Brewery is one of the most lucrative industries in the market. This is due to the high demand for beer and the need to meet such demand. Therefore, many businesses enthusiasts try to set up their own brewery for significant profits.
However, setting up your own brewery is not an easy task. It requires a lot of capital. Even if you are running an established brewery, money is required to meet the expenses. Therefore, brewery businesses need to approach different modes of financing. Although you can visit albryg.dk for a better understanding of brewery financing, following are some of the popular methods of financing listed.
1. Commercial lending
This is perhaps the most popular and thus, effective form of financing. Commercial lending can be an essential manner through which a brewery can be financed. This form of lending comes in different types. For example, you may approach commercial lenders such as banks and non-banking finance companies, mutual funds or other corporate groups which may be interested in financing the venture. These types of loans are normally secured wherein a collateral will be taken as a guarantee in case the business defaults on the loan. Securing debt or loan is advantageous in the sense that the brewery will not be required to pay any profits to the lending organization. All the business decisions will solely be made by the brewery itself. However, one of the major shortcomings is that in case you default on the loan, the collateral can be encashed.
2. Government grants
Private financing has always been popular in this era. However, breweries can also access government loans and grants for significant amount of financing. There are many government schemes now launched in the market which provide subsidized grants which low interest rates and flexible installment plan. These grants and the loans can be accessed for short-term financing of the brewery. Nevertheless, this form of financing is highly competitive. Every year, there are thousands of applications and there is a specific quota to which the grants will be given. There are other formalities which are to be complied with by the applicant.
With the passage of time, crowdfunding is getting more and more popularity in the market these days. Billions of dollars are injected as investments in different companies throughout the world via crowd funding platforms. The brewery industry is already familiar with the idea of crowdfunding. Companies in the past have raised substantial amount of money through such platforms. It helps the business to raise financing quickly and even get their products and services marketed effectively. However, again, this form of financing is competitive and the brewery business needs to have solid presence or plan to successfully acquire such funding.
4. Equipment finance
Equipment financing is one of the most effective forms through which a brewery business can raise capital. It is essentially an agreement between the owner of the equipment and the financier wherein the financier pays a periodical payment to the owner for use of the equipment. In a nutshell, the equipment is being leased to the financier in accordance with certain terms and conditions. One of the biggest advantages of equipment financing is that one can get tax deductions which can also help brewery business save a great deal of money. However, it is essential that the brewery must go through the different terms and conditions to evaluate whether the deal is right for the business or not.
5. Financing through accounts receivable
This is an undermined mode of financing which a lot of breweries are not aware of. It is a business arrangement wherein the brewery sells all the outstanding receivables at a discount to a particular company. The said company thereafter is liable for collection of such receivables and the cash will be provided upfront to your business. It is one of the most effective and very quick method to inject capital into your business. However, if you want to access this method of financing, then there is a certain drawback. The discount offered comes at a high level of interest. This can be an important factor to take into account.
6. Private investments
There are hundreds of individuals and corporate organizations out there which provide private forms of investments. These investors normally have cash in surplus which they are ready to invest into businesses which have a solid and crisp plan. Therefore, they will evaluate the plan of the brewery and perform due diligence. The risks are assessed to further evaluate how much the brewery business will return. The loans are provided accordingly. These private investments are in the form of venture capitalists, angel investors and business incubator programs. These private investments are not necessarily in form of loans but can be equity injections as well. The business profits are shared. These forms of investments are now gaining more traction.
7. Other means
Brewery businesses are popular and are high in demand, as discussed above. Therefore, it is likely that the business owners can get small investments from their relatives and acquaintances. Funds can be borrowed from family and friends. This is also termed as self funding. There are hundreds of benefits when it comes to this form of financing. For example, the loan is much more flexible with lower interest rates. It is always advisable to make such transactions in a formal manner i.e. through contracts. The contracts must lay down neatly and succinctly all the terms which will govern the transaction. It is important to note that the failure of formalizing the arrangement may harm the personal relationship between the borrower and the lender in case of a default.
The bottom line
Above are some of the financing methods which brewery businesses can acquire. The above list almost covers the major forms. However, within each methods, there are different types which breweries can inquire into. Irrespective of the method the business may choose, it is essential that the transaction is done in a formal manner.