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Small Business and SBA Lending Blog
Last updated on May 19, 2023
5 min read

SBA 7(a) Loans for Liquor Stores

There are about 50,000 wine, beer, and liquor stores throughout the United States, generating an annual revenue of approximately $60 billion. Find out how an SBA 7(a) loan can help yours.

In this article:
  1. SBA 7(a) Loans for Liquor Stores: What You Need to Know
  2. How Liquor Stores Can Use SBA 7(a) Loans
  3. Buying Merchandise
  4. Buying Out a Partner
  5. Refinancing Debt
  6. Buying or Expanding a Liquor Store
  7. The Importance of Getting a Liquor License
  8. Be Careful With Liquor Store Acquisitions
  9. Case Study: Buying a Liquor Store in Colorado
  10. SBA 504 Loans May Be Better for Larger Stores
  11. How Can I Get the Best Financing for My Business?
  12. Related Questions
  13. Get Financing
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There are approximately 50,000 wine, beer, and liquor stores througout the United States, generating an annual revenue of around $60 billion.

If you’re looking to purchase, expand, or refinance business debt on a liquor store, SBA 7(a) financing could be a fantastic option — and since borrowers can use these loans for working capital, owner-occupied commercial real estate, and equipment, they’re the perfect choice for the needs of many wine, beer, and liquor sales businesses.

SBA 7(a) Loans for Liquor Stores: What You Need to Know

The alcohol sales industry is changing quickly, and with a greater emphasis on craft beers, whiskeys, and hard sodas, local liquor stores need to keep up with trends if they want to stay competitive.

Fortunately, the SBA 7(a) loan can provide liquor businesses the capital they need to survive— and thrive in a constantly changing market.

How Liquor Stores Can Use SBA 7(a) Loans

Buying Merchandise

Liquor stores are constantly in need of new merchandise — and that can get expensive, especially when sales can often be cyclical. Fortunately, SBA 7(a) loans can fund working capital, including merchandise, employee salaries, and even marketing materials for a liquor retail business.

Buying Out a Partner

If one or more of your business partners wants to move, retire, or go into a different business, an SBA 7(a) loan can be an effective way to buy them out.

Refinancing Debt

SBA 7(a) loans can be used to refinance SBA-eligible business debts offered to the borrower on unreasonable terms, significantly reducing interest rates and improving cash flow for liquor retailers.

Buying or Expanding a Liquor Store

If you’re considering purchasing an existing liquor store or expanding a liquor store you currently own, an SBA 7(a) loan might be able to help you achieve your goals.

The Importance of Getting a Liquor License

One of the most complex — and most expensive — aspects of opening a new liquor store is obtaining a new liquor license. Liquor license prices can vary by state and by city, with some licenses costing only a few thousand dollars, while others costing hundreds of thousands. There can also be differences based on how the license was obtained; some states have lotteries that grant a certain number of lucky businesses a license at a discounted rate, while charging a much higher price to directly purchase a new license from the government.

Unfortunately for aspiring liquor store owners, SBA loans cannot typically be used to purchase a liquor license. The main reason for this is simply that doing so would be too risky for both the lender and the SBA; if the license was not approved, the borrower would not be able to start the business, and would have no way to repay the loan.

Be Careful With Liquor Store Acquisitions

If you’re seriously considering purchasing an existing liquor store, you’ll want to be extremely careful when it comes to the price you pay for the business. Many liquor store owners are notorious for poor bookkeeping and large amounts of unrecorded cash sales (often to avoid paying taxes).

So, while the seller of a liquor store might only show $400,000 in revenue on their tax documents, they may tell you they bring in more than $1 million a year; but that doesn’t mean you should necessarily believe them. A good rule of thumb is to purchase a liquor store only on the value of revenues/profits that can be recorded— not on the word of a seller (especially if you don’t know or trust them.)

Case Study: Buying a Liquor Store in Colorado

Imran, an entrepreneur from Colorado Springs, recognized a unique opportunity to acquire an established liquor store in his city. Having a background in retail management, he was confident in his ability to successfully run the business. However, he faced a few challenges during the acquisition process.

The first challenge was the seller's poor bookkeeping and large amounts of unrecorded cash sales. Imran had to be extremely cautious in determining the accurate revenue and profit of the business. He decided to rely only on the recorded financial information rather than the seller's word. To ensure he was making an informed decision, Imran consulted with a business valuation expert and performed thorough due diligence.

The second challenge was obtaining the liquor license. Imran learned that SBA loans typically cannot be used to purchase a liquor license due to the associated risks. However, he discovered that the liquor license would be transferred to him as part of the liquor store acquisition, which alleviated this concern.

To finance the acquisition, Imran decided to apply for an SBA 7(a) loan. He requested a loan amount of $450,000 to cover the cost of buying the liquor store, excluding the liquor license. After submitting a comprehensive loan application, including his detailed business plan and financial projections, Imran was approved for the loan.

With the SBA 7(a) loan, Imran successfully acquired the liquor store and took over the operations. He implemented new management practices and improved the store's inventory management system, leading to increased sales and customer satisfaction.

This is a fictional case study provided for illustrative purposes.

SBA 504 Loans May Be Better for Larger Stores

While SBA 7(a) loans are often the best financing option for many liquor retailers, others may actually find that the SBA 504 loan is a better choice. This is especially the case if the business only want funds to purchase commercial real estate to build a new store, or, for larger liquor businesses, to build a new distribution facility.

While SBA 504 loans can’t be used for working capital, they do have lower interest rates and can finance commercial real estate construction/acquisition deals well beyond the SBA 7(a) loan's $5 million maximum.

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Related Questions

What are the eligibility requirements for SBA 7(a) loans for liquor stores?

In order to qualify for an SBA 7(a) loan for a liquor store, you must have less than $6 million in annual sales and demonstrate a legitimate financial need. You must also be paid up on other federal loans. SBA 7(a) payment terms for liquor stores can last up to 25 years if you’re buying a building, up to 10 years for equipment purchases, and you can get seven years for working capital.

For more information, please see the following sources:

What are the advantages of SBA 7(a) loans for liquor stores?

SBA 7(a) loans can provide liquor businesses the capital they need to survive— and thrive in a constantly changing market. Common SBA 7(a) loan uses for liquor stores include:

  • Buying merchandise: Liquor stores are constantly in need of new merchandise— and that can get expensive, especially when sales can often be cyclical. Fortunately, SBA 7(a) loans can fund working capital, including merchandise, employee salaries, and even marketing materials for a liquor retail business.
  • Buying out a partner: If one or more of your business partners wants to move, retire, or go into a different business, an SBA 7(a) loan can be an effective way to buy them out.
  • Refinancing debt: SBA 7(a) loans can be used to refinance SBA-eligible business debts offered to the borrower on unreasonable terms, significantly reducing interest rates and improving cash flow for liquor retailers.
  • Buying or expanding a liquor store: If you’re considering purchasing an existing liquor store or expanding a liquor store you currently own, an SBA 7(a) loan might be able to help you achieve your goals.

Advantages of SBA 7(a) loans for liquor stores include:

  • Funding for working capital, including merchandise, employee salaries, and marketing materials
  • Ability to buy out a partner
  • Refinancing of SBA-eligible business debts offered to the borrower on unreasonable terms
  • Ability to purchase or expand a liquor store

What are the maximum loan amounts for SBA 7(a) loans for liquor stores?

The maximum loan amount for an SBA 7(a) loan for a liquor store is up to $5 million. This amount can be used for working capital, buying merchandise, buying out a partner, refinancing debt, and buying or expanding a liquor store.

For more information on SBA 7(a) loans, please visit https://www.sba.gov/funding-programs/loans/sba-7a-loans.

What are the repayment terms for SBA 7(a) loans for liquor stores?

The repayment terms for SBA 7(a) loans for liquor stores depend on the loan amount and the type of loan. Generally, SBA 7(a) loans have a repayment term of up to 25 years for real estate purchases and up to 10 years for working capital and other uses. The interest rate is typically based on the Prime Rate plus a margin, and the maximum loan amount is $5 million.

For more information, please visit the SBA 7(a) Loan Program page.

What documents are required to apply for SBA 7(a) loans for liquor stores?

The documents required to apply for SBA 7(a) loans for liquor stores include:

The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.

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