Craft Financing

Craft Financing

Starting any new business is a daunting task, and hats off to the brave souls that do. Every industry or business has its own set of challenges to overcome when starting up, but craft distilleries offer a few unique hurdles all their own. Most of these come down to one thing. Money.

Distilleries take a ton of capital, and can’t truly be shoe stringed. Sure, a new distillery can be frugal as all get out, but they can’t pull a Bezos and run things out of their garage for a couple of years.

Opening a distillery takes money, and a lot of it. The trick is getting it. Even though the economy is booming and rising interest rates are making lenders more likely to lend, it can be a challenge.

Knowing Where to Look & How to Explain it All

Acquiring funding for a distillery is, on its surface, the same as getting the cash to start any business. Either the person with the idea has enough money to do it themselves, they line up investors (friends, family, acquaintances), or they get a loan.

Sometimes it’s a combination of all three. No matter what option is best for a person, no sane individual or institution is going to give someone that kind of money unless they are sure what said money will be used for.

The best way to do that is to kick things off with a stellar business plan.

A distillery’s business plan should be comprehensive and concise. It won’t be able to fully answer every question a potential investor might have, but it should get them to ask the right questions and leave them in an easier state of mind with an “Okay, that’s what this means,” feeling when they read it again.

There are great resources online that will help anyone hammer out a great business plan. A well-done business plan will also help explain one of the biggest hurdles craft distilleries have getting investors on board – the years between starting up and seeing the first profits roll in.

Describing to lenders and/or investors how a distillery will run is only one part of it.

What and why something will be specifically needed is also important. No business is without their often arcane rules and regulations, but with the exception of firearms, there is almost no industry with as much red tape and legal hoops to jump through just to get the doors open as the liquor industry. For example, you will need a lawyer.

Even if you do everything right, that doesn’t mean that every city, state, or federal bureaucrat will know what they’re doing. The money needed for lawyers will be more than other businesses because they will do more than drafting contracts and reviewing documents.

Getting others to understand why X amount of money needs to be set aside for legal fees or other important core elements like distillery specific accounting software, is crucial.

Show Them the Know How

Big dreams and a well thought out plan is good, but how will it be executed?

A new craft distillery will need to get some experienced and skilled professionals onboard. Don’t get too caught up trying to win over the Catch 22 crowd at first.

They’re the ones who won’t invest/lend because you haven’t hired professionals to run the distillery, but how can you hire the talent without starting capital?

This bunch of potential investors can always be called later on, once the other investors are onboard and the ball is rolling. Skilled people are out there, and online job sites make the search easier than ever before.