Funding a brewery: savings, loans, investors and grants

Know the number first

You cannot choose funding until you know how much you need and when. Total the capital cost, the pre-opening period and the lowest point of your cash flow, then add a buffer. Our guides on capital costs and the 12-month forecast show how.

The mix you choose will usually have three parts: money for equipment, money for the opening months and money for stock and receivables.

Your own savings and family money

This is the cheapest and fastest money, with no interest and no dilution. It is also the most personal. Money from family has expectations that are rarely written down. Put it on paper: is it a loan or a share, who gets repaid first and what happens if the brewery closes? A lender or investor will want to see that you have put in your own money, because it shows commitment.

Bank and institutional loans

Loans give you cash without giving up ownership, in exchange for interest and fixed repayments. They suit businesses with predictable earnings. They are risky if sales are uncertain, because instalments are due whatever happens. Banks look at repayment cover, security and the promoters' own stake. We cover this in getting a bank loan for a brewery.

Equipment finance, working capital lines and government-backed schemes exist in many countries, with terms that change. Ask the lender what applies to you now.

Investors

An investor gives you money in return for a share of the company. There is no instalment, but you give up ownership and often some control. A small illustration: an investor who puts in 2,000 for 20 per cent values the company at 10,000 after the money and 8,000 before it. If you disagree with that valuation, you are really negotiating the price of your own business.

Ask what the investor expects: a board seat, a veto on certain decisions, a way to sell their stake in five to seven years. Brewing is a slow business and not every investor is patient. Choose someone who understands that and will answer your phone in a bad month. Check how they have behaved with other founders. Talk to at least one of them before you sign.

Grants, schemes and other sources

Public schemes, subsidies and grants exist for some manufacturers and some borrowers, in India and elsewhere. Their eligibility, amounts and timing differ by state and country and change often. Do not build your base plan on a grant you have not been awarded. Treat it as a bonus. Ask your adviser or the relevant agency what is on offer now.

Other sources include equipment supplier credit, customer prepayment through memberships and community share offers. Each has legal conditions, so take advice. Rules on raising money from the public differ widely by country.

Mixing sources

Most breweries combine two or three. A typical pattern is the founder's savings for the first costs, a term loan for equipment and a working capital line from the same bank. Match the type of money to the use: long-term money for long-life assets, short-term money for stock. Funding equipment with short money is a classic cause of trouble. An overdraft that must be cleared in a year cannot pay for a fermenter that lasts twenty. Also check what each source stops you doing. Some lenders restrict further borrowing or dividends. Some investors need consent before you open a second site.

Keep a buffer. Raise a little more than the model says, since the model is wrong in at least one place.

Before you ask anyone

Prepare a plan with the numbers, the licence position, the team and what you want. Say who is asking for how much. Be clear about what you will not give up. We promise no loan, grant or investment to anyone. We can help you prepare a project report, which is the document every funder will ask for. The course below teaches the numbers behind it. Work through the model first, then choose the mix. Founders who pick the source before they know the number tend to accept whatever terms arrive first.

Common questions

What is the cheapest way to fund a brewery?

Your own savings carry no interest, but they carry personal risk. Loans cost interest. Investors cost ownership. No source is free.

Can I get a grant to start a brewery?

Some schemes may apply, depending on your country, state and project. Terms change, so ask your adviser or the relevant agency.

How much should founders put in?

Lenders and investors usually want to see a meaningful stake from the founder. The right amount depends on the project and the funder.

Should I give equity or take a loan?

A loan needs reliable cash flow to repay. Equity shares the risk but costs ownership. Many breweries use both.