Financing Your Indie Brand WRITTEN BY STEVEN SEIM
t the Chicago Indie Spirits Expo in September, several industry experts hosted a panel regarding brand financing. Panelists included:
Lew Bryson beer and spirits writer
Paul Hletko American Craft Spirits Association (ACSA) president and Few Spirits (Evanston, IL) founder
Josh Morton Barrow’s Intense Ginger Liqueur (Brooklyn, NY) founder
Scott Winters founder and CEO of The American Spirits Exchange, Ltd.
Dave Schmier co-founder of Redemption Rye and co-founder of the Indie Spirits Expo This experienced and diverse group gave advice and answered questions related to gaining funding, things to be aware of, and creative ways to get the money you need to start your distillery. The panel started by reiterating a point which Have a very clear goal is always important: Have for your business. a very clear goal for your business. Clarity is the key regarding investors. The more details the better, so that any potential investor can know exactly what you’re offering and the chances of making a return. Panelists then covered less common ways to finance a distillery. Purchase order factoring was described by Winters as the option to borrow against your own shipped product. The advantage is that you get paid for a product on day one instead of waiting for normal payment later. The cost of the loan is the trade-off for the faster payout. Barrel financing was also discussed, and one panelist commented
that they had yet to see really successful returns from this practice. Since banks don’t have the proper permits to sell alcohol, it can sometimes be difficult to find those who are willing to take your barreled product as collateral. Some banks don’t want to take on the challenge of handling alcohol if a debt defaults. Regardless of what kind of financing your business ends up using, many on the panel agreed that it will usually be necessary to offer personal assets and guarantees as collateral, so you’ll have to think very seriously before pursuing those means. Many young distilleries can take Take advantage of various advantage of various local city or state programs. local city or state programs meant to help small business. Help for altering a building, local marketing, networking, and more are all available through many local organizations. In some places the Department of Agriculture will guarantee up to 95 percent of a loan if a business is on farm land and uses resources from that state. One panelist also recommended leasing equipment instead of buying, which can help lessen upfront costs. While it may not be best for your business to lease a still, leasing less crucial equipment like a forklift can help save money over buying. When asked about the process of deciding a breakdown of percentages in equity for initial investments, Hletko described the method he used when starting. While you can never be sure of how a business will grow, he decided on an amount of business that he hoped he would be at in 10 years. Estimating how much it would cost to do that much, which is largely a guess, led to the dollar figure he started with. From that number he decided on debt versus equity versus personal loans and the structure of the business. Hletko also described the process he’s gone through of finding money after some success. Being named Craft Whiskey of the Year by Whisky Advocate meant a big surge of new orders that Few Spirits wasn’t able to fulfill right away. Showing a bank almost $1 million of unfulfilled purchase orders made it a lot easier for Hletko to find banks willing to lend. WWW.ARTISANSPIRITMAG.COM
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