Before even thinking about applying for a business loan for your microbrewery or vineyard, you need a clear idea about your business. Your plans could include any of the following:
Brewpub. A restaurant and pub selling beer. Factor in kitchen and brewing costs.
Microbrewery. A small-scale brewery producing unique beers. Your microbrewery may sell beer directly to the public along with tastings and food like a brewpub, or it may just brew beer for sale elsewhere.
Small-scale vineyard. A vineyard producing small batches of its own wine. Your costs will be lower but you won't be able to produce enormous quantities of wine. Developing a strong product and brand is key.
Cellar-door winery. The definition of a cellar-door winery is one that offers tastings to customers. You may serve food as well.
Vineyard/restaurant. Take your food and wine to the next level by running a full-scale restaurant to serve your wines with carefully paired dishes.
Tour-focused vineyard. The process of winemaking is fascinating, from cultivating grapes to serving the final product. One way of building your brand and creating demand for your wine is to open your vineyard up for tourists.
What types of business loan should I be considering?
There are many business loans available for aspiring vineyard and microbrewery owners, and many more for people who already own such businesses.
Here are some loan options:
Loan
Amount
Pros
Cons
Term loan
$10,000 – $500,000
You can borrow a single, large sum and pay it back over time.
Regular fixed loan repayments make it easier to manage your finances.
You will be able to make larger purchases or cover major expenses.
Lack of flexibility.
Borrowing a large sum of money exposes you to greater risks if your business fails.
The loan usually requires security.
Equipment loan
The cost of purchasing equipment
Covers the cost of purchasing major equipment such as harvesters or brewing equipment.
Flexible payment options.
Use your equipment to make money and pay off the loan while earning profits.
May come with several fees and charges.
Can be complicated to arrange financing and may require a consultant or specialist.
Business Overdraft
$10,000 – $100,000,000
Unsecured loan.
You can link to an existing business account.
Good for emergencies and spending on extras or unforeseen costs.
You need an existing business account.
Funds only accessible after other funds are depleted.
Line of credit
$10,000 – $100,000
Quick access to cash.
Less risk than a large loan.
Interest is only paid on the money you spend
You can negotiate fixed or ongoing terms.
Needs a good credit history.
Not suitable for major purchases and long-term business financing.
Purchase order financing
Varies, up to 70% or even 90% of the order
You can use a customer's order to secure a loan.
A good option for a brewery needing a cash injection to fulfill a large order.
Only useful for existing businesses.
Limited to businesses in need of cash to fill specific large orders.
Invoice financing
Usually 80% of an amount invoiced and awaiting payment
Existing businesses can use outstanding invoices as a form of security.
Can provide quick, relatively low-risk cash.
No interest rate.
Invoice financing isn't an option for startups or new businesses.
The array of loan options can be confusing. Consider your business needs carefully, consult with lenders and always read the fine print. Remember that your choice of loan depends on multiple factors:
Your business situation. If you're starting a business from scratch you might face bigger funding obstacles. If you already run a microbrewery or vineyard you have more options: you can use your business, equipment or inventory as collateral and secure a more favourable loan.
Your needs. Getting a loan to buy land and start a vineyard is a different prospect from getting a loan to purchase brewery equipment. A line of credit might be very helpful to cover fixed expenses for a few months but it probably couldn't fund a major renovation to your microbrewery.
Your assets and security. Do you own property? Do you have a significant amount of cash or other assets? If you have something you can use as security, your loan options begin to open up.
Example: Bishop's End Brewery
Bishop's End is a microbrewery in Sydney's Inner West run by Michael and Jayne. Established three years ago, Bishop's End sells craft beer to restaurants across New South Wales.
Michael and Jayne have decided to expand their warehouse brewery. They want to double beer production and open a restaurant on the premises. Space isn't a problem and they have funds to cover the restaurant outfit, but they need to a buy a new brewing system in order to produce more beer.
Loan choice: Equipment loan
The brewing system costs almost $200,000. Michael and Jayne opt for an equipment loan. They negotiate a four-year loan with a good interest rate and are able to use the brewing equipment as security. They pay a deposit of $28,000 and won't have to make repayments in the first 6 months.
What expenses do I need to plan for when opening a vineyard or brewery?
Producing and selling beer and wine is a serious commercial undertaking, even at the smallest scale. When looking at a business loan you'll need to factor in significant costs for equipment, premises and licenses.
Premises. You can't brew craft ale in your bathtub. You need a suitable premises in which to brew, store and possibly serve your lagers and ales. Make sure you consider factors like room temperature, ceiling height (for your tanks and boilers) and ventilation. Flooring is important too, as liquid spills can erode some surfaces over time and possibly damage your equipment, making drainage another key consideration.
Brewing equipment. The list of essential brewing equipment is extensive, and expensive. You will need boilers, cooling systems, kegs, fermentation tanks, cleaning equipment and bottling or canning machines.
Storage. This includes storage tanks and refrigerations systems.
Serving and kitchen equipment. If you're planning to run a microbrewery that doubles as a gastropub serving your beer with food, you'll need to add in all the equipment costs of a commercial kitchen and restaurant.
Vineyard
Real estate. You can't grow grapes without land. Your property costs are a major expense, but remember that the quality of the soil matters as much as the price.
Vines. Good wine starts with good grapes. Look at wholesale vine nurseries to get an idea of costs. Your choice of vine and grape depends on the soil, temperature and also market preferences. It's a tricky blend to get right.
Farm equipment. You will need equipment like a grape harvester, mulcher and vine weeder.
Winepress and storage. No vineyard is complete without a winepress and barrels. You'll also need bottles, plus bottling and labelling equipment.
Licensing costs
You can't make and sell alcohol without the proper licences. Every state in Australia has different licences and prices, so check local regulations to find out about producer or wholesaler liquor licences that will allow you to:
Produce your own alcohol.
Sell your alcohol on the premises
Licensing rules differ by state, but usually you are permitted to produce your own alcohol and also sell it outside your premises. In NSW, for example, the licence is called a producer/wholesaler licence. The licence costs $500 but this can be reduced to $200 if you produce less than 100,000 litres per year.
The Winemaker's Federation of Australia has a helpful page breaking down the licence details of each state in Australia.
Excise rates
All beer and spirits made in Australia are subject to a form of tax called excise duty. The excise is administered by the Australian Tax Office and is calculated by taking the volume of alcohol produced and multiplying it by its alcoholic content.
Microbreweries will need an excise license from the Australian Taxation Office (ATO). You can learn more about excise rates and licenses on the ATO website.
Wine produced in Australia is subject to an equalisation tax instead of an excise rate. The tax is calculated as 29% of the wholesale value of the wine you produce.
Brand trademarks
Part of succeeding as a business is branding. If you create a distinctive, appealing and memorable label or name for your beer or wine, you should consider a trademark. Trademark applications are handled by IP Australia, a government body that oversees intellectual property matters. Trademarks can cost up to several hundred dollars.
How can I increase my chances of getting a loan approved?
Loan applications can be daunting but the more research and preparation you do the better. If your application is backed by expertise, experience, a solid plan and some assets, you'll be able to negotiate better rates and financing options.
Here's what you need:
A business plan. This is particularly important if your vineyard or microbrewery business is new. A detailed business plan reassures potential lenders and demonstrates that your business can actually go from plan to profit.
Security. Having property, cash or other assets to use as security makes it easier to negotiate a better loan. The higher fees and interest rates on an unsecured loan translates to a lot more costs over the course of the loan.
Skills and experience. Lenders also take into account your experience, skills and qualifications and how they relate to your business. If you've worked as a commercial brewer you're well placed to run a microbrewery. Ten years of experience in the wine industry will impress a lender if you want funds to open a vineyard.
Financials. If you've been in business for a while you'll need to show a lender your financial records. These include tax returns, a balance sheet, a profit-and-loss statement and a cash flow statement.
How do I compare business loans for vineyards or microbreweries?
Whether you're brewing beer or making wine the way to compare loans is to look at the following:
Interest rates. Check if the loan has a fixed or variable interest rate. How will an interest rate increase affect your ability to pay back the loan?
Repayment terms. How must the loan be repaid? Does the loan offer an initial period without repayments?
Fees. Some loans have no fees while others come with surprising charges, such as account establishment fees or ongoing maintenance fees. Always factor in fees when comparing loans.
Flexibility. For many businesses, flexibility is key. Being able to extend a loan's terms or repay on a flexible schedule can be of great benefit.
I have a few more questions about business loans for my microbrewery or vineyard.
Your personal and business credit histories affect your ability to get a loan. But if your credit history is a big problem there are bad credit business loans that might help. You can also get a free credit score here.
Online lenders can be a great way to secure funding. They tend to have looser lending requirements than banks, but are still bound by regulations. However, they don't always have the same level of specialised service for businesses as banks.
Personal and business credit cards can be used to cover business expenses. They're not a great option for purchasing major vineyard equipment or a commercial brewing system, but for smaller purchases they're a good idea.
Are you looking for a business loan but don't have an asset to offer as security? You still have loan options available. Find out what you need to know about unsecured business loans and how to compare them.
As well as bridging financial gaps, BOQ’s Cash Flow Finance funding grows alongside your business’s profit margins and capacity. Receive up to 80% of the value of outstanding invoices to keep your business moving.
Is your business in a cash flow squeeze? Find out how spot factoring can ease your cash flow troubles in as little as 24 hours, even if you have no collateral.
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