Commercial Real Estate Financing Aging Like Fine Wine
Author: Valerie Mellema
Date posted: 12.08.22

In 2010, a fine wine company started up with a winemaker at the helm. The owner comes from a generations-old wine family that has had an impact on everything from the viticulture and enology of wines to marketing and distribution, sales, and operations in the wine world. The owner’s grandfather runs a winery that produces dozens of wines distributed across the West Coast. This fine wine company was created to fill a gap in the market for casual Italian-influence white and red wines made at the winery. Estate bottled wines were also included for sale.

Steady Business Catches Up

Since the moment the wine company opened its doors, it had been steadily growing. The owner leased a property in an area known for commercial vineyards and has gone on to increase club membership and wine sales ever since the initial opening.

 

However, as sales volume went up, it became harder to fill all the orders that came in as growth accelerated. The owner realized that something had to change. The first step would be purchasing the space that was leased. After that, the tasting room and winery could be expanded, and a new vineyard introduced.

 

What Does It Take to Move Forward?

Once the idea was there, the owner couldn’t put it out of his mind. The wine company was clearly at a turning point and capital would be needed to bring it to the next level. However, before deciding what kind of financing would be best, it was important to consider how much money would be needed to make the changes.

 

After sitting down with a financial advisor, the numbers were worked out. All the changes required would necessitate a $1,000,000 loan. This could offer funding to purchase property and land for the winery and vineyards.

 

Selecting Commercial Real Estate Financing

There were a few things that came into play when choosing the right financing option. The first is that the winery was still considered young compared to most of them in the area. It can be challenging for emerging wine companies to get appropriate financing.

 

In addition, underwriting requirements were more stringent than usual in an area affected by drought. Both factors had to be considered when choosing the right financing. After a lot of research and help from others, the owner eventually chose to apply for commercial real estate financing.

 

The Top Benefits of Commercial Real Estate Financing

Commercial real estate loans are highly specialized for purchasing or refinancing real estate. These loans have a great potential loan-to-value ratio and can be structured as an SBA loan or a bank term loan. They also tend to be affordable since interest rates are low and term lengths are long.

 

Since moving forward immediately wasn’t a priority, it was no issue that funding could take up to 90 days. The presence of monthly payments also seemed ideal for the owner. With interest rates as low as 6%, it seemed like the best possible option.

What Happened in the Aftermath

After receiving the loan, the wine company was able to purchase the property they had been leasing, including a vineyard, tasting room, and winery. The tasting room helped with strengthening customer relationships and would offer a place for events. The vineyard could be used to increase the production of wines to sell them directly to consumers.

 

By making the leap and choosing commercial real estate financing, the wine company is doing even better. It can now handle much larger crowds and has the means to create additional customer loyalty.

About The Author | Valerie Mellema

Valerie has over 16 years of experience as a professional writer of blogs, eBooks, articles and press releases, with a focus on finance and alternative lending. Valerie resides with her family in Texas and is passionate about her horses.

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