Whenever an entrepreneur is opening a brewery or currently is operating a brewery, he or she is faced with the decision to either purchase, finance, or lease the brewing equipment. There are three main times breweries are faced with equipment challenges. The first is when they first open their brewery. The second is when they are expanding. The final time is when they are introducing a new product which requires a new piece of equipment. This post will discuss these three main times and the pros and cons of purchasing, financing, and leasing brewery equipment.
When opening a brewery, the owners are faced with how they will acquire the brewery equipment. One option is to purchase the equipment in the beginning of operation. This option has its pros and cons. If you have the capital to purchase the equipment and enough cash flow leftover for operations or reserve then this can be a great idea. It also will save the brewery money in the long term because they will not be paying for additional interest incurred. However, it is often difficult to raise enough capital in the beginning to purchase equipment outright. If cash flow is a concern then this option can lead to a strain on the business and in extreme situations lead to a business closing before it had a chance to succeed. Financing or leasing equipment is another option to consider when opening a new brewery. With this option, owners typically receive financing through the bank for a specific amount. The loan is normally good for several aspects in the business including working capital, operations, as well as equipment or property. There are many different loans available that cover a variety of needs. By offering the brewery equipment as collateral for the loan or lease, equipment financing offers lower interest rates and payment terms regardless of the borrower’s credit score or amount of time in business.
When a brewery is expanding either the amount of equipment or the brewery system altogether, they are faced with different challenges to consider. If the brewery has been in business for a while, they may be in a good place in terms of cash flow and are able to purchase the equipment. Being in business for a period of time also allows them to receive a loan easier. A brewery may choose to take out a loan to keep their cash flow levels the same and pay off the loan quick to reduce the amount of interest.
When a brewery needs new equipment for a new product or to replace old equipment, it is normally one piece of equipment and the cost is typically lower. With this challenge, a brewery may be able to pay for the equipment due to the small cost associated with the equipment. Breweries will most likely not be able to take out or loan due to the small amount needed. Leasing the equipment, however, is another option. Breweries are able to pay on the equipment monthly until the piece of equipment is paid off.
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