MicroBrewr 066: How to get an SBA loan for a startup brewery

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Kris Kennedy works in the Small Business Lending Group with First Community Bank in Roseville, California. They were the first financial institution listed as an allied trade member of California Craft Brewers Association.

The U.S. Small Business Administration’s loan program makes it easier for small businesses to get funding from traditional lending institutions. Kris teaches us how to get an SBA loan for a brewery.

All participating banks must go by the SBA guidelines. There are typically 5 criteria to judge worthiness for a loan:

Cash flow – This could be historical or projected. Can you repay the debt?
Economic environment of the industry – Also includes changes to the industry such a new regulations or supply issues.
Collateral – Can include business assets and personal real estate.
How much the borrower is investing – They typically require 20-25% for startups.
Character – They check your credit score including public records such as judgments and liens. Credit score must be at least 680.

Loan funds can be used for a variety of things. Eligible expenditures include:

Operating equipment
Real estate
Tenant improvement to real estate
Construction of a new building
Refinancing for business debt
Purchase of an existing business
Working capital

Loan amounts can range from $350,000 to $5 million dollars. Loans are offered in 10-year and 25-year terms. They’re fully amortized, meaning that the monthly payment will be the same through the life of the loan. There’s usually no pre-payment penalty after the first 3 years.

Kris says the ideal candidate should have experience working in a commercial brewery. Planning on opening a brewpub, have restaurant or hospitality experience. Basically, show that your past experience applies to running a brewery.

If you’re a homebrewer wanting to get an SBA loan, it could help to have awards for your beer. So start entering in contests!

Lastly, Kris says, it’s good to work with a lender that has experience in the industry. If you’re in California, Arizona, Nevada, Washington, or Oregon, and you need funds to start or expand a brewery, get in touch with Kris.