Brewers and Bankers:  Cheers to a Symbiotic Relationship

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On the beerandbrewing.com website where entrepreneurs can find over 30 courses on all aspects of the craft brewing business, you can sign up for the “Fundamentals of Building Your Brewery” course. The very first lesson:  “Financing Your Brewery.” It is job one.

The Business of Brewing

Starting a craft brewery takes vision, hard work, and a lot of capital. Brewhouse equipment such as mills, mash tuns, and mash kettles are just a start. Then there’s the malt, grain, hops, and other ingredients. And whether they’re going into kegs or growlers or bottles or cans, each of these carefully crafted brews will also need some marketing and promotion to connect them with their thirsty future fans.

This year alone, well over 500 new craft breweries will open in the U.S., and that’s following decades of growth in the movement. Start-up costs, even at the low end, come in at $100,000 or more, with ambitious breweries easily topping a million dollars.

So, the need to finance a startup brewery is obvious. What’s not so obvious is where to seek the funding. That’s exactly why a lot of entrepreneurs seek out financing experts at a local community bank. Even if the bank can’t provide all of the necessary financing, they can guide the new owners toward additional sources and help make the introductions.

Crafting a Partnership

Local bankers love to get involved with interesting businesses, and craft brewing definitely fits the bill. Even if they haven’t had direct experience with a brewery startup, chances are they have helped guide one or more restaurants from startup to multiple location stage. The trend in craft brewing includes opening one or more brewpubs, so getting thoughtful guidance from a local banker early in the game can help set the stage for success later on.

Finance officers are people, too, and they have been known to sample craft brews without the need for much peer pressure. Outside of restaurants, golf courses, or perhaps a minor league team in the area, it will be easy to compete for your banker’s attention with a brewpub business. You can leverage this to get a free education in finance over that new IPA you’ve just launched.

Community banks might not be able to supply all the financial needs of a craft brewery, but they are an essential part of the mix. When banks lend to new businesses, they assume a lot of risk. After all, not all startups grow into huge success stories. That’s why there are also specialized financing companies that know, for example, the craft brewing business well enough to manage the risk of providing deals for financing.

That doesn’t mean that your local bank won’t lend you money. What it means is that you can expect to need a combination of sources to finance your craft brewery business. Here’s an example of a big success story that required a team effort.

Garrett Marrero and Melanie Oxley Marrero started Maui Brewing Company in 2005. Through the years, they’ve received financing from their local bank, Bank of Hawaii, along with SBA (Small Business Association) loans and support from the Maui SBDC (Small Business Development Center). Today, they have multiple restaurant locations, and they’re the largest craft beer producer in Hawaii. By the way, they were named the SBA’s 2017 National Small Business Persons of the Year. Greg Knue, Vice President/Commercial Banking Officer at Bank of Hawaii, nominated them.

“Without the support of the SBA,” said Garrett Marrero, “without people like Greg Knue and everyone at Bank of Hawaii, Maui Brewing Company would still be a dream of mine as opposed to reality for all to drink.”

The Takeaway

Craft breweries are at the top of the list for many entrepreneurs who want to do their own thing. Like any startup, the owner or owners must learn the financial end of the business in order to boost their chances for success. Bankers at community banks offer the ideal combination of financial knowledge and eagerness to help startups build their businesses—especially if it involves a pint or two down the road.