30 Days to go …. Running out of cash

Where the hell has all our cash gone?  Sometimes I wonder how this business is costing us so much money.  How the heck do other breweries start a brewery for so much less than we are spending?  I know we have bitten off more than we can chew, but seriously, what the heck.  Running out of cash is not an option for our business, so we have moved on to plan B, plan C and soon plan D.

We have raised $1,200,000 and we figured that would be enough to get us to day 1.  As you know from reading my previous blog posts (check the finances category), it was a process getting to a point that we were comfortable.  About 8 months ago it seemed like we would go over by about 20% and so we secured a loan and line of credit to cover this amount.  We felt comfortable we would have more than enough to get through the tough times to day 1, and then profitability.

Surprise, surprise, a few things go over and all of a sudden we are projecting a cash shortage starting about 60 days after we swing open our doors, that reaches a maximum about 180 days after we open for business.  Thats right, even though we will be open and selling beer, and doing well, we will still be running out of cash.  It makes us scratch our head and realize the importance of keeping our costs down, and brewing some kick ass, killer beer.

So we have a few options for gaining access to this additional funding.  If you come to a situation like ours, here are the paths you can take to secure medium term financing (longer than 12 months, but shorter than 5 years).

  1. Get funding from your shareholders.  Maybe you have a shareholder that has deep pockets and is willing to lend you some cash for a short-term to help with your cash crunch.
  2. Get financing from the BDC.  The BDC is able to help with financing, especially if you have equipment or machinery that you are able to secure the loan against.
  3. Raise additional money.  Either from your current investors, or another batch of new investors who can help you keep your loan commitments down and your cash position positive.
  4. Owners lend money to company.  Thats right, time to put your money where your mouth is.  Take a line of credit that you have personally, and sign over the funds to the business.
  5. Pre-sale some of your products.  Thats right, maybe you can sell some of your capacity to another brewery, or start selling your merchandise before you open in order to help with smaller amounts of money.  This won’t work with larger sums.

I am sure there other ways of getting money, but these are the options we have available to us.  We have 2 strong contenders and 1 outlier, and we think one of these is going to work out for us.

One thing is for sure, manage your money, stay on top of your finances, and don’t forget to always have your next 3 possible steps planned out.  If you don’t, you might get to a fork in the road and have insufficient options available.  This is not a good place to be, especially when you are near opening day.  It would suck to come this far and have it fall to peaces at this point.

One of these options will provide us the money we need, and we hope we make the right choice.  Only time will tell whether or not we did make the correct choice.

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2 thoughts on “30 Days to go …. Running out of cash

  1. Ryan

    I don’t know what kind of dollars it would produce, but have you given any thought to the ‘founders club’ idea like S&O did?

    Reply

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