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A Guide to Liquor Store Loans

A Guide to Liquor Store Loans
Susan Guillory

Susan Guillory

Updated March 14, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Liquor stores can generate good profit margins and are considered largely recession-proof. But they also come with considerable expenses –  such as inventory, payroll, rent, and security systems. Fortunately, there are a number of loan options that can help you get you the funding you need to start or grow your wine and spirits business.Which type of liquor store loan will work best for you will depend on how much money you want to borrow, how you want to use the funds, and how soon you need the money. Here’s what you need to know to find, and apply for, a liquor store loan.

What Are Liquor Store Loans?

There is no formal designation for liquor store business loans. However, there are a number of small business financing options that liquor store owners can use to purchase inventory, do renovations, pay employees, buy real estate, invest in marketing, and more. These include the SBA 7(a) loan, short- or long-term loans from banks and online lenders, business lines of credit, commercial mortgages, and merchant cash advances. If you also own (or you’re looking to purchase) a bar, there are even loans for bar owners.

How Do Liquor Store Loans Work?

Liquor store loans work like any other kind of small business loan. Typically, they provide you with a lump sum of cash that can be used for a variety of purposes. You borrow the money at an agreed-upon interest rate and repay it over time until the loan is paid off, which could be anywhere from a few months to 25 years.When a lender is assessing if you are eligible for a liquor store loan, and how much they are willing to lend to your business, they typically consider several different factors, including your revenues, time in business, plan for using the borrowed funds, available collateral, along with your business and personal credit scores.

Types of Liquor Store Financing

Knowing what type of business loan you need is the first step to getting a loan for your liquor store. These options can help your business cover common expenses, expand a business, or acquire an existing store.

Business Term Loans

Small business term loans let you borrow a set amount of money that’s paid back with interest on a predetermined schedule, which could be months or many years. They are available from banks, credit unions, and online lenders.One of the best term loan options for a liquor store loan is an SBA loan, such as the 7(a) program. These loans are backed by the U.S. Small Business Administration (SBA) and come with favorable terms — low rates, high amounts, and long payback periods. But, you’ll need excellent credit to qualify. You may also need to prove that you have a liquor license or that you will be able to get one. If you don’t qualify for an SBA term loan, you may want to look into a short- or long-term loan from an online lender. These tend to be quicker and easier to qualify for than SBA and traditional bank loans, but typically come with higher interest rates and fees.

Equipment Financing

If you want to purchase equipment for your store, such as a point-of-sale system, display fixtures, or a computer, you may want to look into an equipment loan. With this type of small business financing, you typically get a quote for the equipment or asset you’d like to buy, and a lender will front you a significant portion of the cost. The asset you purchase with the loan acts as collateral for the loan. 

Business Line of Credit

Not all loans for liquor stores provide a lump sum of cash up front. With a business line of credit, you’re given access to cash up to a pre-approved maximum. You can take out however much you need up to the limit, repay it, and then borrow it again. This can help relieve temporary cash flow issues or help you seize an unexpected opportunity. You only pay interest on the amount you use.

Commercial Real Estate Financing

Rather than lease retail space, you might decide to purchase property for your liquor store. Or, if you already own your liquor store, you may be looking to refinance your existing mortgage. For either of these scenarios, you’ll want to consider a commercial real estate loan. Because the property you’re buying (or refinancing) serves as collateral for the loan, you may be able to get low interest and a long repayment term.

Merchant Cash Advance

A merchant cash advance (MCA) isn’t technically a loan but, rather, an advance on future liquor sales. With an MCA, you sell your future revenue at a discount to a merchant cash advance company. To collect their money, the advance provider will usually deduct a percentage of your daily credit and debit card sales. This can be a quick way to access a lump sum of cash, but tends to be more costly than other types of financing.

Business Acquisition Loans

If you’re looking to buy an existing liquor store or acquire a competitor, a business acquisition loan may be a good option. This is a loan that's given to a small business specifically to acquire another business. You may be able to qualify for a good rate if the target liquor store’s assets provide enough collateral to cover the loan. You’ll want to keep in mind, however, that you can only use a business acquisition loan for a short window of time and only for the agreed upon purpose.

Uses for Business Loans for Liquor Stores

There are many things you can do with liquor store financing. Here are some ways you might spend the proceeds from a liquor store loan.

Expansion

Maybe business is booming and you’re ready to renovate or expand your store. Or, perhaps you’re interested in opening a second location or purchasing a competitor’s store. If you don’t have the cash to move forward on your plan, a liquor store loan can turn your vision into a reality. The idea is that the investment will help you bring in more revenue, which you can use to quickly pay back your loan.

Emergencies

When faced with an unexpected event, such as a major storm, a pandemic, or significant disruption in your supply chain, would you have enough cash to cover basic operating expenses for a few weeks or possibly months? Small business financing, such as a business line of credit, can help provide a cushion in case of emergency.

Payroll

Your employees are key to the success of your liquor store. Getting a loan to cover payroll, such as a short-term business loan, business line or credit, or merchant cash advance, can help ensure that your team gets paid on time, even when cash flow is tight. This can help keep your workers happy and motivated to sell.

Technology Upgrades

Investing in new technology, such as a new point-of-sale system, cloud-based business management system, or an e-commerce site, can help streamline operations and enhance customer experience. A liquor store loan can help you take advantage of cutting edge technology that saves you time and helps boost profits.

Inventory

Another use for liquor store loans is to purchase inventory, which is likely your largest expense. A liquor store loan can allow you to stock up before peak seasons, take advantage of a great deal on a large purchase when it arises, and keep up with rising demand for certain products. 

Getting a Liquor Store Loan

Once you have a sense of what you want to do with a liquor store loan, you’ll want to start exploring and comparing business loan options

Finding Out What Kind of Loan You Want

We’ve explored all types of business loans you can use for your liquor store, so now it’s time to narrow it down. A good first step is to look at your personal and business credit, as well as your annual revenues, to determine what type of financing you might qualify for. If your credit and financials are strong, you may be able to get a low-interest SBA term loan, which can be used for a variety of purposes. If your finances aren’t strong, you might consider an online term loan or a merchant cash advance. If you have a very specific use for the funds, such as purchasing equipment or buying a retail space, you may want to look into getting a targeted loan, like an equipment loan or a commercial real estate loan.

How Much of a Loan Do You Need?

Once you know how you want to use the loan, you’ll want to create a budget to get a sense of how much you will need to achieve your goal. As you run the numbers, it can be a good idea to add some extra padding to your budget to account for unanticipated setbacks or expenses.When considering loan size, you’ll also want to make sure you can afford to make the monthly loan payments. Borrowing a million dollars to overhaul your business may sound fabulous, but what happens when that large payment is due? Not being able to make your payments puts you at risk of defaulting on the loan and could jeopardize your liquor store.

Gathering Documents

When you apply for your loan, the lender will want some documents about your business. These may include:
  • Tax returns
  • Financial statements (such as profit and loss statements and bank account statements for the business and business owners)
  • Corporation or LLC paperwork
  • Business plan or proposal for how you plan to use the loan
  • Owner’s photo ID
It can be a good idea to gather these documents now so that you’re ready to go when you start applying for a small business loan.

Applying for Your Loan

Some applications, like those from an SBA lender, may be lengthy and complicated, while online lenders tend to have shorter applications. If you’ve already gathered what you need beforehand, however, applying should go pretty smoothly.When filling out a business loan application, you’ll want to be sure to include everything the lender asked for and in the correct format. This can reduce any unnecessary back and forth between you and the lender and help make sure you get a decision as quickly as possible.Once everything is in order, how you’ll actually apply for the small business loan will depend on the lender. An online lender may allow you to link your bank accounts through its website, whereas a bank may require you to apply at a branch or over the phone. Turnaround time will also vary depending on the lender. Online lenders may let you know right away if you’re approved and funding may only take a matter or days or weeks to receive. With SBA loans, the application, approval, and funding process can take several months.

The Takeaway

There are many types of loans available to you as a liquor store owner. The best rates and terms will typically come from the SBA 7(a) program if you qualify.If you don't have stellar credit or haven’t been in business for at least two years, you may want to consider an online term loan, a merchant cash advance, equipment loan, or a business line of credit. Ready to start looking for the right loan for your liquor store? Lantern by SoFi can help. With our online lending tool, you can quickly review and compare small business loan options (including SBA loans, term loans, and lines of credit) that meet your needs and qualifications. There’s no obligation and you only need to fill out one application.
Photo credit: iStock/gorodenkoffThe tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC0122023

Frequently Asked Questions

Are liquor stores eligible for SBA loans?
Can banks take liquor as collateral for a loan?
How profitable can owning a liquor store be?

About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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