While the COVID-19 economy continues to wallop the wine, beer, and spirits industries, thankfully some enterprises in those trades are holding their own—some are even growing. If you’re in those upbeat categories and need equipment, the pandemic presents never-before-experienced obstacles with regard to traditional lending. How can you get around them? By taking the equipment financing route to keep your products flowing.
Creative solutions for equipment cash. Many liquid art makers now have damaged credit due to the COVID-19 shutdown. But the flexibility and nimbleness of the equipment leasing industry can help you overcome bruised lending power. It also does so more quickly and creatively than traditional lending avenues.
Fewer funders and approvals, a dose of hope. Many banks have stopped lending to breweries and wineries, especially tasting-room-focused operations in the “service industry” class. To approve a loan, banks are also likely to want bigger collateral (for example, your home), a blanket lien on your business assets, and more. But equipment lenders often categorize distilleries and wineries in the less-risky “manufacturing” class, and that safer stipulation has lenders dipping their toes back into the lending pool.
Help for higher funding hurdles. The loss of key revenue streams has impacted key ratios banks use to approve credit—your company’s net profit and net income, for example. It’s now tougher to qualify for funding, but the damage can be less painful when obtaining gear through an equipment leasing plan.
Careful with deferrals. When the pandemic started, payment deferrals were a blessing for beverage makers. But many lenders want to see distance between the deferrals you took and your request for new bucks. If you’re looking to buy packaging gear or production equipment, full payments to your current creditors make it easier to qualify for a new loan, lease, or financing.
The price of rate shopping. It’s wise to shop around for a deal, but there’s an opportunity cost in spending weeks (or months) trying to save a point or two on a loan. Equipment lenders operate quickly and may charge a little more for that speed. But that fast pace can pay for itself many times over by letting you immediately put your equipment into service and boosting your income.
Meet the “COVID Statement.” Most non-traditional lenders now want to see months of complete bank statements and get answers to such questions as “How has COVID impacted your business?” and “What is your crisis plan if there’s another shutdown?” Be prepared to smartly answer these timely queries.
What you’re buying matters. Equipment that improves efficiency, boosts production, raises quality, or creates a point of distinction from your peers (hello, enviro-friendly technology) is more likely to get approved today. If that’s what you’re looking to purchase, highlight that fact.
Good luck in these very difficult times and the ever-changing next normal, and may your funding efforts be spirited and fruitful.
Rick Wehner is founder of Brewery Finance in Denver, Colo., which finances and leases manufacturing equipment for craft beverage producers, including bottling and canning gear.