Brewery, Winery and Distillery Feasibility Study in Virginia

Wineries, breweries and a heavy 504 share

Virginia's beverage makers borrow under SBA through both programs. Of 92 approvals from FY2017 to FY2026, worth $60.8 million, 27 came through SBA 504 and 65 through SBA 7(a). The state ranks 17 of 53 for the class, the location quotient is 1.36x, and beverage manufacturing ranks 11 of 39 among Virginia's classes. The median loan is $325,150, 1.12x the national class median, with the middle half spread from $125,000 to $816,250.

The loans are spread across many places. Loudoun County leads with only 7 approvals, Richmond City has 6, Fairfax and Louisa have 4 each, and Chesapeake, Falls Church, Nelson, New Kent, Newport News and Norfolk follow at 3 apiece. Business Finance Group, Inc. holds 12 of the 504 loans worth $11.4 million and 504 Capital Corporation 11 worth $8.9 million. On the 7(a) side Manufacturers and Traders Trust Company now holds 7 Virginia producer loans worth $1.1 million and TowneBank 5 for $3.0 million. Franchise share is 1.1%.

Closings fail more often than loans

The Virginia record says a beverage deal is more likely to fall apart before funding than after. Cancellation reached 15.0% of FY2017 to FY2024 approvals, and the ceiling, counting loans not yet disbursed, is also 15.0%. Charge-offs are low: of 49 Virginia producer loans disbursed in FY2017 through FY2021, the write-off floor is 2.0%, and the same 2.0% inside five years, both floors. Volume has thinned, from 22 approvals in FY2017 to between 5 and 12 in each later year, so recent Virginia lending rests on few deals.

Testing a Virginia winery, brewery or distillery

A feasibility study in this class has to test the revenue lines separately: wholesale and distribution volume, and on-site sales from a tasting room, taproom or events, which SBA's code cannot show because the code tells us the borrower produces a beverage and nothing about how it sells. For a farm winery, demand testing means visitor traffic and drive times from nearby cities; for an urban brewery, it means the competing taprooms nearby. Vineyard establishment, equipment and any event space need current bids. The coverage model should allow for the years before vines or barrels yield saleable product. The appraisal is the hardest test: a winery's value mixes land, improvements and a going concern, and a lender holding a 504 first lien needs to know what the land and buildings bring without the business. The class covers breweries, wineries and distilleries only; the rest of manufacturing is outside it.