Liquor Store Financing

Liquor Store Loans – 100% Financing

100% financing is possible if you need a loan for a liquor store in each of these scenarios:

1. You are purchasing a building you have been leasing
2. You are moving from leasing space to owning a building
3. You are expanding your business by purchasing a competitor
4. You are expanding by opening a new location

It is also possible to purchase a liquor store by getting the seller to finance 10% of the purchase price by way of a standby note. Specifically, if the seller is willing to hold a loan for 10% of the purchase price and forego the receipt of payments for 24 months, then as a buyer you do not need a down payment.

You will still need all of the other qualities a lender likes to see – including good credit, the right experience, mangement, etc. as well as some level of reserves/cash in the bank/post-closing liquidity, but this is a great way to get buy a liquor store with no down payment.

The above loan structures can be used for buying the business and/or buying the business and the real estate.

If you already own a successful liquor store and rent your space but want to purchase a building, you can learn how to get 100% financing for a building on our commercial loan with no down payment page.

SBA Liquor Store Loans

The Small Business Administration offers 2 programs – the 7a and the 504 – as financing solutions for a liquor store, wine store or beer distributor depending on whether or not you are purchasing a business, a business and  building or just a building:

The 7a can be used for all of the following:

• buying a business
• refinancing a business
• buying a business and a building
• refinancing a business and building
• ground up construction for an expansion or startup
• goodwill/blue sky, working capital, debt consolidation, tenant improvements/build out, inventory (occassionally)

The 504 can only be used to purchase, build or to refinance a building.

Buy a Business With or Without Real Estate

SBA 7a loans are “cash flow loans” and they can be quite flexible.

They allow for creative financing structures as well as financing for business acquisitions that do not include commercial real estate, so if you are looking for a loan for liquor store then the 7a is a good solution as it allows you to finance goodwill, inventory and working capital if the cash flow of the business is strong enough. 

Recent Liquor Store Business Fundings

We recently helped a client obtain an liquor store loan for a business in Texas. The cash flow of the store was marginal, but it was in a good location and the borrower had very good experience in the industry as well as a spouse with a solid job. Many lenders passed on the opportunity but one of our local lenders who believed the borrower’s experience would lead to increased sales made the loan.

We also recently helped another client in New England (who operates a local restaurant) obtain financing for a 2 location liquor store business. The purchase price of approx $2 million included over $1 million in goodwill. The cash flow for the business was steady and it had the added benefit of having a few apartments upstairs that the borrower planned to renovate and lease out for additional income.

Loan Terms

The term and down payment of a 7a small business loan for a liquor store are determined by the use of loan proceeds and whether or not it includes a commercial building.

Terms:

• If the loan includes a building and that building is more than 50% of the use of proceeds of the loan then it is possible to finance the entire amount over 25 years.  In fact, some borrowers may qualify for a 25 year fixed rate.
• If it is just a business purchase (without a building) then the maximum term of the loan is 10 years.

Down Payment/Equity

Whether you need financing for a liquor store that includes real estate or not, most conservative lenders will offer financing with 10% down, but there are SBA lenders who will consider zero down.

FYI, some 100% lenders typically have a hard time doing smaller loans.  “Smaller” is typically defined as under $350K.

As mentioned above, since the 7a loan actually has no minimum down payment requirement it is possible to get financing for an expanding business or one that is moving from leasing to owning without a down payment as long as the business has solid financials and the borrower(s) have good credit.

In order to qualify for better terms, loans can also be structured with 10% down where the 1o% comes from another source.  The SBA is flexible with regard to the source of the down payment.

Possible Sources of Down Payment for SBA Loan for a Liquor Store

1. Money that is borrowed if you have another source of income or a spouse with income and can prove you can affored the payments on the borrowed money
2. Gifts
3. Investors
4. Seller held funds on “full standby” – no payments to be made on the seller held debt for 24 months
5. 401k from a former employer – this can be done tax and penalty free in some situations.  Minimum down might need to be 40K for this to work due to expenses related to rolling over retirement account into the business
6. Equity in another business or business property that is pledged in lieu of down payment

Experience

Liquor business experience is not necessarily required to get a loan.  It can really help, but most lenders can get comfortable with borrowers with some level of business or business management experience, especially if the seller is willing to stay on for little while to help you learn what you need to know.

Obviously the “better” deals with stronger, more experienced borrowers will receive more favorable terms.

Seller Held Second Mortgage

It is fairly common for the seller of a store to hold a second mortgage in lieu of the borrowers putting more money down – especially if there is a lot of inventory involved, but for a lender to consider the seller 2nd as “real” equity (as if it is part of the borrower’s down payment) it will need to be structured with no payments due for 24 months.  Keep in mind, there is NO prepayment penalty on SBA loans with terms shorter than 15 years.

Liquor Store Building and Construction Loans

Construction loans for liquor stores are possible under both the 7a and the 504, but the 7a is a much cleaner process as it is just one loan with one underwriter/lender.  Qualified borrowers can build a new liquor store from the ground up or purchase another space and renovate it.

Bottom Line

Liquor store financing using the SBA loan programs are attractive to borrowers because they:

• offer financing that is available with little to no down payment
• have flexible structures
• offer a long term amortization
• typically have a low rate

SBA loans are attractive to lenders because they receive a guarantee from the Small Business Administration that protects them the event of default and the loans can be very profitable for lenders.

Click here for more info about the 7a loan program.

 

Please contact us at 1-800-414-5285 for more info.