower interest rates and can make it easier to qualify for the loan. Keep in mind that you’ll still need some cash for a down payment.
Depending on the lender and the cost of the equipment, you can get a loan with a repayment term of anywhere between two and ten years.
An alternative to getting a loan to buy equipment is to lease it. Leasing involves making a monthly payment to another company to rent the equipment from them. You don’t own leased equipment, but have more flexibility to upgrade or replace the equipment by canceling the lease.
What Types of Brewery Equipment Can Be Financed?
You can typically finance any of the equipment that you need to run a brewery. That includes everything listed above as well as other essential business tools like computers and delivery vehicles.
What Are the Benefits of Financing Brewery Equipment?
There are many benefits to financing brewery equipment.
The biggest is that it reduces the upfront cost of acquiring new equipment. If you’re just starting out, you might not have the cash to buy expensive equipment. Financing can help with that.
Even established businesses can turn to financing if they want to speed up their ability to expand.
Financing with loans also has the advantage of letting you take ownership of the equipment and eventually pay it off. Once you’ve paid the loan, you can keep using the equipment without a monthly payment.
What Are the Eligibility Requirements for Brewery Equipment Financing?
Lenders want to make sure that you’ll repay your debts, so they’ll examine your application and background before approving your loan. Some of the things they’ll consider include:
- Credit score. The higher your score, the better, but aim for a minimum of 600 – 650. Keep in mind that many lenders will look at both your business and personal scores.
- Time in business. Newer businesses tend to be riskier borrowers, so it’s easier to get a loan if you’ve been around for a few years.
- Revenue. The more money your company brings in, the better your chances of qualifying for a loan.
Where Can You Get Brewery Equipment Financing?
There are many places to look for brewery equipment loans.
- Equipment vendors. Many manufacturers and vendors have their own financing offers. However, these restrict you to working with just one supplier.
- Traditional lenders. Most banks and credit unions offer business loans. Be sure to check with the bank you use for your business bank account to see if they have good loan deals.
- Online lenders. Online lenders are known for low rates and fast approvals but may have lower loan limits than other lenders. You might like to review the best equipment financing options offered by online lenders.
- SBA loans. Loans insured by the SBA have huge loan limits but take much longer to fund and approve than other options.
How Long Does It Take to Finance Brewery Equipment?
How long it takes to finance brewery equipment varies greatly with the type of lender you choose and the quality of your credit. Having good credit will speed things up while having poor credit can lead to longer underwriting processes.
Some online lenders offer funding as soon as the next business day. SBA loans can take weeks to fund.
Can You Finance Used Brewery Equipment?
Yes, it’s possible to finance used brewery equipment, but the terms of the loan may be different.
For example, the lower value of used equipment may lead lenders to require higher down payments or charge higher interest rates than with new equipment.
Is Brewery Equipment Financing Possible with Bad Credit?
Yes, you can usually find equipment financing, even if you have poor credit. However, that doesn’t mean it will be easy. Some lenders may deny your application, meaning you should have a few lenders in mind.
Also, be ready to deal with higher interest rates and fees.
Can a Brewery Startup Get Equipment Financing?
Yes, startups can get brewery equipment financing, though it’s harder than it is for established brewers. Your personal credit will play a bigger role if you’re running a startup and you may face higher loan costs.
Is Brewery Equipment Financing a Good Choice for Your Business?
Brewery equipment financing can be a good choice for your business in many cases.
Some of the tools required to run a brewery can be incredibly expensive, making them hard to purchase with cash. Financing lets you improve your cash flow by spreading the cost out over months or years. If you use the tools well, they can even produce enough revenue to cover the cost of the loan.
The drawback is that you’ll have a new monthly bill to pay. If you don’t make good choices about what equipment to buy, you can find yourself struggling to repay your debts.
Brewery Financing: Equipment Loans vs Leasing
Using a loan to buy equipment is one way to grow your business. An alternative is leasing, which involves renting tools instead of buying them.
What Are Brewery Equipment Loans?
Brewer equipment loans involve borrowing money from a lender to purchase equipment. You own the equipment you buy and must repay the loan, plus interest. Once the loan is paid off, you keep the equipment and can use it as you wish or sell it.
Pros and Cons of Brewery Equipment Loans
There are advantages and drawbacks to using loans to buy brewing equipment.
- You own the equipment and can do what you want with it
- Build equity and pay off the loan over time
- Eventually, you will no longer have to make monthly payments
- Typically has a higher monthly cost
- Poor credit can make loans very expensive
- It’s harder to replace/upgrade the equipment
What Is Brewery Equipment Leasing?
Leasing lets you rent equipment from another company in exchange for a monthly payment. You won’t own the equipment, but you have more freedom to change your lease agreement and get different tools.
Pros and Cons of Brewery Equipment Leasing
Before signing a lease, consider the pros and cons.
- Lower monthly cost
- More flexibility to replace or upgrade equipment
- The lessor may take responsibility for repairs and maintenance
- You don’t build equity in the equipment
- You’ll never pay the lease off
- There may be limits or restrictions on how you can use the equipment
Brewery Loans vs. Leasing: Which Is Right for You?
Choosing between a loan and a lease requires careful consideration of your situation.
Loans are usually best if you’re planning to keep the same piece of equipment for a long time. Once you pay off the loan, you’ll get to use the equipment without having to make a monthly payment. That can lead to a big savings over the life of long-lasting tools.
Leases are best for things that don’t last as long or for equipment you might want to replace or upgrade regularly.
Additional Financing Solutions for Breweries
There are some other ways to finance equipment for a brewery, including:
- Business term loan. Term loans are like equipment loans but aren’t secured by the equipment. That means they often have higher rates and shorter terms than equipment loans.
- Business line of credit. Lines of credit offer the flexibility to draw money multiple times. That makes them useful if you aren’t sure what equipment you need yet or expect to buy equipment in multiple batches.
- Business credit card. If you can find a card with a 0% interest introductory period, it can be a cheap way to borrow. However, limits are usually low.
Common Brewery Equipment Financing Terms
Before you apply for a loan, it’s important to know some basic terminology. That will help you understand the details of the loan you’re applying for.
- Collateral. An asset used to secure a loan. Typically, the equipment you’re purchasing.
- Interest rate. The cost of borrowing money expressed as a percentage of the loan amount that’s added to the balance each year.
- Origination fee. A fee, expressed as a percentage of the loan amount, that is charged when you receive the loan funds.
- Late fee. A fee you’ll pay for making a payment after the due date.
- APR. The cost of borrowing money, including interest and fees.
- Loan term. The length of the loan’s repayment period assuming you follow the minimum payment schedule.
- Principal. The balance of the loan without currently accrued interest. Your monthly payments will cover accrued interest and pay down a portion of the loan’s principal.
- Loan amortization. The process of paying off a loan over time. The amortization schedule of a loan shows how the balance decreases over time and what portion of each payment goes toward interest and principal.
- Equity. The value of the equipment used to secure a loan minus the loan’s outstanding balance.
What to Know Before Applying for Brewery Equipment Financing
Before you apply for a brewery equipment loan, there are a few things you should know.
- Your credit score. Knowing your credit score can help you estimate the cost of borrowing money and give you an idea of which lenders will approve your loan application. If you check your credit a while before you intend to apply for the loan, you can take steps to try to boost your score.
- How much you need to borrow. Don’t just apply for a loan and figure out what you’re buying later. Have a solid plan and know what the equipment you need to buy will cost. Applying for loans can be expensive and you don’t want to find out you borrowed too much or didn’t borrow enough.
- Your business’s expected revenue. Look at your brewery’s current income and estimate what the revenue will be once you start using your new equipment. Be realistic and make sure the new equipment you’re buying will produce enough revenue to be worth buying.
What to Look For in Brewery Equipment Financing Packages
When you’re applying for a brewery equipment loan, you should be looking for a few things.
- Interest rates. One of the most important things to look at when you apply for any loan is the interest rate. The interest rate of a loan determines how much it will cost both on a monthly basis and overall. Look for the lowest rate possible.
- Fees. Fees also impact the cost of a loan. Common fees include origination fees and early repayment fees. Try to avoid loans that charge these fees.
- Minimum and maximum loan amounts. Before you apply for a loan, make sure the lender is willing to offer a loan of the proper size. You don’t want to work with a lender only to find it won’t offer a loan of the proper size for your need.
- Range of loan terms. Different lenders will offer different loan terms. The more term options a lender has, the more flexibility you have to adjust the monthly payment on your debt.
Comparing Different Financing Options
When you’re in the market for a new loan, it’s important that you don’t just submit an application with the first lender that you see and accept the loan once you’re approved. You need to shop around.
It’s also important to think creatively about other ways to finance a purchase. You can often buy business equipment with something other than an equipment loan, such as:
- Business term loan. A term loan is like an equipment loan in that it has a fixed rate and a monthly payment. However, the interest rates are usually higher because the equipment doesn’t serve as collateral. Still, if you need cash for multiple purposes, you may prefer getting one large loan to cover them all to getting multiple loans.
- Business credit card. Credit cards are designed for smaller purchases and tend to have very high interest rates, making them a poor choice for long-term financing. However, some card issuers offer 0% APR financing when you sign up for a card. That can let you use the card without paying interest for as long as a year or more, making it a way to finance less expensive equipment.
- SBA loans. The Small Business Administration offers a loan program that reduces lenders’ risk, making it easier for companies to qualify. SBA loans have high borrowing limits – in the millions of dollars – and might have lower interest rates. However, they involve a lot of paperwork and take a long time to get approved.
Looking at Loan Repayment Terms
The length of a loan is also known as the loan’s term. For example, if you get a loan with a five-year term, you’ll pay the loan back over the next five years, typically through sixty monthly payments.
Lenders can select the loan terms they offer, and there are pros and cons to different terms.
In general, loans with shorter terms have larger monthly payments, but cost less overall. Loans with longer terms have smaller monthly payments but cost more in the long run. You need to strike a balance between month-to-month affordability and total cost to repay the loan.
Depending on the amount you borrow and the equipment you buy, you can typically find brewery equipment financing loans with terms of one to five years.
How to Qualify and Apply for Brewery Equipment Financing
To give yourself the best chance of qualifying for brewery equipment financing, follow these steps:
- Write down your business plan. A written plan can be helpful to show how you’ll pay back the debt.
- Determine your needs. Decide on the equipment you’ll buy and how much it will cost.
- Gather documents. Get any documents you think your lender will ask for. Typically, this includes bank statements and business financial documents.
- Compare lenders. Look at multiple loan offers from different lenders to find the best deal.
- Apply. Fill out the application and meet with the lender to discuss your loan. After that, just wait for the approval.
Applying for a lease usually involves a similar process, though lessors may not check your credit score.
Financing brewery equipment can help you start or expand a brewery without a huge upfront investment. Make sure that you have a plan to use the new equipment to repay your loan and you can help your company succeed.