About Financing for Food and Beverage Companies
Food and beverage companies have a lot of upfront costs to pay, and that money is due before the customer even decides to buy from your store. Manufacturing, freight, and storage fees add up, not to mention marketing and shipping costs. Financing for food and beverage companies provides many sellers with the means to stay in stock and even grow their businesses.
You need steady cash flow to procure and store inventory. Without enough working capital on hand, you can’t prepare for food shortages or pay for that storage space when the prices rise. In addition, working closely with your trusted business partners, such as the production crew and fulfillment center, will keep you updated on any changes and trends. This knowledge will make it easier to manage your budget.
Financing Opportunities for Food and Beverage Companies
Searching for the perfect type of financing and funding partner for your business can be overwhelming. There are numerous options, and each one has unique guidelines and requirements. In order to decide, you’ll need to consider your current business health and future goals. Review your budget carefully, so you can make a smart decision about your finances. With that said, let’s review some of the best financing options for food and beverage businesses.
Bank loan
A bank loan is perhaps the most recognized type of financing that food and beverage companies can utilize. It is when a bank gives you a lump sum of cash, which you repay in regular, fixed payments over a set period of time. You’ll also owe the bank interest on your loan, which is typically on the lower side compared to other types of financing. A bank loan is the option to go for if you have great business history, a good credit score, and you can commit to fixed monthly repayments. However, some banks might require collateral in order for you to secure a loan.
Pros
- High limit amount
- Lower interest rates
- Interest is tax deductible
- Builds business credit
Keep in mind that the application process is long and tedious. It may take months before you have access to the funds. The approval rates are low, as well. Banks prefer giving money to those who have great credit history, high revenue, and have been in business for at least three years. If you don’t have collateral to offer in order to boost your chances, then another type of loan may be better for you. However, every bank is unique in their guidelines, so do your research before making a final decision.
Cons
- Long application process
- Low approval rates
- Strict eligibility requirements
- May require collateral
Revolving line of credit
A revolving line of credit can be compared to a credit card, as more funds become available to you as you repay what you borrow. You only pay interest on the portion you are currently using, so you don’t have to worry about meeting a deadline to pay off the whole lump sum. It’s a great tool to have for emergency expenses, such as repairs or lost inventory. You can withdraw cash from the account at any time, and you can spend it on anything relating to your business. It even helps you build business credit, so you can apply for a better loan down the line.
Pros
- Easy to access
- Quick and easy application process
- Only pay interest on the amount you use
- 100% control over spending
Keep in mind that good things come with tradeoffs. This type of loan has higher interest rates compared to others, and the borrowing limit is often low. This wouldn’t be the loan to use if you plan on expanding or making significant purchases. Extra fees may be included, as well, so read your contract carefully.
Cons
- Possible fees
- High interest rates
- Low borrowing limit
Crowdfunding
Are you a talented salesperson with a new idea? Well, when you can’t get banks and lenders to work with you due to eligibility or credit history, then you can turn to crowdfunding. This type of fundraising doesn’t require credit checks or business history evaluations. All you need to do is convince numerous investors to give you money for your idea. If they decide to work with you, you’ll have instant access to cash, and you won’t need to pay it back in the traditional sense, either.
Pros
- Complete creative control
- Quick cash
- No credit checks or other requirements
- Instead of repaying investors, you give them rewards or equity
You can find potential investors on online platforms, but you’ll need to put time and effort into your campaign if you want it to stand out. Many crowdfunding campaigns fail to reach their goals, so building a creative, high-quality campaign is a must. In addition, putting your idea online comes with the risk of idea theft.
Cons
- Large percentage of crowdfunding campaigns fail
- Idea theft is possible
- Takes time and effort to build a successful campaign
Equity financing
Equity financing involves selling shares of your business to investors. In return, they provide you with funding, experience, and perhaps even valuable insights. Equity investors most often come in the form of angel investors and venture capitalists, who select promising businesses to invest in. They’ll expect a share of future profits and likely a stake in your company’s decision-making process. You can use equity financing to cover short-term costs, such as rent and payroll, or long-term costs like expanding.
Pros
- Quick access to large sums of capital
- Receive valuable insight from industry experts
- You don’t have to worry about fixed repayments
If you’re debating between equity financing and a regular loan, there are several factors to consider. First, it’s important to decide if you are comfortable giving up ownership in your business. In addition, keep in mind that shareholders may take more money than you anticipate. Equity financing can wind up being more costly than a loan, depending on your arrangements. However, equity financing can be a big aid to businesses seeking to grow.
Cons
- Profits must be shared
- Dilution in ownership
- May cost more than interest on a regular loan
Inventory financing
Inventory financing is a type of loan that is designed to provide funding for inventory procurement. This loan is great for those that rely on consistent inventory to get them through the year, such as food and beverage companies. The lump sum will only go toward inventory, so if you need funding for other aspects of your business, look elsewhere. You’ll use the inventory as collateral on this loan, which typically leads to lower interest rates. Every lender has different requirements, but this loan type is known for being quick and easy.
Pros
- Lower interest rates
- Collateral is the inventory you’re purchasing
- Quick and easy application
If you aren’t confident in your ability to meet the monthly repayment terms, then you should reconsider this loan type. If you fail to pay, the lender has the right to repossess your inventory. Even if you’re eligible, you may not receive all the funding necessary to purchase your goods, so evaluate your budget before proceeding.
Cons
- Low lending limits
- Inventory is at risk
- Can only be used for inventory
Revenue-based financing
If you have a strong, consistent flow of revenue, then you can take advantage of it by securing revenue-based financing. The investors you decide to work with will provide you with funding to boost your business operations. In return, you’ll repay the funds with a percentage of future sales revenue. The time it takes to pay off the loan depends on your sales volume. Most revenue-based financing providers have relatively loose requirements, and you can receive funds quickly. Your ownership isn’t diluted, either, so you keep full control of your busienss
Pros
- Quick funding
- No credit checks required, equity-free
- Payments are a percentage of sales revenue
Keep in mind that the payments you make to the investor may be more than what you would have spent on interest for a regular loan. If you don’t qualify for a loan or can’t wait for funding, then this is a good option. In addition, if meeting fixed, regular payments is a problem for your business due to seasonality or sales fluctuations, revenue-based financing might be a good solution. Make sure you generate steady revenue in order to repay the investor, or you’re going to be working with a very irritated business partner.
Cons
- Repayment requires steady revenue
- The repayment may cost more than the interest on a regular loan
- Not a viable option for all businesses
Merchant cash advance
Merchant cash advances involve flexible contracts. A lender will provide you with funds that you repay with a percentage of your future debit and credit card sales. It’s a quick and easy approval process, as they have lenient requirements. Credit checks and business history aren’t always factors in their decision. Collateral, such as inventory and property, isn’t needed to secure the loan either. Overall, it’s a big help if you need cash quickly and don’t want the pressure of fixed monthly payments.
Pros
- Quick funding with lenient eligibility requirements
- No collateral or credit checks needed
- Flexible contracts and repayments
While there are many benefits to a merchant cash advance, it is often quite expensive due to its lenient requirements. It doesn’t benefit your credit history, so if you’re looking to boost your credit score, you’ll need to look elsewhere. If you fail to make the payments, the lender has the right to remove money from your account, regardless of your current sales volume. Consider this before committing to a payment you can’t make regularly.
Cons
- High cost of capital
- Doesn’t help credit history
- Cuts into profit margin
8fig Financing for Food and Beverage Companies
8fig is a company that provides businesses with funding and tools for growth without the worry of strict eligibility requirements or inflexible repayment terms. We understand that you need money to make money. Our adaptable funding option will provide you with the cash you need in order to succeed as an online food and beverage company. We’ll help you boost your inventory and even grow your business.
Why use 8fig for food and beverage company financing
There are many benefits to using 8fig for financing for your food and beverage company. Traditional banks and other lenders often have strict eligibility requirements, long wait times, and rigid repayment terms. It can take weeks of paperwork and months of waiting before you receive funds. 8fig has a fast and easy application process and you can get your funds in just days. It’s also a growth platform, providing you with all of the tools and resources you need to plan, fund, and manage your cash flow, supply chain, and sales. You’ll finally be able to reach your full potential.
How 8fig works
1. Apply
The application process is fast and easy. Answer some questions about your business and sales, and then provide basic information about your supply chain stages and expenses.
2. Connect your store and bank account
In order to provide you with an optimized Growth Plan, 8fig requires that you connect your store and bank account to the 8fig platform.
3. Get funded
With 8fig, you can get funded in just days. Since 8fig funding is continuous, you receive capital infusions into your business right when you need it.
4. Make adjustments
If something changes and you need to adjust your payments, remittance schedules, or even funding amount, you can always do so thanks to 8fig’s flexibility.
5. Grow your business
All that’s left to do is sell, sell, sell. With 8fig, businesses are able to scale 2.5x as fast.
What 8fig offers in addition to financing
Funding is just one aspect of 8fig’s Growth Plans. In addition to financing for food and beverage companies, 8fig provides you with tools to improve and grow your company, such as supply chain mapping, forecasting software, and sales analytics. We’re more than just a funding solution – we’re your business partner. However, you still get to keep full control of your business.
As you grow, you’ll appreciate the tools that allow you to predict sales, optimize your cash flow, and boost revenue. All of this is done on one growth platform. With 8fig on your side, you’ll grow to new heights faster than you ever thought possible.
Who is eligible for 8fig food and beverage financing
Compared to banks and other funding solutions, 8fig has lenient eligibility requirements. We don’t check your credit score, instead looking at your business sales history to determine your eligibility. We’ll work with promising businesses, providing cash, resources, and advice throughout the entire process.
8fig has realistic expectations when it comes to business. We only require that you have 12 months of trading history, a minimum of $100,000 in yearly sales, and an average of $8,000 in monthly revenue for the last three months before you apply. If you qualify, you can receive up to 90% of your supply chain costs, which certainly takes the pressure off of your budget, leaving you room to boost other aspects of your business.
How to apply for 8fig financing
It’s easy to apply for 8fig financing, and it only takes a few minutes. Simply answer the questions and follow the prompts and you’ll get funded in no time!