Microbrewery, brewpub and taproom finance

Who can borrow and what lenders look for

Lenders read a brewing business as both a producer and a hospitality operator, and they underwrite both sides. On production they look at the brewing capacity and barrelage, the route to market across trade sales, the taproom and any direct or online sales, and the duty position, because beer duty is a genuine cash-flow cost that has to be funded through the cycle. On hospitality they assess the taproom or brewpub trade like any licensed premises, the wet and dry split, the footfall and the margin. They want to understand how diversified the income is, because a brewery selling only wholesale to a few accounts is more exposed than one with a busy taproom that captures the retail margin direct from drinkers. For the equipment, an asset financier focuses on the kit itself, its value, its useful life and its resale market, alongside the business cash flow, because the equipment is the security. Experience counts on both sides, brewing know-how and hospitality operating, and a clear plan for capacity and sales reassures lenders that the kit will be used and the beer sold. We present the production and the taproom sides in the way each lender needs, and we structure the property and equipment funding so neither is stretched over the wrong security or term.

How much you can borrow

The two sides scale differently, which is why we fund them separately. The premises, where a freehold is involved, borrow on a commercial mortgage up to around 60 to 70 percent of value, sized on the going-concern trade much like any licensed property, with a busy taproom strengthening the case because it adds a retail margin to the production income. The brewing and packaging equipment is funded on asset finance, hire purchase or a lease, where the amount is driven by the value and useful life of the kit and the resale market for it, rather than a property loan to value, and the repayment is matched to the equipment's working life. Splitting the funding lets each part carry the borrowing it can support on its own security: the premises over a long mortgage term, the kit over its shorter working life, so the business is not paying a long mortgage rate on equipment that will be replaced sooner, nor stretching short equipment finance over the bricks. Where the taproom adds a strong direct-sales line, the improved trade can support more on the property side over time, which a later refinance can release. We model the premises and the equipment together, so you can see what each part borrows and how the two combine into the total funding the business needs.

Rates and costs

Cost follows the two-part structure. The premises mortgage sits in the licensed-trade term-loan range, indicatively from around 7 to 10 percent, quoted as a fixed rate or a margin over base or SONIA, set by the trade, the loan to value and the term. The brewing equipment funded on asset finance is priced on the kit, its value, its useful life and its resale market, over a shorter term that matches the equipment, and is usually a touch dearer than the property loan but spread over the life of the kit. Expect arrangement fees on both facilities, a valuation on the premises, legal costs, and on the equipment side any documentation fees for the hire purchase or lease. Funding the kit separately on asset finance is usually cheaper over the life of the equipment than loading it onto the property mortgage, because the term matches the asset and the equipment itself is the security. Beer duty is not a finance cost, but it is a real cash-flow factor we keep in view when sizing the working capital around the funding. We disclose our broker fee in writing, compare the property and equipment options on total cost, and never claim an exclusive tie to any lender or asset financier.

Brewery finance, a pub mortgage or pure equipment finance

Microbrewery, brewpub and taproom finance is the right structure when a business both makes and sells beer, because it needs the premises and the brewing equipment funded against different security over different terms. It differs from a straight pub mortgage, which funds a licensed premises that buys in its beer rather than brewing it, and from pure equipment finance, which funds kit with no licensed-premises or property element. A brewpub or a brewery with a taproom sits in between, part production and part hospitality, which is exactly why we split the funding: a commercial mortgage or lease finance on the premises, asset finance on the kit. If you are only buying brewing equipment for an existing site, asset finance alone may be all you need, and if you are buying a pub that simply stocks a local brewery's beer, a pub mortgage is the product. We match the structure to how much of the business is production, how much is hospitality, and what is owned against leased.