Financial Solutions for the Adult Beverage Industry
For your business to be successful, it needs financing. There are a few different methods that will help you achieve your goals, but which one is right for you? From traditional methods like angel investors to newer crowdfunding, there is a lot to navigate. We've decided to highlight some of the different ways to obtain the capital you need.
"Angel" investing is the largest form of investment in the food, beverage, and alcohol industry, and It's expected to continue to grow over the next couple of years. The name "angel" was coined way back when patrons funded Broadway shows. These days, these angels are accredited and usually have an annual income of somewhere over $200,000 or have a minimum net of about $1 million. How much these investors give depends on the business, the circumstance, and their interest in the venture. While some are willing to give out money to projects they believe in, others provide loans that turn into convertible debt, or equity. If you're interested in learning more, you can visit the website for Angel Capital Association.
Venture capital comes with a lot of different nuances, so it's easy to get confused when you're reviewing this as an option to finance your business. In essence, a venture capitalist invests in ideas, nurtures these ideas, and then eventually exits. While that sounds relatively straightforward, it can get complicated. The firms responsible for loaning out the money usually target companies with a solid business plan who are in the next stages of building their infrastructure. Eventually, these companies should reach a certain size to be sold off to a corporation or should obtain enough credibility for public-equity markets to step in and replace the venture capitalist. For the adult beverage industry, there is a lot to gain from working with this type of deal, and individual firms provide connections to help your business grow.
Bank loans are one of the oldest forms of financing available. The benefit of working with this type of capital is not having to relinquish control of your company. The downside is the amount of interest that you will end up paying back. Working in the alcohol beverage industry, business owners are eligible for Small Business Administration SBA loans. These loans give the owners the option to raise the money that is needed to get their business started without giving up equity in the process. If you're looking for a quick line of credit, this type of financing would be right for you.
When the 2012 JOBS act passed, it opened the doors for the adult beverage industry to participate in crowdfunding. There are a few different types of crowdfunding available to help you raise the capital you need.
Using rewards-based crowdfunding, you're able to obtain the capital you need without having a physical product. Campaigns last 90 days, and each participant must specify a financial "goal." The incentive for donating is a reward your company establishes at the beginning of the campaign. The reward can work however you need it to but choose wisely because it could make or break your success. If you meet your goal, you get to keep all the cash. It's not debt or equity; it's just revenue for your business.
Comparatively speaking, debt-based crowdfunding is similar to sourcing a loan from a bank, but the bonus is the lower interest rates and more flexibility. It works with investors receiving shares for their investment with their reward being dividends on profit shares. These investors also have the option to sell their shares at a higher rate when the company becomes more profitable. While this may sound a lot like equity, it's not. According to CrowdFund.co, the most significant difference is "mitigated by working with a firm to spread out those investments over an interested market segment that is the best fit for the startup."
One of the newest crowdfunding sources on the market, it's also one of the fastest growing. It provides companies with the opportunity to raise up to $1 million online over a 12-month period. Anyone who invests gets a share or a percentage of ownership. What's unique about this method is anyone can be an investor. The JOBS Act made it possible for anyone over the age of 18 to invest in an equity offering.
Deciding which investment opportunity is right for you and your business can be a challenge. That's why it's important to work with a financial advisor that will not only guide you through the different options but understands the challenges of working in the alcohol beverage industry.
At Brindiamo Group, we're here to help you find success. Learn more about our financial solutions by visiting our website.