How to Buy a Liquor Store with an SBA Loan
SBA loan financing to buy a liquor store: 7 things you need to know.
Buying a liquor store can be a great investment with a stable income. SBA loans offer a great opportunity to leverage your money and get funds for working capital for inventory, marketing, and improvements but the business may not be as hands off as you are expecting it to be.
Here are 7 things you need to know when buying a liquor store:
1) You can afford more than you think
How much do you have available to put toward buying a liquor store?
You can buy a liquor store with an SBA loan with as little as 10% down. This allows you to leverage your money and buy into a higher income. Your down payment can come from cash, retirement funds (401k or ROBS), home equity line of credit (HELOC), outside investor, or gift. Use the Total Funding calculator to find out how much you can afford here.
Estimate your down payment, monthly loan payments, and more for specific liquor stores here.
Advantages
Note that an SBA loan to buy a liquor store allows you to also include money for working capital for inventory, marketing, payroll, and improvements.
On the other hand, conventional loans are more difficult to qualify for, have higher down payments and shorter loan terms, often involvement balloon payments, and do not allow for working capital.
If you are planning on using an SBA loan to buy a liquor store, get started with a same-day pre-qualification here. A pre-qualification is a great way to get a headstart on your application and will help in your negotiations. There is no credit check required and you’ll receive your pre-qualification letter and borrowing estimate within 24 hours.
2) Keep up with consumer tastes and industry trends
A successful liquor store depends on much more than a store full of alcohol and a good location. You must keep up with the ever-changing consumer tastes and trends.
In order to keep your selection great, you have to provide the alcohol categories, brands, varieties, sizes, and price ranges that consumers want. In addition, your staff must be knowledgeable about the inventory you sell.
Disadvantages
Here are some of the recent trends:
- An increased demand for craft beer, whiskey, hard cider, and hard soda
- Within vodka, a growth in non-premium vodka and a decrease in premium vodka and flavored vodka
- An increase in experimentation – consumers are less loyal and enjoy trying new things
- An interest in the story behind the alcohol – consumers are making purchases based on the alcohol’s background, founder’s story, and city or state of production
- The digital revolution is becoming increasingly important – an online presence allows you to interact with the consumer, keep up with alcohol preferences, respond to concerns, and market
3) Outdo your competition
In order to set yourself apart, you have to know what the consumer wants and offer it at competitive price. You must provide a large and complete selection and have to keep up with inventory.
In addition, you can offer other products such as groceries, cigarettes, cigars, and drinking and party supplies.
As with any business, cleanliness and customer service are especially important as well. Make sure the shopping experience is an enjoyable one.
4) Keep working and operating capital in mind
Owning a liquor store can require a lot of working and operating capital:
- Inventory: Inventory is expensive and there is a high turnover that you must keep up with. You have to offer a full and complete selection. Some types of alcohol can cost hundreds of dollars. Also, make sure any inventory included in the sale is current and easily sellable, as opposed to full of older items that are not selling.
- Payroll
- Marketing and advertising
- Renovation and improvements
- Unexpected business expenses
If you are using an SBA loan to buy a liquor store, you can include working and operating capital in the loan. Get your same-day pre-qualification with no credit check required here.
5) Understand licensing and regulation
Individual cities, counties, and states can have different regulations regarding liquor stores. This is great for small businesses because it prevents major national chains from forming; however, you must do your research to understand the rules for change in ownership and compliance after ownership for each individual location.
The Alcohol and Tobacco Trade and Tax Bureau (TBB) and state and local authorities can be great resources for this and should be used to verify information from the seller or seller’s broker.
6) It may require more involvement than you think
Liquor stores are stable investments and are less prone to economic downturns than other retail businesses. During economic hardships, alcohol consumption shifts from pricier bar and restaurant options toward retail purchase for home consumption.
Although liquor stores can be a good investment, they may be better suited for owner-operated than absentee-run businesses. It will be up to you as owner to make sure you are constantly monitoring the latest industry trends and offering what the consumer wants.
In addition, there is a lot of cash and inventory that must be carefully monitored because it is susceptible to stealing by shoppers and employees.
Overall, you’ll need a very generalized knowledge of business and will have to handle accounting, marketing, sales, operations, employment management, and customer service.
7) Don’t pay for cash flow that cannot be documented
Since liquor stores involve a lot of cash sales, many of them have poor books and records. Don’t just take a seller’s word for what they verbally report for business revenue – if they can’t prove it, they can’t charge you for it.
Summary
Buying a liquor store can provide a stable investment but may be better suited as an owner-operated business as you will need to take care of industry trends and inventory. Using an SBA loan to buy a liquor store allows you to leverage your money and provides for working capital for inventory, marketing, payroll, and improvements.
Download our FREE Liquor Store Buyer’s Guide and Due Diligence Checklist
HOW DO I GET STARTED?
The best online SBA loan platform is YourEdge™ by YourSBA.com:
- Get prequalified to buy a liquor store within 24 hours
- Start here with YourEdge™
- Find out how much you may qualify for using our SBA Loan Calculator tools here.
- Liquor store acquisition loans from $350,000 to over $5 million.
- 5x success rate of your bank
- No fees
- No credit check / No hard credit pull
- No bank runaround
- Online, streamlined application accepted by all of the most aggressive SBA lenders for competitive interest rates and a 95% success rate.
See if you qualify for an SBA loan by taking just a few minutes to complete the quick form here. The pre-approval process takes less than one day and does not require a hard credit pull.
