To paraphrase Murphy’s Law, if there’s a chance that something can go wrong, sooner or later it will. No one needs to understand this maxim better than brewers. The brewing industry has to deal with a wide variety of disruptions that can raise costs, lower revenues, or otherwise threaten production. In order to weather these issues, you must maintain access to a steady source of working capital. This is particularly important if you are dealing with:
No matter how diligent you are about keeping your brewery clean, there’s always a risk that there will be some sort of health or sanitation problem with your product. Often, such problems are the result of issues with your ingredients and other supplies, which you may have had no way of knowing about ahead of time. Regardless of the source, you’ll likely have to stop production for days or even weeks so that you can clean your equipment and replace any contaminated supplies.
Working capital is essential when you’re facing sanitation issues. Not only will revenues fall because you can’t sell your product, but depending on how extensive the cleaning is or how much inventory you have to replace, your costs may increase dramatically. With working capital, you can stay above water financially until your production lines are back up and running.
Besides health and sanitation issues, you may have to deal with sudden increases in the cost of key supplies. Perhaps there is a crop failure that reduces the availability of an ingredient that you rely on, driving up the price of remaining stocks. It’s also possible that the cost of maintaining and replacing brewery equipment will rise.
While you can adjust to costs increases by cutting costs elsewhere or raising your prices, it may take time before you are able to fully make up the difference. Working capital lets you keep your business running in the meantime, giving you the breathing room to get your finances in order.
Success in brewing means responding to new market opportunities, but sometimes your equipment can hold you back. Say you identify an untapped market for a certain type of beer, but you don’t have the equipment to make it. Unless you can get that equipment, you’ll lose that market to someone else. Working capital allows you to buy new equipment and pursue such opportunities whenever they arise.
Dimension Funding offers working capital and equipment leases for breweries and countless other types of businesses. Contact us today to learn more about how our capital can benefit your company.