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Business tends to be good for liquor stores in almost any economic environment. After the pandemic, liquor stores have seen an uptick in business due to restrictions. This favorable business climate has banks ready and willing to hand out SBA loan approvals to applicants.
An SBA 7(a) or 504 loan for liquor stores can be used for buying inventory, merchandise, refinancing debt, expanding or even buying a new liquor store. It’s pertinent to note that SBA loans can’t normally be used to buy a liquor license.
The liquor store industry in the United States is worth over $72 billion with nearly 50,000 businesses spread across the country. According to some estimates, this industry has posted an annualized growth rate of 4.4% over the past five years. That explains the rise in requests for liquor store financing as more and more people want to open a business in this industry.
Demand for alcoholic beverages increased significantly during the COVID19 pandemic and it’s expected to remain strong in the following years. Rising disposable income levels have made it possible for customers to purchase more premium products. This supports revenue growth for the industry.
Benefits of owning a liquor store business
The biggest benefit of owning a liquor store business is that you get to be your boss. You have complete flexibility to set your working hours and have full decision-making authority on how the business is going to be run.
It’s not the unavailability of liquor store loans that prevents most people from venturing into this industry. The various regulatory hurdles involved in obtaining a liquor license are a barrier to entry for many potential business owners. They may not have the required patience or the resources to go through the entire process.
It also doesn’t hurt that there’s always going to be demand for alcohol. Since alcoholic beverages have a long shelf life, the inventory risk is greatly reduced for store owners. As long as the products are properly stored, they won’t go bad for a very long time.
How to obtain liquor store financing
Your first thought might be to reach out to a bank for liquor store financing. It can be difficult to obtain a conventional loan to buy a liquor store for a variety of reasons. Liquor store businesses have elements of risk, such as fluctuating inventory levels, that many banks aren’t willing to take on.
It doesn’t help that this industry is also infamous for over-reporting expenses or under-reporting cash sales. This presents a hurdle for the banks’ appraisal process and can thus lead to a refusal of the loan application.
SBA loans for buying a liquor store
If you’re looking for liquor store financing, consider applying for an SBA loan. The various loan programs offered by the Small Business Administration can help provide you with the financing you need to set up your liquor store. The SBA is a government agency and it’s not going to directly lend the money to it. What it does instead is guarantee a significant portion of your loan. That lowers the risk profile for SBA’s lending partners, which include conventional banks and financial institutions, so they’re more willing to approve loan requests.
With an SBA loan, you also have to put significantly less cash or equity down to qualify. The most common SBA liquor store loans include the SBA 7(a) and Express loans.
SBA 7(a) loan for buying a liquor store
The 7(a) is the preferred SBA loan for liquor store businesses. You can use the funds made available to you through this program to purchase merchandise, and inventory, refinance debt, expand your existing liquor store business or even purchase a new liquor store.
The SBA 7(a) allows for a lot of versatility. It’s pertinent to note that you can’t use an SBA loan to purchase a liquor license. This restriction will typically apply to any and all liquor store loans that you may be interested in seeking. If you own an existing liquor store business and want to buy out a partner, you can also utilize the funds from an SBA 7(a) loan to do so.
The maximum value that an SBA loan for a liquor store can be is $5 million. These term loans are generally repaid with monthly payments that include interest. The payment stays the same for fixed-rate loans since the interest rate is locked in. However, for variable rate loans, it’s up to the lender to request a different payment amount if the interest rate changes.
SBA Express Loans for liquor stores
SBA Express Loans are a part of the agency’s 7(a) loan program. Up to $500,000 can be borrowed under an Express loan. The approval times are typically much faster for these loans.
If approved, the funds can be utilized for equipment purchase, working capital, and real estate. Do remember that Express loans over $25,000 have a collateral requirement. The SBA usually responds to Express loan applications within 36 hours.
All eligibility and credit decisions are ultimately made by the lenders. The market prime rate plus 4.5-6% interest is applied with repayment terms of up to 10 years.
How to apply for an SBA liquor store loan
Access our network of SBA lenders that include leading nationwide banks, credit unions, and other financial institutions. Our lending partners are used to handling applications for liquor store financing so they will diligently pursue your opportunity.
There are countless SBA approved lenders that are ready to offer you a loan for a liquor store and these are just some of the top lenders:
| Rank | Bank | City | State | # of Loans | Avg Loan $ | Avg Interest |
|---|---|---|---|---|---|---|
| 1 | Hanmi Bank | Los Angeles | CA | 24 | $903,646 | 6.0% |
| 2 | U.S. Bank | Cincinnati | OH | 12 | $44,167 | 7.2% |
| 3 | Open Bank | Los Angeles | CA | 6 | $2,263,333 | 5.1% |